Viewers of the television show "Game of Thrones" are treated to epic battles, political intrigue, heroes, villains and characters you're not sure whether to love or hate. The show also has dragons — fire-breathing dragons! Beyond the entertainment value of Game of Thrones, the show offers insights into leadership and investment decision-making. Disruptive technology, diversity and family succession planning are central to the struggle for supremacy in the fictional world of Westeros. Advisors will be familiar with the top five investment lessons from "Game of Thrones":
1. Beware of Disruptive Technology
Jaime Lannister (also known as the Kingslayer) led his large and well-armed army into battle against the army of Daenerys Targaryen (also known as the Mother of Dragons) in a recent episode of the show. Daenerys rode into battle on the ultimate in disruptive technology, a fire-breathing dragon! Jaime's army suffered a disastrous defeat, and he survived to learn a life-changing lesson about the threat of disruptive technology.
Amazon and Apple may not have dragons, but the disruptive force from both companies is equivalent to that of a fire-breathing dragon. Amazon's leadership in ecommerce changes how people shop, profoundly changing the competitive environment for brick-and-mortar retailers. Apple is a serial disrupter, challenging established business models in computing, communication, music, photography and advertising. Real-world Jaime Lannisters often ignore the threat from disruptive technology until it is too late.
2. Complacency Is Often the Downfall of Successful Organizations
"Maesters" on "Game of Thrones" are scholars who are trained at a university-like retreat called the Citadel. Although maesters are thought to be the wisest men in Westeros, their complacency may be a fatal flaw. In the current season, the maesters are repeatedly confronted with evidence of an imminent threat to humanity. Rather than take the threat seriously, the maesters laugh off the threat and initiate halfhearted efforts to gather more information.
Examples of complacency are easy to find. Many retail organizations shrugged off ecommerce threats, taxicab companies ignored the inroads made by ride-sharing companies such as Uber, and investment managers that charged high fees or sales loads were slow to react to the increased popularity of index and smart beta ETFs. Today, there are many company leaders who are complacent about the competitive environment, and risk being ambushed by disruptive competitors.
3. Markets Adapt to New Tactics
Jaime Lannister lost a key battle in the first season of "Thrones, tactically outsmarted by by the leader of the opposing army. Jaime learned a lesson from the season one defeat, and with a change in strategy won a key battle in the current season.
Investment markets are remarkably adaptable, and sustaining a competitive edge is increasingly difficult. Success breeds imitation in the investment industry, and a herd of imitators can erode or erase the benefits of successful investment strategies.
Quantitative investment strategies gained popularity in the early part of the 2000s, but many "quants" ended up as part of a herd that invested in the same stocks. The quant boom ended badly with the "quant quake" of 2007, as the herd headed for the exits at the same time.
