intelligence and wealth

brat


When most of us were younger, we were told to do well in school – make good grades, impress the teachers in order to get good recommendations, do extra credit.
Scoring well on the ACT or SAT meant a lot.  Proving that you were smarter than the average bear somehow indicated future success.  Yet intelligence isn’t always a marker of success – at least success as measured by wealth.

Intelligent people are often gripped by what I’d call (technically) “smart people stupids.” If you’re an intelligent person, it’s quite easy to imagine a variety of outcomes to any given set of circumstances.  If A happens, then B or C or even D might occur.  Wondering whether “slim chance event D” might occur can drive an intelligent person nuts – you might sit around wondering how you would deal with situation D; would reaction D.1.1 be appropriate, or D.1.2?  How will this affect you 15 years from now?

Over the last ten years I’ve started to believe that intelligence – at least as far as the ability to imagine future events based on current circumstance – can be a crippling factor in the pursuit of wealth (and happiness). Someone who doesn’t have the ability to imagine positive outcome X may also be able to avoid thinking about negative outcome Y – and therefore be freed from worrying about the result of their actions.  Worrying about the future is a heavy burden; not worrying about the future would be liberating for most of us.

I know people who don’t worry – like I do – about long-term wealth. They assume that they will have “made their nut” at some point – whenever they make it.  Whether it’s the blissful ignorance of uncaring or fewer smarts I don’t know.  I would assume that not worrying about the future is an overall net plus.  It may put you into some pretty bad situations, but at least you won’t worry about the outcome.

I suspect that being intelligent and being wealthy will always be unrelated. Just because I can play the saxophone, for example, doesn’t make me smart or stupid.  It just marks me as a good saxophone player.  I don’t think wealth accumulation can be associate with intelligence for much the same reason – it’s a skill, just like musical ability, or sports ability, or the ability to learn and speak foreign languages.  You can’t think your way into it – you have it or you don’t.

photo credit: swambo

18 comments

  • I think I disagree that people have a “wealth gene” or not, and that having that “gene” correlates, either positively or negatively, with intelligence. Perhaps it is the case that intelligent people, who can imagine various outcomes, know that choices must be made in life, that those choices have ramifications, and that choosing usefulness, meaning, love and/or stability often trumps choosing money. There are certainly smart people who have pursued wealth, but I think most intelligent people pursue a life that enables them to pursue their intellectual curiosities and strengths. Sometimes that results in wealth, but probably not all that often. A professor, for instance, can spend his life studying medieval English literature. Such a lifestyle doesn't result in wealth, but it results in a life with a rich interior life. A teacher may have a desire to share her love of a foreign language with high school students. She may not make lots of money, but she has satisfaction and stability. Their worries about the future are not necessarily naive because they know that they may face financial stress, but they do not feel, even if they lose their jobs, that the time they spent in those jobs was in vain. I think, when we get to the end of our life, that we need to be able to look back and say that we did something useful, worthwhile, helpful. If you are pursuing that course throughout life, it helps you stop worrying about the future, don't you think?

  • I could see this… but I could also see that smart people imagine more possibilities, and therefore might be willing to take more risks.

    Regardless, I'm 1000% in agreement on the smart people stupids thing. Welcome to my job!

    • I think it's the opposite – when smart people can imagine more possibilities they tend to make no decisions, and take no risks. Being paralyzed by too many choices and outcomes.

  • I don't think smart people and wealth goes hand in hand. However, I do believe that smart people have a higher chance in getting wealth (whether it is earning more income or just from inheritance). But I have known some smart people with big money issues. They just do not know how to manage their money.

  • I think you'll find a positive correlation between intelligence (as measured operationally by Stanford-Binet or similar IQ test) and wealth, or at least income. But it's by no means a perfect correlation. And there is also probably a moderately positive correlation between education and wealth (or income), which is why we go to college, after all. But if you are looking for a single determinant of wealth, I think you're out of luck. Speaking of which, luck (good or bad) is also likely to be positively correlated with wealth.

