Can inflation lead to an increase in purchasing power? If so, then how?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 336.3 million views in recent years.

In the answers below I focused on the following topics and issues:

  • Inflation is rising around the world. Most people assume that inflation affects their purchasing power in a negative way – it makes us all poorer. But could inflation lead to an increase in purchasing power? If so, then how?
  • What have been the most important things I have learned since starting my own business? Would I do anything differently if I started again?

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Source for all answers – Adam Fayed’s Quora page.

Can inflation lead to an increase in purchasing power? If so, then how?

In 1939, Gillette bought the entire radio right to the World Series.

It cost $100,000. A massive amount of money in those days. Imagine how much they managed to influence people by spending such a large amount of money.

As many young people watch sport, they managed to influence some people forever, buying at 1939 prices.

So, they managed to sell razors in the 1950s, 1960s, 1970s, and 1980s, with associated prices, by advertising at 1939 Dollars.

Likewise, we see something similar in the modern age. When Google and Facebook ads were new, they were cheaper.

People could buy at those prices, and in some cases, have lifetime client relationships.

You might say this is only for big firms, or companies in general – small, medium, and large.

That isn’t the case. Think about almost any relative, friend, or acquaintance you know (or suspect is) who is an “everyday millionaire”.

In other words, the kind of person who is wealthy despite never being super high-income.

How did they do it? Well, they bought assets like the stock market at 1950s, 1960s and 1970s prices, and are selling a portion at 2021 prices.

Money needs to be put to work. The more productive investments, business or personal, that can be made at 2021 or 2022 prices, the better.

Let’s put this another way. Most businesses would be prepared to pay 10% over the asking price for lifetime rights.

If Forbes offered a business a deal costing $1million a year, most big established firms would be willing to spend over $50million for a 50-year rights deal, for obvious reasons.

As an individual, you can buy things at 2021 prices and dispose of the assets at 2040 or 2050 prices.

Inflation is a tax on savings if you aren’t careful, but there is a way around this.

What are the most important things you learned when starting your own business?

There are too many things to mention here, so I will stick to the most important things.

The most important things I learned are:

  1. Cashflow is king. It sounds so simple but revenues in, and expenditures out, are the most important things
  2. Ideas don’t count. Only well-executed ideas matter. I saw this on Twitter. It is a bit oversimplified but it has an element of truth to it

3. Many people will doubt you. Some of the same people claim they always believed in you when/if you succeed.

4. Reading, thinking, and planning are just as important as working hard. It is part of working smart.

5. It is important to stretch yourself. Humans want the easy option – the path of least resistance. If somebody succeeds, they often take their foot off the accelerator and work less hard.

6. Speaking about the path of least resistance, nobody likes paperwork. Why is big tech so big? The products? The cheapness when it comes to Amazon? Partly.

Yet the ease of transactions and scalability are key. If you are in any industry, clients are more likely to deal with you if the paperwork is easy.

Even if you have the best product in your industry, you won’t get that much traction if the hassles associated with it are high.

7. Diversification of risk is important. Don’t put all your eggs in one location’s baskets if you can. If you can sell internationally, you are reducing your risks a lot.

8. Concerning risk, taking calculated risks is key. What is more, taking risks when others won’t, will pay off to a greater degree than in normal times.

Simple example. During the worst of the Covid panic, social media ads were cheaper.

They became more expensive once the panic ended. You can guess when the best time to spend was.

9. It is better to have experience in the industry before starting your own business. This gets back to execution. It is easier to execute ideas if you have experience and not just a good idea.

If you really want to start a business in an area where you have less experience,e try starting a business in a new industry or in a developing country – there is less competition this way.

10. Things do change and evolve. Sometimes they change quickly, like during Covid. It is important to pivot and keep up to date with changes when called upon.

11. It is better to make a decision quickly. That doesn’t mean rushed, but if a decision can be made in seconds or minutes, just make the call.

If a decision really needs to take days or weeks, then fine, but make sure this genuinely needs to take time and isn’t procrastination.

12. Learning to say no is important. This gets even more important once things get bigger, and more people ask for things from you.

13. Production beats perfection. In many situations, getting something out at 70% perfection quickly will beat 100% in 3 months. You can then improve it.

14. Ideas are a numbers game. You might have to try many and execute them all, to find one that works.

15. Doubling down on your strengths pays dividends more than working on your weaknesses.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 551.2 million answers views on Quora.com and a widely sold book on Amazon and a contributor on Forbes.

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