WHAT DOESN'T KILL YOU MAKES YOU STRONGER

This year's Inc. 5000 companies managed to grow quickly through a period of high inflation the likes of which we haven't seen in over 40 years. Here's how it shaped these businesses for the better.

- JAMES SUROWIECKI

Over the past four years, companies have had to deal with problems that no one could have foreseen in 2019: a global pandemic, supply chain disruptions, worker shortages. In the process, they also had to figure out how to handle a problem that had seemed to be a thing of the distant past-inflation. After more than a decade in which the inflation rate rarely touched even 3 percent, it soared to 7 percent in 2021 and was at 6.5 percent in 2022. And even as it's cooled down over the past 18 months, its impact on all companies-particularly this year's Inc. 5000will likely influence their behavior for years to come. Which raises an interesting question: Is coming of age in an inflationary moment a boon or a bane?

This question may seem to have an obvious answer, since inflation presents a series of challenges to businesses that stable prices do not. Rising interest rates make raising moneyeither via equity funding or debt-more expensive. Operating costs inevitably rise. Figuring out how to keep workers, who expect raises to match the rising cost of living, becomes more complicated. And balancing the need to pass along costs and maintain profit margins with the desire to avoid alienating customers makes pricing decisions more difficult.

You might think, then, that periods of high inflation would discourage entrepreneurship and deform companies, leaving scars that make it hard for them to adjust to normal times. And yet, when you look at both the experience of the past few years as well as the inflationary period of the 1970s and early '80s, what you see is something quite different: Entrepreneurship is flourishing, with companies being started at a fast clip and established small companies accelerating their growth.