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.
It's that ultimately, consumers can delay some purchases if they become too expensive.
But there are a few areas in which they have much less discretion, especially food, housing, and energy (and especially gasoline).
This is where the worst anxiety arises. People need to eat, they need places to live, and they usually need to travel.
So, against all of this, how can emotional intelligence help?
I think the key is to follow what we'll call the "Rule of Plenty." It has two parts:
- The first part is for yourself: Recognizing that we live in a time of incredible abundance. by historical standards. We live longer, survive diseases, and have living standards that would have been science fiction to most people even a few decades ago.
- The second part is for your interactions with others: Recognizing that you likely have plenty that you can share--undervalued assets that can turn people's anxiety into gratitude and even loyalty (especially colleagues, customers, and employees).
Let's jump into that second point before this gets wildly theoretical.
Assume you're running a business. Can you unpack policies to offer things that might be worth a lot more to your employees now than just a short time ago, and that can go a long way toward easing anxiety? Examples:
- Salaries. This is the big one at the outset. Can you pay If your employees are anxious, can you pay them more? If you think you're already paying at teh top of your ability, my colleague Bill Fotsch has an idea: offer additional pay tied to increased performance.
- Schedules. Yes, we're already working from home more than ever, but can you accelerate additional remote work or compressed work schedules? Your employees save on commuting, which might ease some anxiety about energy costs.
- Stipends. Are you paying for employees who have converted parts of their residences into work-from-home spaces? Can you cover phone, Internet, and computer costs? It's another legitimate way to put money in their pockets and reduce anxiety.
- Perks and benefits. How about student loan repayments, tuition assistance, or job-related skill development? Again, you're looking for things that will benefit your employees but also likely benefit you, and create greater loyalty.
- Ask for suggestions. Your employees probably have ideas that you'd never think of regarding how to ease anxiety and combat inflationary psychology. Articulating their solutions gives a bit more sense of control; doubly so if their ideas are implemented.
In the end, it's about considering how moves you make affect employees' anxieties, and acting accordingly. Also, it's worth pointing out two big moments in history.
The first was the era of inflation during the 1970s and the early 1980s; the second was the rise of popular interest in emotional intelligence, dating to the publication of Daniel Goleman's book, aptly called Emotional Intelligence, in 1995.
You'll note the chronology; the last time society went through this kind of challenge, people simply weren't talking about using strategies of emotional intelligence to combat fear and improve their leadership.
Today? It's a whole different story, and it's why I've tried to compile as many important emotional intelligence lessons as possible in my free ebook, 9 Smart Habits of People With Very High Emotional Intelligence.
Good things come in cycles, and tough times eventually end. We'll pull through this, and the most emotionally intelligent leaders will play an important part in getting us there.