Inflation

Inflation is a sustained rise in the general level of prices — the value of money in terms of goods falls. It's usually measured by a price index (e.g. CPI, PCE) over a period. Causes include demand pull (too much spending vs capacity), cost push (e.g. energy, wages), or monetary expansion. For founders, inflation affects real wages, input costs, and the real value of debt and cash; it also shifts discount rates and valuation. High inflation erodes nominal contracts and makes long-term planning harder; low and stable inflation is the usual baseline. Separate nominal (stated) from real (inflation-adjusted) when judging returns and costs.

Assume an inflation path for planning (e.g. 2% or current consensus). Do valuation and capital allocation in real terms when possible, or be explicit about nominal. Lock in nominal cost (e.g. fixed-rate debt) when you expect inflation to rise; avoid long nominal receivables when inflation is high. Index key contracts if the horizon is long.

Inflation: sustained rise in the price level. Use real (inflation-adjusted) figures for strategy and valuation; assume an inflation path for comp and contracts. In high-inflation regimes, shorten nominal commitments and pass through where possible.