Game of Thrones and seven lessons in economics and finance

An adaptation of the best-selling book series A Song of Ice and Fire by author George R.R. Martin, Game of Thrones is a smash-hit HBO television series. Set in a fantasy medieval world, Game of Thrones tells the story of the Seven Kingdoms and a struggle for power in a changing time where dragons have returned from extinction and the Children of the Forest and White Walkers are no longer fables told by old maids to scare little children. As different as it may seem from the real world we live in today, there are some lessons in economics that we can learn from the Seven Kingdoms that are applicable to our world (sometimes frighteningly so!).

So at the risk of ruining Game of Thrones, here are seven lessons that the series can teach its watchers about economics and finance. Oh and before we start…

Original image source: IMDB. Words added.

Lesson one: Cash is king

The (former) Tyrells of the Highgarden were a rich family, desperately courted by the Lannisters to help with the dire situation in King’s Landing. The Lannisters understood that kingdoms need people, and people need to be fed and clothed – all of which requires money. The people need to know their leaders are going to be able to provide for the economy in order to place trust in their rule.

In the real world, we look over to Donald Trump – a man who has filed for bankruptcy multiple times. These bankruptcies can be seen as strategic; his net worth today is 3.7 billion USD. The fact that he is a successful businessman has awarded him with support from many people (read ‘commonfolks’) who do not necessarily agree with his stance on human rights issues and often cringe when they read his tweets. Their reasoning? He’s smart with his money therefore presumably he’ll be smart with the government budgets. In order to gain popularity, the leader of a nation needs to show how smart they are with their finances.

Lesson two: Defence comes at a cost

Be it the battle of the five kings, or the struggle for power between Daenerys and Cersei (the “Mad Queens”), the balance sways to the side with the greatest number in their infantry. It matters how many men are fighting for their leaders. Whether the Knights of the Vale are involved, the Dothraki, the army of the unsullied, or even the ginormous dragons, wars are won by the strongest armies; and the various kings and queens make it known to the others that they are not against using their power in numbers to win the coveted Iron Throne.

Much like Westeros, the real world can be a volatile place to live. Every year, a big portion of many national budgets is allocated to military defence (armies, air forces, navies and other defence forces). The Australian Federal Budget in 2017 included a $34.2m allocation for the military security required for the 2018 Gold Coast Commonwealth Games. This might seem exorbitant when you consider other social issues like the rise of homelessness in Australia, but defence is an important mechanism in the face of rising terror activities. Furthermore, as North Korea tries to place itself on the map as a formidable force with nuclear weaponry, defence spending seems wise.

Lesson three: Insurance is protection

As the aforementioned Tyrells were destroyed by the Lannisters, their gold and food were taken by the victors as spoils of war. Then down came Daenerys and her dragon Drogon – burning the loot carts and destroying the Lannister army in what seems like mere seconds.

The lesson here is easy; you need to have proper insurance in place, just in case your enemy comes down on you with their fire-breathing baby! Okay, maybe that’s a little extreme – but in today’s uncertain world, it’s absolutely imperative to have proper insurance in place. Whether it’s life insurance or income protection, it pays to plan for the worst no matter how old you are. It may be ominous to put it in those terms, but it’s better to be prepared than get caught off guard and unprotected. Fact: 100% of all people will die at some point in their life, and it’s unlikely you’ll be coming back as a White Walker.

Lesson four: Banks are powerful in their own right

The Iron Bank of Braavos is a powerful bank operating from Essos and has significant influence over the major houses of the Seven Kingdoms. We saw how the Iron Bank intimidated the likes of Tywin Lannister, and how having them on your side makes you seemingly invincible.

After the Global Financial Crisis (GFC), we’ve seen governments crack down on the major banks to become more transparent in their reporting, and most banks have introduced checks and balances to ensure their internal controls are followed to the absolute letter. Despite shaky confidence in the world’s major banks, Australia’s four major banks still have a great impact on our economy and are able to exert significant influence over major government projects.

Lesson five: Industry is essential

Now that the power hungry royals in the Seven Kingdom are all slowly becoming aware of the threat from the White Walkers, it is easy to see that they will require mass production of armoury and weapons if they have any chance of surviving. Blacksmiths are the unsung heroes of this show.

While the real world is not gearing up for a war against an army of the dead, our industries are moving towards mass production in order to gain economies of scale and survive in the shaky aftermath of the GFC. Ours is a world of cash flow problems, unstable stock markets and increased competition caused by new technologies opening up channels of distribution and marketing. While socialists might argue that mass production is nurturing consumerism, it is simply a case of feeding demand with supply. Our world might not need dragon glass, but industry is essential for growth.

Lesson six: Violence slows growth

Wild fire destroyed the great citadel of King’s Landing, taking with it the lives of thousands of people and inexorably destroying the city’s infrastructure. There is a part in season seven of the show (where Ed Sheeran reminded us all that Game of Thrones is only a work of fiction) where we are told of the horrors faced by the people of King’s Landing after this attack.

This reality is not too dissimilar from the war ridden areas of our world – like Syria, Afghanistan and Iraq – where the fight against terrorism is persisting alongside the struggle to establish a semblance of governance and industry. When you’re greeted with a battleground every day, it’s hard to funnel energy into anything else beside the war effort. Growth is slowed, halted, and sometimes even reversed.

Lesson seven: We’re all in this together

The common enemy of the kings and queens of the Seven Kingdoms is the army of the dead lead by the Night King. Eventually the protagonists of the series will need to put aside their differences and embrace unity in order to defeat this evil.

Similarly, the countries of the world cannot exist independently; we all need each other to fill the gaps of the trade deficits, to import the items our country is short of, and to export the things we have in ample supply.

For example, studies show Japan’s population is largely aging, and ultimately they will have more jobs available than they have workers, which suggests that Japan will require skilled immigration to fill in the gaps. While the world struggles with political and instability and will never truly be able to agree on things, we have to come together and help humanity in order to progress the human race.

While the show has undoubtedly taught us a lot, it is important to realise the limitations. Personalised lessons in economics and finance are best obtained by speaking to the experts. When it comes to your personal situation, there is nothing like speaking with a financial planner. Whether you want to learn about planning for the future, exploring different investments, or protecting your assets through insurance or estate planning, we’re here to help.

Be the ruler of your own kingdom and contact us today.

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Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.