Figuring Inflation

The most common form of figuring inflation uses the consumer price index (CPI) to monitor the changes over time. These numbers are tracked and compiled, by region, by the Bureau of Labor Statistics. There are different indices but the most revealing of all is the CPI for all items. This includes energy, food, service, and other costs. The only notable thing it excludes is healthcare costs. These numbers give us an idea of what consumer spending is for many different items and categories over a period of time, which gives a fairly accurate depiction of inflation itself.

To figure inflation the first thing we will need is a data set for the regions you are interested in. I chose national and southeast. Keep in mind that it takes a while to compile all the data, so there is always a lag in what is available. Here are the numbers since 12/2006:

National CPI Southeast CPI
12/2006 201.800 194.800
01/2007 202.416 195.021
02/2007 203.499 195.950
03/2007 205.352 197.904
04/2007 206.686 199.618
05/2007 207.949 200.804
06/2007 208.352 201.675
07/2007 208.299 201.571
08/2007 207.917 201.041
09/2007 208.490 201.697
10/2007 208.936 202.155
11/2007 210.177 203.437
12/2007 210.036 203.457
01/2008 211.080 204.510
02/2008 211.693 205.060
03/2008 213.528 206.676
04/2008 214.823 208.085

 We can then use this formula to calculate the change over time as a percentage, which is inflation:

 % inflation for period = [ (cpi2 – cpi1) / cpi1 ] * 100

To calculate the total inflation throughout 2007 we take the index from December 2006, to account for the change in January 2007, and the index from December 2007 and plug them into our formula:

[ ( 210.036 – 201.800 ) / 201.800 ] * 100 = 4.08%

Likewise, we can calculate the inflation for 2008 using the same methods, which show us to be off to a rocky start:

[ ( 214.823 – 210.036 ) / 210.036 ] * 100 = 2.28%

These calculations are important to keep in mind when it comes to negotiating salary, regardless of whether it is for a job offer, a raise, or anything else. If the inflation rate you calculate is less than when the compensation increase is, you are losing real income, if the inflation rate is the same then you are breaking even, and if the inflation rate is lower then you are increasing your compensation.


The Art of Momentum

Maintaining momentum really is an art form. This came to me where most of my thoughts do, during my morning commute. There is a certain portion of the highway that routinely slows down because it junctions with one of the largest thoroughfares in our city. Traffic inevitably stops or slows here, but for the select few, there is a way to keep moving. Over the past two years I, and many others, have discovered that there is a specific pattern to the traffic flow.

Approaching the junction lane 1 slows because everyone is getting over to avoid incoming traffic and because people are trying to move into lane 2. Lane 2 slows slightly to accommodate movement from lane 1 and from people trying to get into lane 3. Lane 3 speeds up because people are exiting the highway and there are fewer cars. Leaving the junction the opposite occurs. Traffic in lane 3 slows down to accommodate incoming vehicles and because people are trying to move to lane 2. Lane 2 slows slightly to accommodate people from lane 3 and because they are trying to move to lane 1. Lane 1 speeds up because there is the least amount of resistance there.

traffic.gif

The most interesting part of the traffic though is that as you pass through the junction there is a gray (bluish) area that affords drivers the opportunity of maintaining their momentum. But there is an art to it. If you move over too early you end up sitting still because you are stuck in the red part of lane 1, however if you move over too late you find in the red area in lane 3. Either way, you are killing momentum. The ability to move in and out of the gray area on a green lane truly is an art form that takes the ability to read the situation correctly and be lucky enough to be in a position to capitalize upon it.

Finding the way to maintain momentum will vary by interchange, highway, city, number of people on the road, the time of day, the day of year, whether there are a lot of schools around, and many other variables. What stays constant is that in all cases there is either a way to maintain momentum or there isn’t. When there is a way to maintain momentum the practice is often going to be more of an art form, sprinkled with a little luck, than it is to be a skill.

Sounds like business, huh?


The Forsaken

What happens when you temporarily forsake one or more of your corporate values, intentionally or unintentionally?

In short, I have never been a party to such a situation so I don’t know. But I do see some clear paths that are likely:

The company learns to appreciate the benefit of the value.
This is the corporate equivalent of taking a sabbatical from sex just before the wedding. The basic concept is that the deprivation of something for a period of time makes it that much more desirable and enjoyable when it finally happens. While the analogy may (or may not) ring true for sex and marriage, there is a pivotal difference between the sex-marriage analogy and the corporation-values one. This difference comes from the fact that most people are able to let go of corporate values, especially ones they never truly aligned with, easier than they can part with the idea of something as strongly reinforcing as sexual contact. In order for this to work the reward at the end of the deprivation period must be strong enough to sustain the company throughout the entire deprivation period.

The company loses its desire to uphold the value.
This can happen for a couple reasons. First, the company may decide that the benefit, after the deprivation period, is not strong enough to warrant the wait period and they give it up. Second, people may gradually become accustomed to the value not being present. Either way, the populous gradually shifts their paradigm such that it excludes the value. Once this happens it is no longer a matter of reintroducing a previously held value but attempting to introduce a value that is now foreign. In order for the value to become a core part of the business again it will take extreme effort.

The company identity shifts.
There are two main reasons this can happen, the first of which is mentioned in the previous point. The second is that the growth of the company will dilute the population that still holds the value. This will typically be more prominent in high growth companies but can happen anywhere. For example, assume a company has 100 people, 70% of which are highly attuned to the value when it is forsaken. By the time the company reintroduces the value, they have grown to 300 employees. Assuming that the original 70% still are attuned to the value, which is highly unlikely, we now have diluted the workforce down to 23% of the people that are in accord with the value. This results in the same problem as the last point in that it will inevitably take a herculean effort to resurrect the original value.

People Leave, People Arrive
If people are so attuned to a value that the lack of that value separates them from the company they will likely become disenchanted. Once people become disenchanted they either create change or they move on. If the dropping of the initiative is involuntary these people will likely try to revive it. However, if the drop is intentional then people will typically just move on. With this transition, the company will begin to appear more attractive to individuals who struck a discord with the value. This will continue to shift the corporate personality away from the dropped value, making it harder to reintegrate in the future.

This is the typical path. This is what I would expect to happen. However, there are times when the unexpected choice ends up making the difference between levels of success or between success and failure. Every now and then you hear about a leader so aligned with his or her company that they are able to make bold moves, that the critics denounce, and bring about broad and positive change. On the face of it, dropping a corporate value seems like a bad move. Whether there are hidden benefits is something that I can’t see but await a case study that shows the true outcome of such a situation.