(Spoilers below, beware!)
Property law hasn’t changed that much since the days of Medieval England, and the laws of supply and demand remain constants of capitalist economies. Sure, the details of real estate zoning and inheritance/estate law can shift, but the fundamentals of real estate are essentially timeless.
Look no further than HBO’s Game of Thrones; here are 12 lessons about money and real estate that we can learn from the denizens of Westeros.
1. Choose your partners well, because your partnerships will be tested (and often).
Partnerships are tricky things, and should never be entered into without 100%, unfailing trust. Just ask Ned Stark after Littlefinger revealed his true colors. Or Robb and Catelyn Stark at Edmure’s wedding, hosted by the Freys.
For better results, Jon found someone he can trust implicitly in Ser Davos, in Sam, in Tormund. Of course, he too learned some hard lessons by trusting Ser Allister Thorne to be First Ranger. But note that the lesson he took to heart wasn’t “trust no one” after he was betrayed; it was to take the true measure of his future partners and only partner with honest, loyal people.
2. Debt can crush the rich, too.
When you spend outside your means, bad things happen. Debts can ruin families, can undo all that a family has built. Robert Baratheon overspent, and it put him under the power of people who didn’t have his best interests at heart. His successors are still trying to clean up the financial mess of debts he left behind.
And then there’s Jorah Mormont, who accrued so much debt that he turned to crime to try and pay it down.
Live on a fraction of your income, and invest the rest. If you spend more than you earn, you’ll find yourself at the mercy of lenders, attorneys and advisers who are savvier and more ruthless than you are. Or you’ll find yourself in such dire straits that you make desperate gambles, destined to fail.
3. Leverage other people’s money and time for your gains.
One of the greatest lessons about money is that you can put other people’s money and time to work toward your goals and wealth.
Leveraging other people’s money involves either borrowing money or raising money through partnerships. Leveraging other people’s time involves paying them to help you meet your goals.
Real estate investors tend to understand this lesson implicitly. When you borrow a rental property mortgage, you leverage other people’s money to buy an asset that grows your income and net worth. Even after accounting for the mortgage costs, you still earn a cash flow every month – one that you can predict using a rental property calculator.
When you hire a property manager or a contractor, you leverage their time so that you don’t have to sacrifice your own.
In Westeros, Cersei Lannister took advantage of both sides of leverage in a single maneuver. She arranged a loan from the Iron Bank, specifically to hire 20,000 mercenaries in the Golden Company. An army to defeat her enemies and consolidate her power.
Leverage is one money lesson you should learn sooner rather than later, or you’ll still be relying on your own sweat and your own savings in 20 years from now, rather than employing others’ money and labor.
4. Calculate risk, rather than avoiding it.
Life is inherently risky. You can’t run from risk your entire life. But you can manage it, calculate it, and choose which risks are worth taking and which are better left alone.
Look no further than stocks. Half of Americans own no stocks at all. None, not even as part of a retirement account.
It’s not because stocks are expensive. You can open a brokerage account for free, you can invest with $50, and you can even buy commission-free ETFs if your account is with Schwab or Vanguard.
It’s because half of Americans are afraid of the risk. But not investing is far riskier, in the long term, than investing. If you invested $100 in 1928 in the S&P 500, it would be worth $399,885.98 today. Left in cash, it would have lost nearly all of its value: $100 in 1928 was worth $1,468.46 in today’s dollars. (Read up on real estate vs. stocks for early retirement before throwing all your eggs in one basket!)
Jaime Lannister calculated risk when he sent Edmure Tully into Riverrun to take command and surrender the castle. Jaime had a choice: an extended siege that he couldn’t afford (in other words, guaranteed failure), or take a risk on Edmure.
Among the many lessons about money that everyone needs to learn is that not acting is often riskier than acting, in the long run. The more you learn about personal finance, the more you learn you need to learn how to calculate and manage risk, rather than run from it.
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5. Think like the bank, because the bank wins in the end.
Monarchs and dynasties came and went in Westeros. The Iron Bank outlived them all.
They don’t play at politics or war or trying to impress anyone with fancy clothes or titles. Instead they make investments, and live on the income of those investments.
It’s an easier life than running around trying to conquer the world. And a lot less dangerous to boot.
Among the most important lessons about money is learn how to build passive income. You can put your feet up while everyone else runs themselves ragged.
6. Diversify your income streams.
Passive income is great, but if you rely only on a single source, you’re vulnerable to that source disappearing.
