What Game of Thrones teaches us about perspective

Reality is subjective, and based on our perspective. Your perception is your reality.
By Larissa Fernand |  10-05-19 | 
 
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About the Author
Larissa Fernand is Website Editor for Morningstar.in. She would like to hear from you and welcomes your feedback.

Game of Thrones is esoteric and bizarre, with White Walkers, witches, dragons, and magic. Bring in the back stabbing, manipulation, deceit, murder, politics, quest for power, loyalty, honour, love, incest, and elaborately choreographed (and sometimes torturous) sex scenes, and reality is starkly presented, with great intensity and drama.

Before you scoff at the reality slant, just google Lessons from Game of Thrones, and you will be surprised at the enormous amount written on that topic. The interplay of multifarious characters and their motivations give rise to many a lesson, be it on the subject of finance, leadership, management, or philosophy.

On the subject of finance, I would like to elaborate on just one insight:  perspective. When it comes to morality or ethics or money, all of us have deeply held views. And this impacts how we perceive reality.

To most, Eddard Stark is an honourable and courageous man whose deeply embedded values are apparent in his love and loyalty. But to Daenerys Targaryen, he is the warrior who rode beside Lord Robert Baratheon in a bloody rebellion which got her father, King Aerys II Targaryen (who earned the moniker “The Mad King”), and brother, Prince Rhaegar, killed.

The Wildlings were perceived as savage brutes who constantly were at each other’s throats. To Jon Snow, they were simply a spirited people, in love with their freedom who refused to bend their knee to any king. He admired Mance Rayder and fell in love with Ygritte.

While a fair number of characters looked down upon Tyrion Lannister as vile and ugly and depraved (at least in the earlier seasons), his sister included, Jamie Lannister never did. He trusted his sibling and loved him.

Cersei Lannister is the cruel, conniving, manipulative, alcoholic diva. Jamie Lannister, who loved her to bits, probably saw her as an insecure and psychologically abused woman who lost her mother as a child, had to contend with a very dominating father, found herself in an empty marriage, had to keep an incestuous relationship under wraps, and live in the shadow of the prophecy that she would be pushed aside by another queen “younger and more beautiful” than she.

It’s all about perspective. How you perceive a situation is due to your insecurities, biases, prejudices, experiences and upbringing at play.

Take the case of two individuals, both in their 30s, earning well, single, no dependents. Let’s further assume that each are financially well to do and already possess a home with zero debt.

One channelizes all his savings into bank fixed deposits and fixed income instruments, simply because he saw his father lose heavily in the stock market. He perceives equity to be dangerous, and does not have the stomach for a market upheaval. The other only invests in equity and is comfortable with the asset class.

Identical circumstances. Identical risk capacity. Yet, the investing outcomes differ because the risk tolerance differs.

(Risk tolerance is the attitude and perception towards risk, and finances. Risk capacity is all about the financial aspects of an individual’s ability to sustain a market decline without suffering an unacceptable loss of lifestyle or quality of life. It is based on the individual’s assets and liabilities, sources of income, cash flow, time horizon for the various goals, and number of dependents.)

Let’s take this one step further. Risk tolerance is not static. People overestimate their risk tolerance when the market is in bullish territory. And then they really pull in their horns when things go bad, and are inclined to dump everything and switch to a more conservative mix or hold cash. They (wrongly) perceive equity to be risky when the market is in the grips of a bear hug, but throw caution to the wind when it keeps climbing greater heights.

Ditto with debt. Some are extremely averse to it, others have no problem living dangerously on the edge.

Morningstar’s behavioural finance team noted that an individual’s unique “mental time horizon,” has a significant impact on their perspective, which, in turn, impacts their cash management, debt reduction, and savings behaviour.

The greater the long-term perspective, the more far ahead they think into the future, the more money they tend to save. When they live life with a short-term perspective, more weight is given to immediate needs, resulting in financial behaviour that discounts the future and hurts long-term goals.

It’s all about perspective. Everyone views reality through a different perspective, and accordingly makes decisions.

This gets all the more stark when in a marriage the two partners have divergent perspectives on savings, spending, debt, and donating to charity. Even if you are single, your perspective towards money could be hindering the creation of an optimal portfolio. It is not surprising to see many DIY investors hold portfolios that directionless and chaotic.

Chaos isn't a pit. Chaos is a ladder. —Littlefinger

Perspective, again.

Would like to end with a suggestion: Do consider obtaining the help of an independent financial adviser who can bring about clarity in your wealth creation strategy. An objective perspective will help.

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