from Steve Hsu:
Does being smart help you become rich?
Folksy Warren Buffett once said that an investor with IQ of 150 should sell 30 points to someone else, as anything above 120 is unnecessary.
Igon Model: IQ correlates positively with wealth, but the effect goes away for IQ > 120. IQ above 120 provides no advantage, relative to IQ=120, for acquiring wealth.
Were this model to be true, one would expect with overwhelming probability to find that the vast majority of rich people have IQ around 120, but not much higher. This is because IQ is normally distributed: as you go further out the tail the population decreases exponentially. To be specific, IQ = 120 corresponds to the 90th percentile, whereas IQ = 135 is 99th percentile (i.e., only 1 in 10 people with IQ > 120 have IQ > 135) and IQ = 145 is 99.9th percentile (i.e., only 1 in 100 people with IQ > 120 have IQ > 145).
Now let's look at the 2009 Forbes list of richest people in the world:
1 William Gates III 53 40.0 United States
2 Warren Buffett 78 37.0 United States
3 Carlos Slim Helu 69 35.0 Mexico
If the Igon Model were correct, we would not expect to find this list dominated by people with IQ much higher than 120. But in fact we do. Note these three made their money in different ways: Gates founded a software company, Buffett is primarily an investor, and Carlos Slim is an oligarch ;-)
Bill Gates scored 1580 on the pre-1995 SAT. His IQ is clearly >> 145 and possibly as high as 160 or so.
Warren Buffett graduated high school at 16 ranked in the top 5 percent of his class despite devoting substantial effort to entrepreneurial activities. Most people who know him well refer to him as brilliant, that folksy quote above notwithstanding. I would suggest the evidence is strong that his IQ is above 135, perhaps higher than 145.
Carlos Slim studied engineering and taught linear programming while still an undergraduate at UNAM, the top university in Mexico. He reportedly discovered the use of compound interest at age 10. I would suggest his IQ is also at least 135.
So it would appear that the three richest men in the world all have IQs that are higher than 90 percent or even 99 percent of the > 120 IQ population. (Relative to the general population they are all likely in the 99th or even 99.9th percentile.) The probability of this happening in the Igon Model is less than 1 in 1000.
FAQs
Intelligence appears to have no direct correlation with wealth. Key examples of this include famed NBA player Earvin "Magic" Johnson Jr. (who is wealthy) and Christopher Michael Langan, an American with a very high IQ (who is much less wealthy).
Do you need high IQ to be rich? ›
The path to riches doesn't necessarily require high IQ scores or an extensive list of academic achievements. Your unique qualities, emotional intelligence, creativity, perseverance and practical skills can be your secret weapons on the journey to financial success.
Is there a correlation between IQ and wealth? ›
The ratios show people with above-average IQ scores are only 1.2 times as likely as individuals with below-average IQ scores to have a comparatively high net worth. Simply put, there are few individuals with below-average IQ scores who have high income but there are relatively large numbers who are wealthy.
What does being rich mean to you answer in one word? ›
Some common synonyms of rich are affluent, opulent, and wealthy. While all these words mean "having goods, property, and money in abundance," rich implies having more than enough to gratify normal needs or desires.
What is Elon Musk's IQ? ›
IQ tests provide insight into an individual's cognitive ability. As mentioned earlier, Elon Musk's IQ score is believed to be between 155 and 160.
What IQ do most millionaires have? ›
There's actually been research on this recently (Jonathan Wai article this year), and many are someone within the top 1% of IQ, which is a range that contains about 1/3 of human ability (from about 137 to 200+). What is the average IQ of millionaires? The average IQ of self-made* millionaires is 118.
What kind of IQ is high? ›
A score of 116 or more is considered above average. A score of 130 or higher signals a high IQ. Membership in Mensa, the High IQ society, includes people who score in the top 2 percent, which is usually 132 or higher. Keep reading as we explore more about high IQ, what it means, and what it doesn't mean.
Is having a high IQ smart? ›
No. It means you have an ability to process information at a high level. It doesn't mean you're smart in everything you do. Einstein [may have] had a high IQ, but it doesn't mean he was able to, for example, make good decisions about his financial life.”
What IQ is impressive? ›
Scores above 130 are labeled as above average or “very superior,” while scores under 70 would be considered below average or labeled as “borderline impaired.” Most people have an average IQ between 85 and 115.
What is the average IQ of a billionaire? ›
The average IQ of self-made deca-millionaires (over $10M net worth) is 118. The average IQ of self-made* billionaires is 133. The average IQ of self-made deca-billionaires (over $10B net worth) is 151. Of note, average incomes correlate well with IQ, however there is a much lower correlation between IQ and net wealth.
Warren Buffett reportedly has an IQ of over 150 (anything past 140 is considered a genius), and while it has, no doubt, helped him become one of the world's richest men, the lesson here is to value emotional intelligence (EQ) just as highly.
Is IQ genetic? ›
Studies have shown that intelligence has a genetic component, but they have not conclusively identified any single genes that have major roles in differences in intelligence. It is likely that intelligence involves many genes that each make only a small contribution to a person's intelligence.
What is a slang word for rich? ›
Synonyms: wealthy , affluent , well-to-do, loaded (slang), flush (slang), well-off, opulent, well-heeled, prosperous, filthy rich, rolling in money (informal), rolling in it (slang)
What do you call a really rich person? ›
millionaire. a person whose material wealth is valued at more than a million dollars. billionaire. a very rich person whose material wealth is valued at more than a billion dollars. multi-billionaire.
What is another name for a rich kid? ›
Use the word scion when talking about a young member of a family that is known to be wealthy, powerful or otherwise important, such as a prince, heiress or the children of, say, the President.
Are more intelligent people more successful? ›
Scientists are constantly trying to answer why some people with high IQs become successful, and others don't. Nobel Laureate in Economics James Heckman explained that erudition and intellectual abilities make up only 1-2% of career and financial success.
Who are most likely to become millionaires? ›
The top five careers for millionaires include engineer, accountant, teacher, management and attorney. 79% of millionaires did not receive any inheritance at all from their parents or other family members.
What is the average IQ of rich people? ›
The average IQ of self-made deca-millionaires (over $10M net worth) is 118. The average IQ of self-made* billionaires is 133. The average IQ of self-made deca-billionaires (over $10B net worth) is 151. Of note, average incomes correlate well with IQ, however there is a much lower correlation between IQ and net wealth.
Do all billionaires have high IQ? ›
New research has shattered the myth that the ultra-wealthy are the smartest people around. According to a recent study, being a billionaire doesn't necessarily equate to having a superior intellect.