Tywin Lannister saw the writing on the wall when the family’s gold mines ran empty. So he arranged marriages with the wealthiest family he could find, the Tyrells, to bolster the crown’s resources.
If you rely on one property to generate all of your rental income, or one stock to pay all your dividends, you risk complete financial collapse if that one investment suffers. It’s why the first lesson about money that all investors learn is diversification, to spread risk.
Know better than to put all your eggs in one basket, and that includes one asset class. Spread your money between many different types of stocks, and many different real estate holdings, and with that diversification you can even bend the 4% Rule to retire earlier.
7. Don’t count on inheritances.
Children of wealthy parents often don’t see a penny of their parents’ money. Danaerys didn’t see any of hers. Sam didn’t see any of his (well, he wouldn’t have, if he hadn’t stolen his father’s sword). And poor, stupid Edmure Tully… that remains to be seen.
In Medieval England, there wasn’t much social mobility to speak of. But in today’s world, most millionaires are self-made, based on their habits. Rich heiresses might make for entertaining “reality” TV, but most of America’s rich never inherited a cent.
8. …And even when people do inherit property and money, they usually squander it.
Did you know that 70% of wealthy families see the wealth exhausted by the second generation? By the third generation, 90% of originally wealthy families are no longer wealthy.
Robb Stark lost his family’s wealth and property. Jorah Mormont did the same, blowing through his family money and racking up terrible debts. Stannis Baratheon lost everything, including his wife and daughter, after risking everything on a failed political campaign.
Likewise with lottery winners; 70% of major lottery winners are broke within three years. Save and invest in diverse assets that produce income (like, say rental properties!) if you want to build sustainable wealth.
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9. Starting rich helps, but it isn’t everything.
It definitely helps to begin life with the advantages of a wealthy family. For starters, you get a good education, which prepares you to create your own success. Beyond education, family connections can make a world of difference. And then there’s the little matter of access to funding when you need it.
How far would Tyrion have gotten in life without his education, or his access to money?
Still, where you start isn’t always where you stay. Tyrion was sold as a slave, after all. And look at poor Sam Tarly: firstborn son of a wealthy landowner, whose father disowned him and sent him packing for the ends of the earth.
But in both of those cases, excellent educations eventually led to their recovery, their ability to stand back up after a fall from grace.
10. Weren’t born rich? You can still marry into wealth and property.
Even in Westeros, smarts and a way with words can mean more than raw money. Littlefinger was not born into money, but he was lucky enough to receive a first-class education. He leveraged that education into business success, into networks of contacts and into a marriage with Lysa Arryn.
Likewise with Bronn: sure, he’s no ink-smudged scholar, but he’s bold and he knows his trade well. Opportunity came when Tyrion needed a warrior at the Vale, and Bronn later leveraged the contacts he made through Tyrion to be offered marriages with wealthy women.
11. Connections count: sometimes who you know makes all the difference.
In her teenage years, Danaerys had nothing but a bratty brother and a couple connections: a rich businessman (Magister Illyrio) and a high-ranking government official (Lord Varys), to be exact. But one of those connections introduced her to a powerful man whom she would marry, and through her marriage she secured several other connections and gifts that would later prove invaluable.
Varys himself was only able to create wealth and power for himself through connections and networking. Likewise with his nemesis, Littlefinger.
Even Arya Stark, on the lam from the law, was only able to survive and eventually escape the country because she had relationships with several powerful men (Yoren, Jaqen, The Hound).
12. Hard work yields results (especially when that work is put toward networking).
There’s no substitute for hard work, no shortcuts to lasting success. Jon wasn’t made Lord Commander because he was the most popular guy in the Watch; he earned grudging respect because he worked harder than everyone else and kept a cool head in a crisis. Even the earlier example of Littlefinger, who married into real estate, didn’t take a shortcut – he spent years working harder, networking more, learning and knowing more than anyone around him.
Success takes work. Nor does it last, regardless of how much wealth you’ve already attained, if you don’t continually work at maintaining and improving it. Look no further than lazy, drunken Robert Baratheon. Even Loras Tyrell, heir of the second-wealthiest family in Westeros, succumbed to complacency and indifference. Where did his complacency get him? Sidelined and eventually ruined, because he wasn’t paying attention to the threat from his competitors.
Life, like Game of Thrones, is unpredictable, but there are still firm rules to success. Someone with connections and education can go far in real estate investing and in life, if they carefully manage their finances and their partnerships.
Who would have thought Game of Thrones could teach us so much about wealth and real estate?♦
Have some life lessons from Game of Thrones you want to add? Spread the love in the comments section below!