If You’re So Dumb, Why Aren’t You Rich?

Crazy-fun new study in press at the journal Intelligence. It attempts to puzzle out the connection between IQ and wealth, only to come up with the entertaining — if unsurprising –  result: There isn’t one. Bad news for brainy geeks everywhere.

the non-relationship between financial worth and iq

While it doesn’t stand up to statistical scrutiny, an eyeball check of the above figure does make it look like there is a soft inverse relationship. In other words, maybe we should be accusing random foolish sorts among us of being smarter than they’re acting: Hey, if you’re so dumb, how come you’re not rich?!

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Comments

  1. Rich? But the scale goes only to $230k. I wanna see how smart (or dumb) the *really* rich are!

  2. Hey Jeremy –
    I had the same reaction. Trouble is, according to the paper, the “typical” boomer in 2004 had a network of $50,000 (the median is $140k), so the scale isn’t such a bad measure of plebeian financial reality.

  3. Yeah. Being very intelligent actually does not help all that much in terms of accumulating wealth, for a lot of subtle reasons:
    1) While it is some protection against certain kinds of financial errors (like playing the lottery or credit-card debts), that’s counter-balanced by arguably being more prone to certain other kinds of financial errors (being taken advantage by investments which shift risk disproportionately).
    2) There’s a lot of who-you-know in deal-making, and that’s not highly correlated with intelligence (as compared to being highly correlated with e.g. race and gender).
    3) Being intelligent doesn’t mean liking saving and investing any more than the rest of the population
    And so on.

  4. Greg Linden says:

    Interesting graph, Paul, but it is worth noting that the relationship with IQ is only missing for wealth, not for income.
    From a recent Scientific American article:
    http://www.sciam.com/article.cfm?chanID=sa003&articleID=258C68D0-E7F2-99DF-3FE5895C3D920B22&ref=rss
    A detailed study of 7,000-plus Americans followed since their teen years in the late 1970s reveals that intelligence provides more earning power but not necessarily more accumulated wealth. “The smarter you are, the more income you have,” explains economist Jay Zagorsky of Ohio State University, who analyzed the data. “For wealth, there is no relationship.”
    For each IQ point, there was a rise in income of between $202 and $616 annually. (For example, a person with an IQ of 130 earns between $6,000 and $18,500 more per year than a peer of lesser intelligence.) But this higher yearly income did not translate into higher wealth. In fact, people with slightly above average intelligence (105 IQ score) had an average net worth higher than those just a bit smarter (110 IQ). “There are some very smart people who get into financial difficulties,” Zagorsky notes. “Even smart people don’t save.”

  5. cyanbane says:

    Is 100 the median IQ?

  6. cyanbane says:

    nm,
    The term IQ, or Intelligence Quotient, generally describes a score on a test that rates the subject’s cognitive ability as compared to the general population. IQ tests use a standardized scale with 100 as the median score. On most tests, a score between 90 and 110, or the median plus or minus 10, indicates average intelligence. A score above 130 indicates exceptional intelligence and a score below 70 may indicate mental retardation. Like their predecessors, modern tests do take in to account the age of a child when determining an IQ score. Children are graded relative to the population at their developmental level.
    http://people.howstuffworks.com/question455.htm

  7. Andi says:

    100 being the median this graph proves that those with a higher IQ are more successful at avoiding such surveys.

  8. The eyeball check makes it look like there is a soft DIRECT correlation between IQ and welth:
    for lower income more dots have lower IQ (less than 100).
    For higher income more dots have higher IQ (more than 100).

  9. LaughingLoudly says:

    You all would be rich if you weren’t spending so much time worrying about trivia and commenting on them! ;-)

  10. David H. says:

    I don’t understand this…I’ll have my butler explain it to me later.

  11. Drew says:

    What a weird result — I would have assumed less of a connection between intelligence and income than intelligence and wealth (the importance of saving and the brilliance of compound interest etc.). It turns out the opposite is true.

  12. Helen says:

    I agree with the survey. I know some people with normal IQ that have higher income than the ones I know who have IQ that are above normal. I think it’s about our unique gifts which may be intellectually or physically.

  13. Brent Buckner says:

    Interesting stuff. By me, counter-intuitive to have a strong IQ-income relationship and weak IQ-wealth relationship. I see that data relies upon self-report – for the nonce I won’t move my priors much, but I’ll pay attention if I bump across follow-ups.

  14. NoteForBrent says:

    I had to read your comment twice to ‘get’ it. In British slang, nonce means a sex offender interested in children… 8-/

  15. Brent Buckner says:

    Thanks for the note, NoteForBrent. I suppose I’ll shift to “for now” or some other synonym.

  16. Charlie says:

    Some basketball and other sports players certainly aren’t as bright as other rich people, but they are a group of people who belong to high income earners. This should be sufficient enough to prove their study.

  17. Ian says:

    Many geniuses are in fields that don’t provide a very high income. Many PhDs are earning very little for the amount of work they put into earning their degree, namely post-docs. Post-docs sometimes earn less than the janitor. ;)
    ian

  18. jtollison78 says:

    I have that feeling that I must be missing something mindnumbingly simple, but it seems like those in the 1SD(115) area.
    Also, while noting that this may be representative of the average boomer, I still echo the compaint that the study is capped at $230k. It has the same feel as the intermittent recentering of the SAT in various attempts to make race or gender, or even real IQ, matter less. In this case, you might easily include those low IQ people who are concerned with wealth but unable to achieve it, while excluding smart people who are concerned with wealth and fall outside the graph.
    John

  19. jtollison78 says:

    Hmm, it seems like my opening comment above was cut short somewhere along the way:
    I have that feeling that I must be missing something mindnumbingly simple, but it seems like those in the 1SD(115) area.
    John

  20. jtollison78 says:

    frown, I think it’s reading some sort of HTML tag into my comment… let me rephrase.
    people with IQ less than 85 seems to have a disproportionate number of bad/mediocre outcomes if you look at the graph above when compared to those with IQ greater than 115. What am I missing?
    John

  21. Brent Buckner says:

    Ah. Comments by Mercy Vetsel at Greg Mankiw’s blog point out the issue with controlling for variables that are themselves highly correlated with IQ. Link

  22. anonymous says:

    One of my brothers has a 70 IQ, and he worked for the water department for 30 years. He had a repetitious job which met his learning needs. He was very successful
    I am in administration in educational technology. I make less than he did!
    My other brother had a 150 IQ. He could not hold a job.