Could someone explain this to me like I'm a 5 year old (who understands what a discount rate and present value are, but not why that collection of words makes things harder for reddit)?
If interest rates are zero, that's a good deal. If rates are 25%, that $1 will almost get there on its own in a Treasury. A good deal in a low-rate environment is a bad one when rates, the price of money, are high.
I'm still confused. I think of inflation as a thing that devalues a present day $1. But as it applies to companies with revenue it seems like a rising tide that would lift all boats, and something that kind of divides out of the analysis of the future revenue stream of a company.
e.g. If Reddit's daily revenue is $x and inflation is 10%, then its daily revenue in a year is (approximately, caveats about their ability to raise prices, etc.) $1.1x. So Reddit can say "give us a dollar today and we'll give you $10 multiplied by ten years of 10% inflation in ten years". Is that mental model wrong?
I'm also confused why this problem particularly applies to Reddit, which seemed to the the implication of the comment I originally responded to. Is that just because Reddit makes a loss, and this challenge applies to all such companies?
x / ((1+i)^n)
Discount rates are affected by interest rates, because interest rates represent what else you could do with your capital (you can always invest in a Treasury instead of a tech stock).
So if i goes up, x goes down.
TL;DR the higher returns from US bonds make other investments comparably less attractive because you can get better yields from the USD bonds.