In April the sprawling fantasy epic Game of Thrones will return to HBO. While most the show’s viewers applaud the show for its nuanced treatment of various sociopolitical themes, its wondrous fantastical landscape, and its complex interpersonal dynamics, Game of Thrones' examinations of economics is oft overlooked. But the lessons they teach hold true, whether they take place in Westeros or present day America.
Sure, it might seem like we’re grasping at straws to look for financial tidbits in a show that, on its surface, is plastered with lurid sex and ultraviolence and at its core a broad examination of humanity itself. But make no mistake, Game of Thrones has a lot to say about money, usually as illustrated by its “old money” anti-heroes, the Lannisters.
So what exactly does this highly dysfunctional, yet fantastically wealthy fictional family have to say about getting rich? Pretty much what the same things Warren Buffet would, albeit it with more threats of murder.
"Winter is coming."
For essentially the entirety of the show (and books, I am told, although I have not read it) characters ominously warn that “winter is coming.” The denizens of Westeros are under no illusion that times stay sunny forever. All good times are tempered with the realization that eventually, they will be hampered by lean times.
While this attitude displays a certain amount of fatalistic pessimism, it would certainly behoove many ceaseless market optimists to realize that there’s no such thing as an eternal bull market. When Alan Greenspan said in 2002 following the tech bubble burst that “cyclical episodes overall should be less severe” going forward, assuming that "winter" would never again be as bad as it had been in 2000. Of course, we all know how that turned out.
"A Lannister Always Pays His Debts."
Thus goes the mantra of the realm’s version of the Rockefellers. Their definition of “debt” certainly covers both the personal and political, but, most importantly, when a wealthy Lannister refers to debt he is usually at the core referring to the financial kind.
The Lannisters are in the business of acting as creditors, putting nearly everyone around them in their debt. At the same time, they themselves never acquire too heavy a burden, or at least one they cannot pay off. You have to borrow money to make money, goes the real life mantra. And the Lannisters aren’t afraid to borrow. But they only do so when they can pay it back.
Returning to our whipping boy Greenspan, in that same address to the Federal Reserve in 2002 Greenspan downplayed the financial sector’s increasing reliance on unpaid debt, saying that “swaps and other derivatives throughout their short history, including over the past eighteen months, have been remarkably free of default.” Of course, we all know how that turned out.
Debt is debt is debt. And if it isn’t repaid, no machinations can save you, no matter how hidden in complexity they are.
"Fear Cuts Deeper Than a Sword."
While the fantastical violence of Game of Thrones get a lot of press, the show returns again and again to the idea that violence itself is not usually the biggest motivator of people. Fear is. The specific quote from Game of Thrones is “fear cuts deeper than a sword,” and that idea is of course quite applicable to the financial world. Not that investors have to worry about swords, so to speak. But that if there’s one thing motivating the market at any given time, it’s fear.
A little fear is fine, of course. But fear also causes people to act out of line with what they know to be right, and to act irrationally. And that that fear cannot be trusted to be correct or accurate.
Let’s return to poor ol’ Greenspan one last time. On the Enron disaster, Greenspan said the immediate fearful reaction confirmed the efficacy of the market to self-regulate, saying that it “provides encouragement that the force of market discipline can be counted on over time to foster much greater transparency and increased clarity and completeness in the accounting treatment of derivatives.”
Of course, we all know how that turned out.