Managers Need to Relearn How Interest Rates Work: As rates rise, outdated thinking can lead to costly conclusions.

This article discusses the need for managers and investors to relearn how interest rates work as rates begin to rise after a period of near-zero rates. The author compares the situation to a scenario where gravity is turned off for 15 years and then suddenly returns, requiring people to relearn basic skills. The article explains that the prolonged period of low interest rates has led to outdated thinking and a lack of awareness of concepts like hurdle rates and discounted cash flows. The author emphasizes the importance of understanding the time value of money and the impact of interest rates on business decisions. The article concludes by suggesting that a return to value-oriented thinking may be necessary in the current interest rate environment. [Extracted from the article]