Various people have told me that this has been used as an interview question by many firms to assess "out-of-the-box thinking." The "secret" here is to think of a cake as a three-dimensional cylinder rather than a two-dimensional circle, as most people do. This enables us to not only perform vertical cuts, but also horizontal cuts. So, if you use two of your cuts to make a cross on the top of the cake, effectively dividing it into four equal parts, and your third cut as a horizontal cut across the centre of the cake, thereby dividing each of the four equal portions in half, you'll have eight equal pieces.
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