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In this segment, the speaker discusses adding complexity to a financial model by revising earlier assumptions that may not be realistic. They introduce constants, starting with the inflation rate, which is a challenging estimate. Currently, inflation in the U.S. is just over 1% per year, but the speaker suggests using a 2% rate for modeling purposes. They emphasize the importance of incorporating a realistic inflation rate into the model, as the future value of money will be lower than its nominal future dollar amount due to inflation.
