Harvard Business Review LogoJune 22, 2026HBR Staff; skodonnell/Getty Images; AIAs the era of cheap capital comes to an end, executives will need to relearn the discipline of rigorous capital allocation. For nearly two decades, historically low interest rates allowedFor nearly two decades, executives operated in a world of extraordinarily cheap capital. In the aftermath of the global financial crisis, central banks cut interest rates to historic lows and flooded markets with liquidity through quantitative easing. Between 2008 and 2020, the after-tax cost of borrowing for many large companies hovered at or below inflation—making debt, in real terms, effectively free.
The End of Cheap Capital
As the era of cheap capital comes to an end, executives will need to relearn the discipline of rigorous capital allocation. For nearly two decades, historically low interest rates allowed companies to prioritize growth, tolerate weak returns, and rely on performance metrics that ignored the true cost of capital. But a combination of rising federal debt, massive AI-infrastructure investment, and large-scale energy-system spending is now putting sustained upward pressure on long-term interest rates. The result is a more capital-constrained environment in which strategy, investment decisions, and value creation must once again be tightly linked. This article argues that companies which continue to pursue growth without economic profitability will struggle in this new environment, while those that allocate capital selectively and focus on economically profitable growth will be better positioned to outperform.
TL;DRAI
For nearly two decades, corporations borrowed at near-zero rates making debt effectively free; this cheap capital era is ending. Tech managers must shift from growth-at-all-costs to rigorous capital allocation and ROI discipline in funding decisions.
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