Is High Intelligence a Handicap to Creating Wealth?

Do you have to be smart (as in high IQ) to be rich? You’d think that the answer would have to be yes. And you also have to believe that any research showing this, or the opposite, would have to be famous. You would be wrong on both counts, at least if you look at a piece of research published in 2007 by one Dr. Jay Zagorsky of Ohio State University (see http://www.sciencedirect.com/science/article/pii/S0160289607000219 ).

The research shows that having a high IQ had basically no impact on whether you were wealthy (measured by household net worth) or not. However it did show that people with high IQ are more likely to experience financial distress. Hmmm, that’s interesting….

It’s not all bad if you have a high IQ. You will have a higher income (also shown in this research). And you are more likely to get ahead in big companies and the professions, which is why you got a big income in the first place.

All of this makes me think about the types of people who do get rich and actually create wealth. Seems like there’s a pattern. You get the intelligent people who get great grades, go to university, get masters’ degrees, join big companies, make a lot of money (salary that is) and have a great career (hopefully).

Then there’s a second group. They often drop out of school, drift around, get into an existing company, get bored, then go out and start their own. Often these fail. But some succeed brilliantly. Their owners usually don’t get high incomes (at least at the beginning) but at the end the business is worth a lot. So these are the high wealth creation types.

Why does this happen? What are the key learning behaviors behind these two patterns?

Seems like basically there are two learning styles; learning from books and learning from life. High IQ types usually learn best from books and university professors. These are the ones that become doctors and dentists, go into big prestigious companies and get high incomes and drive Mercedes’s.

The people who learn from life sometimes have lower IQs, don’t like university and university professors, and don’t go into big companies except as salespeople. Often they are dyslexic. They drive Hondas and Chevys, sometimes Ford trucks. These types often start their own companies and become rich.

That why there’s an emerging movement populated by people like billionaire Peter Thiel to give money to young people who want to start companies in return for not going on to university. Those behind the movement believe that for certain people, going to university is actually an impediment to success. You get less startups and therefore less growth with the high education/book learning model.

We tend to see high intelligence as a good thing, that endows its holders with more opportunities in life. I guess the common perception is that you are more likely to do better in life, whether that be a high salary or high income. And there’s some truth in that.

But there’s another perspective one can adopt on high intelligence. That is, that in many ways it’s a handicap. It cuts you off from the mass of humanity because you are cognitively different. More to the point, you are going to think in ways that the vast majority of people don’t think in. If you are a nerd thinking of the next theory of relativity, how many people are going to be on your wavelength? If you want to create a new product or service, will you even understand that the other 99% of humanity is thinking?

So it’s no wonder that there doesn’t seem to be any correlation between high intelligence and wealth. Chances are that most people use their high IQ to think of ideas that are totally foreign or of no interest to the great unwashed. These highly intelligent people want to indulge themselves in great ideas that interest them, not in products and services for people whose interests and intelligence are of little or no interest to them. So in these cases, their high intelligence acts as a barrier to mass social understanding and mass marketing.

As to wealth creation and high intelligence, what about this distinction between income and wealth? A high salary doesn’t mean wealth creation; you are just doing a job pre-ordained by someone else very well. If you create a new company and business model and employ people you have created wealth and social growth. A low salary founder who creates a lot of jobs (think of a local trash hauler) creates wealth but will socially be seen as a failure. A high salary corporate executive who creates no jobs will be seen as having been a success, even though he has, on his own account, created no wealth.

It’s a funny thing. Schools and universities laud high book intelligence. So we push our kids to go and do good in our universities. We want everyone to get a degree or two and get perfect grades.

But is it possible that the very intelligence we push for high levels of is preventing a broader movement for wealth creation in society? Is it possible that universal higher education is a recipe for less entrepreneurship and therefore less wealth creation and lower growth rates in society? Once we all have PhDs or masters, are we condemned to no growth at all?

Is that the definition of the end of history?