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How Great Leaders Use Emotional Intelligence to Beat the Psychology of Inflation

by kimadmin
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You can turn other people’s fears into gratitude and even loyalty. Here’s how.

People are anxious. They’re worried about the economy, and especially concerned about inflation. This is where emotional intelligence can help.

To understand, we need to define the problem. So, we’ll start with inflationary psychology, which works something like this:

  • Prices spike due to purely economic forces: supply chain problems resulting from the pandemic, for example, or rising energy prices after the Russian invasion of Ukraine.
  • Consumers watch, and they make rational decisions. They buy more now (if they can), since they presume that the things they want will cost more tomorrow.
  • More demand means prices rise even more. Also, companies pass higher costs that they expect in the future to their customers today.
  • We risk winding up in a self-fulfilling prophesy of greater inflation, even if some of the external factors that sparked the whole thing are resolved.
  • Eventually, consumers can lose confidence. Even if prices level off, they can become convinced that it’s just temporary relief, and it gets even harder to give up the “buy now before it costs more” mindset.

The summary above was inspired by a smart explanation by Richard Curtin of the University of Michigan, who has run monthly consumer sentiment surveys since 1976. But we should add one more very important point. 

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