EYES GLAZE OVER WHEN WE TALK ABOUT INFLATION? YOU’RE NOT ALONE. BUT WHAT YOU DON’T KNOW CAN HURT YOU.
Rita McGrath / Thought Sparks
FOR ANYBODY BORN AFTER ABOUT 1985, MEANING MOST FOLKS UNDER 40, ALL THIS TALK ABOUT INFLATION SEEMS KIND OF OLD-TIMEY. INDEED, AS PUBLIC RADIO HOST KAI RYSSDAL (CITING A STORY IN THE ONION, OF ALL PLACES) PLEADS, HEY, COME ON, PAY ATTENTION, THIS IS REALLY IMPORTANT!
1982 is a long time ago As Fortune CEO Alan Murray points out, the last time inflation was this high was 1982. Back then, he was covering the thrilling business of the Federal Reserve under the guidance of the famously obscure Paul Volcker, who once told him (in response to insistent questioning) “We did what we did, we didn’t do what we didn’t do, and the result was what happened.”)
Demand for higher wages, without much to show for those who get them Labor was already asserting its muscle (a tiny bit) before the advent of the current inflationary period. Even iconic companies like Apple, Amazon and Starbucks are facing a push from workers for better pay, more security and better working conditions. Though hard-fought, these increases in worker wellbeing will not produce better living standards if everyday prices eat up the gains. For those on truly fixed incomes, inflation is a nightmare as their purchasing power decreases and the prices of necessities increases.
As I’ve written about before, the investment drunkenness that led to so many over-
Companies caught unprepared are likely to lay off staff
valued unicorns looking for breakneck growth at all costs is beginning to give way to a period of greater sobriety. Now, even well run companies, such as the makeup icon Revlon, are going to be caught up in a vicious cycle of supply chain disruptions, unpredictable demand and cash crunches.
THE “ACCESS TO ASSETS” ECONOMY WILL BE CHALLENGED With interest rates low, and the app economy making it financially feasible for many people to access assets without having to own anything themselves, we’ve gotten used to the idea that we can just borrow whatever we need on a variable cost basis. From earth-moving equipment to fractional shares of, well, just about anything, this idea has become embedded in how a modern economy works.
Cash will be king We’ve gotten used to the idea that money is cheap. See comment regarding unicorns, above. To fight inflation, one side effect is that money for everything – your mortgage, your car, even potentially your layaway purchases – is going to get a lot more expensive, as the Fed raises interest rates.
So what can you do? Well, the first rule about getting into a hole is to stop digging. A recent article in Car and Driver reported that with supply chains as challenged as they are, 40% of anxious consumers were willing to pay $5,000 over the manufacturers’ suggested retail price for a new car. And as a Forbes observer noted, most buyers are going to be financing that purchase. This can cause them to inadvertently overspend the family budget. Even worse, they’re likely to encourage others to do the same, a kind of contagion effect. More people competing for more stuff = more inflation.
Meanwhile, at Valize
We had an all-hands retreat last week during which we laid out what we’re thinking about for the coming year. Our main conclusion is that we are all about helping organizations build the capabilities they need to create a brighter future for themselves. We want to be your partners in seeing you succeed. And we’ve got the right tools put together now, we think, to do that. You can kick-start a growth, innovation, or change project in as little as 60 days. We won’t do it for you, but we’ll teach you how to do it for yourself!
https://thoughtsparks.substack.com/