    • Returns Reaper

      There's a big different between wealth and income. The studies done by the authors of 'The Millionaire Next Door' show that as an aggregate, some of the highest paying professions are some of the poorest accumulators of wealth. One example they often point out is doctors. While it is speculation as to why this is the case, it could be the feel since they are a doctor they should live in expensive neighborhoods, drive expensive cars, and spend a lot of money. Some of the best accumulators of wealth, the books says, are small business owners and teachers.

      So while I'd agree there's probably a positive correlation between income and intelligence, I don't think the same correlation exists between wealth and intelligence.

  • I think it's as simple as not all intelligent people have what it takes to be wealthy. But there probably is some correlation between intelligence and wealth even if it's not strong.

    Being intelligent is neither necessary nor sufficient for wealth, but it can help if you want it to.

  • Chad @ Sentient Money

    I have to disagree a little on this one. I know smart people who are risk takers and I know stupid people who aren't. Sure, intelligence isn't the end all be all of gaining wealth, but it helps. It's kind of like speed in sports. For example, the fastest guy on my college football team never started, but the next 9 fastest did. Speed isn't the ultimate determining factor on the field, but it sure helps.

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  • Intelligence is definitely correlated with income if nothing else because the limited supply of intelligence, which is a useful quality, sets a higher price. However, wealth is essentially a moral, that is, value-dependent issue and I think history makes it very clear that morality and intelligence have very little to do with each other. Intelligent people may spend their money better, but many intelligent people spend it nonetheless. I think, however, if you told an intelligent person to maximize wealth, he would do better than a unintelligent person; it's just he “chooses” not to.

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  • Here's my two cents on all of this. What determines wealth as well as intelligence is gene and environment (social). One of the most important aspect of success in my opinion is motivation. In one aspect, you get it from gene, just for the survival aspect hence it can be as basic as being able to eat everyday. This is when your social environment comes into play. If you have been motivated throughout your life time to be as best as you can be or just to be wealthy, than you are on your way to getting richer, and that is when higher intelligence comes into play. I think having above average intelligence (be it accumalated knowledge or just ease of learning) will be the way to speed up the process. The faster you accumulate wealth while keeping out of trouble, the richer at the end of your lifetime you'll be. Basically it is as many people have suggested an interralation of many variables that will influence each other more or less as you progress toward a certain goal.

    Now I also think that intelligence migh also be a detriment to capitalism. For exemple if you believe like I use to that because we are living in a limited supply of good, we can only get richer while someone else gets poorer, especially in the case of investing in stock. In that case, being 'aware' of consequence of such can lead you to a change of lifestyle that doesn't comes against your personnal moral beliefs.

    I also think that high intelligence while growing up, giving you a certain edge over the average person, will tend toward making you lazy, because everything is obviously easier for you. While other learn to work hard for getting the same result. In the long run, the people who have developped a good work ethic will get the edge on the lazy above average intelligent people.

  • There are also different kinds of intelligence.
    Some people with high IQ's don't have 'street smarts' or emotional intelligence.
    I think street smarts is very important to becoming wealthy.

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  • The crux of this argument is the difference between intelligence and wisdom (or knowledge). You can be extremely intelligent, yet naivete or lack of financial knowledge will prevent you from becoming wealthy. This principle applies to all subjects.

    As an anology, think about a superintelligent alien coming to earth with advanced knowledge that corresponds to his known environment or planet. He could get to earth and electrocute himself on a power line or get hit by a train or some similar fate, solely because he lacked the critical KNOWLEDGE of the fact that humans have created a system of electricity and transportation on this planet that is different than his. Only experience and knowledge can make one fully aware of a subject and able to succeed in that subject while avoiding pitfalls.

    Therefore, intelligence, when applied to learning the proper knowledge and wisdom of the financial world, will result in a more positive wealth building ability. (I use the term wealth building ability because obviously, the more capital you start with, the greater your ability due to the mathematics of interest).

  • My wife and I are exact opposites. I am a case of having “overstudied” and so I worry and fuss about so many things that almost nothing gets done. My wife goes about life cheerfully and seems to get a lot more done.

  • 7 years ago I cood not even spel millyunare, now I are won! 🙂

  • 7 years ago I cood not even spel millyunare, now I are won! 🙂