The price of money changes behaviour.
Higher borrowing costs can make spending and investment less attractive. The effect takes time and varies across households and businesses.
Sumeet RastogiEnterprise Applications Leader
Executive profile ↗From the classroom to Monday morning
Three subjects.
One real-world
decision.
People have concerns. Customers have choices. The economy has a vote. Good decisions need room for all three.
Sumeet RastogiISB PGP MAX · Term 2 reflections
A wider view of leadership
The learning starts when
the subjects meet.
I have completed Term 2 at ISB, studying Leading People and Organisation, Microeconomics and Macroeconomics. I am taking one question back to work: what am I missing when I look at a decision through only one lens?
A plan can make financial sense and still struggle with adoption. A discount can increase sales and reduce profit. A promising expansion can become less attractive when the cost of money changes.
This is my way of connecting those ideas to decisions we recognise. Change the assumptions, challenge your first response, and see what follows.
01Read the room.
Leading People and Organisation
Read the room.
Then lead the change.
Before asking people to do more, understand the conditions in which they are working.
Leadership experimentChoose a situation, then a response
The moment
The launch plan gets a quick yes. Afterwards, a team member privately admits that the delivery timeline is unrealistic.
What would you say first? Choose a response to explore its trade-off. Try the alternatives too.
What I want to carry into work
Ask what sits behind the behaviour: clarity, capability, incentives, workload or trust. Create space for honest input, then make ownership explicit.
Outside work · When a family plan meets resistance, asking what matters to each person can be more useful than repeating the plan more firmly.
02A full classroom.
Microeconomics
A full classroom.
A smaller profit?
Customers react to prices. Leaders need to look at both the response and the cost of serving it.
The pricing experimentINR · One training cohort
Would you offer the discount?
At ₹10,000 per seat, the model starts with 100 seats. Each seat costs ₹4,000 to deliver, plus ₹2 lakh in fixed costs per cohort.
₹8,000₹12,000
Elasticity 1.5 means a small 1% price rise reduces quantity demanded by about 1.5%, with other factors held constant.
Expected seats100.00.0% vs 100 seats
Revenue₹10.00L0.0% vs baseline
Cohort profit₹4.00L0.0% vs baseline
Start with the 10% discount. Will more seats make up for the lower fee?
See the calculation and assumptions
Expected seats = 100 × (your price ÷ ₹10,000)−elasticity.
Revenue = price × seats. Cohort profit = (price − ₹4,000) × seats − ₹2,00,000.
Constant-elasticity demand is an illustrative model. Demand parameters are assumptions, not estimates from customer data. Fractional seats represent expected volume; calculations use unrounded values. It assumes no capacity limit, competitor reaction, tax or change in quality. Test those assumptions before applying it to a real offer.
What I want to carry into work
Before accepting a lower fee, ask how demand, delivery cost and capacity will change. Compare the next unit of value with the next unit of cost.
Outside work · A cheaper shop across town may save ₹200 and consume an hour. Opportunity cost asks what else that hour could have been used for.
03The economy has
Macroeconomics
The economy has
a seat at the table.
Interest rates, demand and costs can change a business case even when the team and the idea stay the same.
The expansion experimentINR · Five-year horizon
Connected to your pricing decision
₹10,000 per seat · 100.0 expected seats · four cohorts each year
Adjust the priceDoes the expansion still make sense?
Invest ₹30 lakh today. Use the cohort economics above, then deduct ₹7 lakh of additional annual overhead.
4%16%
For this exercise, the investment hurdle rate is the borrowing rate plus 4 percentage points for risk. This is a simplifying assumption.
Stress-test the operating assumptionsThese are independent stress assumptions. Changing the borrowing rate does not automatically predict demand or inflation.
Value today, after the initial investment₹2.44LNet present value (NPV)
The model clears the hurdle. Check the assumptions before committing.
- Annual operating cash flow
- ₹9.00L
- Hurdle rate
- 12.0%
- Defer: no investment or cash flows
- ₹0 NPV
Cash flows valued in today’s rupees
−₹30LToday
₹8.04LYear 1
₹7.17LYear 2
₹6.41LYear 3
₹5.72LYear 4
₹5.11LYear 5
See the calculation, timing and boundaries
Annual operating cash flow = 4 × stressed cohort profit − annual overhead. The cost-rise case increases per-seat costs, cohort fixed costs and annual overhead by 10%. The demand case reduces seats by 15% at the chosen price.
NPV = −₹30,00,000 + Σ [annual operating cash flow ÷ (1 + hurdle rate)year], for years 1–5. Investment happens today; cash arrives at each year-end. At the starting settings, ₹9 lakh annually discounted at 12% gives an NPV of ₹2.44L.
These are constant nominal cash flows after the selected one-time stress; inflation does not compound in this model. No taxes, working-capital changes, resale value or capacity constraints are included. Financing cash flows are excluded; interest is not deducted again from operating cash flow. The hurdle rate is illustrative, not a full cost-of-capital estimate.
Deferring is shown as zero investment and zero cash flows. It does not model the value of waiting, pilot costs or foregone opportunities. NPV is conditional on the inputs, not a forecast or a decision by itself.
Bigger numbers can hide weaker buying power.
Revenue growth and salary increases need context. Ask what changed in prices before calling the increase real growth.
Capacity grows when capability improves.
More hours and more people are only part of growth. Better skills, tools and processes can increase what the same resources produce.
Bring it home Your salary rose 8%. Are you 8% better off?
0%20%
0%15%
+1.9%
Change in purchasing power, before tax and assuming your spending basket follows this inflation rate.
Exact calculation: (1 + pay rise) ÷ (1 + inflation) − 1.What I want to carry into work
Review plans when the environment changes. Test demand, cost and financing assumptions separately, then look at the combined effect.
From learning to action
A better decision begins
with better questions.
What is the team not saying?
Explore a leadership response above. Look for concerns that a quick yes could conceal.
Does more volume create more value?
At your selected price of ₹10,000, cohort profit is ₹4.00L. Test a discount before assuming the extra volume will pay for it.
Which assumption could change the call?
Your expansion NPV is ₹2.44L. A positive result is a reason to investigate, not a guarantee. Test the downside.
Understand the people.
Test the economics.
Read the environment.
That is the connection I am taking from Term 2. In my next review, I want to ask one question from each lens before committing to the plan.
Keep exploring
The ideas behind the experiments.
Personal reflections and original learning exercises, inspired by the three subjects. These are not reproductions of ISB teaching cases or an official course summary.
- Amy Edmondson · Psychological Safety and Learning Behavior in Work TeamsThe research behind speaking up and team learning.
- MIT OpenCourseWare · Price elasticityWhy changes in price and quantity must be considered together.
- Federal Reserve · Monetary policy, inflation and employmentHow financial conditions can influence spending and investment.
Previously in the journalTerm 1 · From Intuition to Evidence
View the ISB journey