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7 Financial Lessons from Game of Thrones
Game of Thrones has captured the imagination of an entire generation of fantasy and science fiction fans. Its unique storytelling and memorable characters have leapt from the screen and into our daily lives. If you search deep enough, you’ll quickly see that GOT offers up some important financial lessons for new and experienced investors looking to slay their own dragons in the market. Below are seven lessons from GOT that investors can take with them into the market.
- “Winter is coming”
Signs of a long, gruesome winter emerged well before the December Solstice. Investors who heeded to the warning signs were able to find warmth in a difficult season, whereas those who ignored the calls found themselves in a highly undesirable position.
In our case, the prolonged downturn in commodity prices, which bottomed this past winter, had its origins in the warmer months. This should have provided investors with plenty of time to revaluate their positions before $26 a barrel oil became a reality in February. Let’s also not forget the massive equities selloff that kicked off 2016.
In the financial markets, it pays to be forward looking in order to get a sense of where the market might end up. In our case, “winter” can come at any time because it has several meanings (note: “Winter is coming” is never a good sign).
- You need reliable investments
While most active investors leave plenty of room for speculating, they also realize that reliable investments are absolutely necessary for long-term success. Daenerys Targaryen took many risks, but did so knowing she can count on her dragons. At the end of the day, it’s the dragons that’ll help her reclaim the Seven Kingdoms, not her army of unsullied (no offense to those chaps). The same logic applies to investing. Speculation may have its place, but can never replace your long-term investment strategy.
- Remove emotions from decision-making
Humans are emotional creatures (especially when there’s money on the line). Ned Stark found that out the hard way. His string of emotional decisions eventually cost him his head. Now compare his actions to Tywin Lannister, who made very few emotional decisions (OK, so Tywin gets murdered by his outcast dwarf son while on the toilet, but please don’t lose sight of the point).
Emotions and decision-making should never go together in finance. In fact, there’s an entire science devoted to helping investors master their trading psychology to overcome this very issue.
- Debt can really hurt you
Many investors are attracted to brokers promising 1000:1 leverage without really thinking about the long-term consequences of margin trading. In the majority of instances, too much debt can really destroy your chances of success. In GOT, don’t let the throne in King’s Landing fool you. The real power lies with the Iron Bank of Braavos. Don’t think that the Lannisters (or anyone else in Westeros, for that matter) can rule the throne without financing from the Iron Bank.
Ultimately, the Iron Bank will always get its due. The same applies to your broker, which means you should use debt (leverage) sparingly in your trades.
- Be like Jon Snow
We really haven’t thought this one out too clearly, but Jon Snow is awesome and you should endeavor to be more like him. Think about Jon for a second: Was there anyone more patient, more loyal and more composed in the face of adversity? Jon was thrust into the Night’s Watch, taken prisoner by the wildlings, formed an alliance with the Free Folk and defended the Wall against the White Walkers. Jon made a series of incredibly bold moves and wasn’t afraid of the unknown.
It’s clear that Jon’s patience, analytical skills and good judgement are essential for success in investing. While Jon struggled between the Night’s Watch and Free Folk, he sought a middle ground and didn’t let greed or pride deter him. While that appears to have cost him in the end, we are hopeful that he’ll be back!
- Look at the evidence
Investors enter the market with their own pre-conceived notions, which often blind them to contrary signals that can really serve as warnings if caught in advance. Each day, the financial calendar gives investors many signals about their investments. The same holds true for the daily charts. Sometimes investors need to critically examine why they are holding a position and should be prepared to change course quickly if contrary evidence presents itself.
The Lannisters have really done no such thing, if you think about it. They are constantly putting out fires around King’s Landing without actually addressing the root cause. You have White Walkers to the north, a Targaryen with fire-breathing dragons across the seas and infighting throughout the Seven Kingdoms. These fires will surely engulf the Lannisters in the coming seasons.
- Having a trusted advisor is really important
Sansa Stark’s marriage to the monstrous Joffrey Lannister was allowed to happen because she had no one who could come to her aid or give her the advice she needed. With her family murdered, she was left to the vices of a maniacal king who abused her in so many ways.
Although no investor will ever have to endure Sansa’s trials, they can lose their way without a trusted advisor. Luckily, many brokers provide client relationship managers and personal account managers who can help investors navigate their way in the market. A broker that provides personalized services can also fill the same need.
Sources:
Chris Taylor (March 25, 2015). “The financial lessons of ‘Game of Thrones’”. Reuters.
Lynette Gil (July 18, 2014). “5 financial lessons from Game of Thrones.” Life Health Pro.
Michael Janda (September 30, 2015). “Market chills: A commodities crisis could quickly become a financial crisis.” ABC Australia.
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