Notes
A very interesting article on how poorly senior leaders understand inflation and its impact on their business.
“…It seems that corporate leaders do not owe their career advancement to sophisticated economic analysis….”
Leaders anchor their inflation expectation more on what they hear or read on the news/media than on hard data and modeling based:
input prices forecasts (raws, conversion, labor, etc…).
willingness to pay from the customers to your industry products or services and directly to your company within the industry.
depending on the industry (oligopoly, perfect competition, etc…) you need to understand the competition pricing strategies and how will they react to these key variables.
By doing this they are usually behind the curve and reactive to a dynamic environment.
Going back to basics, most of the leaders do not know:
the past year inflation value (country or industry)
the target inflation rate from the Fed and ECB (the 2%) and
what are the actual key refence interest rates (monetary policy) applied by these entities in their market.
Know your numbers, understand how they impact your industry, your company business and the valuation of your company.
