Stupidity is no barrier to wealth: That's the conclusion of a study by Jay Zagorsky, a research scientist at Ohio State University's Center for Human Resource Research. Based on a study of 7,403 Americans who participated in the National Longitudinal Survey of Youth, Mr. Zagorsky found no correlation between IQ and wealth: "Those with low intelligence should not believe they are handicapped, and those with high intelligence should not believe they have an advantage."
But here's what really interesting: Smart people do earn more money. They just aren't particularly likely to save and invest it, which is a recipe for creating wealth. According to the data, each extra IQ-point coincided with an extra $202 to $616 of income a year
So smart people earn more money but apparently fritter it away (Mensa memberships perhaps?). So does that mean that saving money is stupid? Or, are smart people just not very smart when it comes to money?
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
5-06-2007 @ 8:04PM
Lisa said...
I might offend some who have high IQ's here, but I find this study interesting, and consistent with other behavioral studies. Taken as a whole, the studies show a not unsurprising tendency for human beings as a species to revert to the mean, both physically and behaviorally. High IQ (in the traditional sense) also correlates with lowered reproductive rates (in an ecological/evolutionary sense, one would say lowered reproductive success) and with higher rates of certain mental illnesses. It all points to the persistence of Joe Average.
The question of why high-IQ individuals aren't wealthier in spite of increased earnings remains. One hypothesis not considered above is that many high-IQ individuals devote their energies and interests to things other than finance (well, with the exception of those who choose finance as a career, and they tend to do fairly well). Perhaps building wealth just isn't a high-priority pursuit?
In other instances, it may be the attraction for beautiful ideas that tanks the portfolio of someone with a high IQ. There is a certain appeal to an "elegant solution" to a problem, even if the "elegant solution" isn't the most commercially viable solution. It was investment in "elegant solutions" that proved to be Samuel Clemens' financial downfall. I confess that I haven't always been completely rational when I find a company offering a product I find particularly appealing. I have a couple of duds in my portfolio as a result, but I've managed to minimize the damage by limiting my "oh-wow" investing to half a percent of my total holdings.
I'd like to make one other point: there is a vast difference in numbers and cognitive/behavioral characteristics of those individuals one standard deviation above the norm (IQ 120, as described in the study) and those two or more standard deviations above the norm (IQ 140 or above). I don't think that differentiating between those two groups would make much difference in terms of mean financial outcome for each group. One might see more individuals clustered at extreme ends of the financial spectrum in the super-high-IQ groups, but I suspect that the mean would still remain about the same.