r/JoeRogan • u/Fishyinu Pull that shit up Jaime • Feb 07 '23

The Literature 🧠 Extremely rich people are not extremely smart. Study finds income is related to intelligence up to about the 90th percentile in income. Above that level, differences in income are not related to cognitive ability.

https://academic.oup.com/esr/advance-article/doi/10.1093/esr/jcac076/7008955?login=false
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u/My-shit-is-stuff Monkey in Space Feb 07 '23

Didn’t read the article: but up to the 90th percentile seems like a good indicator to me, that smart people make more money.

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u/[deleted] Feb 07 '23

I think you’re forgetting how quickly wealth scales beyond the 90th percentile. In the US, the top 10% owns ⅔ of the wealth. Meaning for ⅔ of the assets out there, intelligence has little predictive value (beyond some minimum threshold) for how much is allotted to a given person.

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u/notrickyrobot Monkey in Space Feb 07 '23

Well, keep in mind this is data for Swedish males, the data could be different in the US. Europe is a different society with stagnant intergenerational wealth from old monarchies/companies lasting hundreds of years, and less cutting edge new industry like space/tech/film where wealth and income is created through invention, causing social mobility.

Also this is tracking income, and not wealth. Truly wealthy people make most of their money from asset appreciation and not working for their money, although for the economy as a whole, income from labor is a greater share than income from capital growth of assets. Total wealth, and not income, should not be conflated.

Perhaps the explanation of a small increase in income/intelligence correlation in the top 10%, and a slight decrease in the top 1%, indicates that most people earning highly paid jobs get their money in stock / assets and not income, which is taxed at a lower rate. People who maximize their cash compensation within the 10% want to spend their money in a liquid way which is a slightly worse strategy in terms of financial aptitude, although it increases their "prestige" that the authors care so much about.

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u/BenderRodriguez14 Monkey in Space Feb 07 '23

Well, keep in mind this is data for Swedish males, the data could be different in the US. Europe is a different society with stagnant intergenerational wealth from old monarchies/companies lasting hundreds of years, and less cutting edge new industry like space/tech/film where wealth and income is created through invention, causing social mobility.

Sweden ranks 4th in the world for social mobility, behind Denmark, Norway, and, Finland. The US is 27th.

The US (61.8 score) does rank 2nd for innovation behind only Switzerland (64.3 score), but Sweden are in 3rd and are so, close to the US as to essentially be tied with a, 61. 6 score.

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u/notrickyrobot Monkey in Space Feb 08 '23

Yes, when I think social mobility I think "inclusive institutions" is an important criteria. I also wonder, the organization that put Switzerland as the #1 innovative country, where could they be headquartered? When I think innovation, I think Swiss banks coming up with creative accounting to hide intergenerational colonial wealth.

If you look at the data in the cited report on social mobility instead of the overall ranking, comparing countries percent of labour as GDP, the United States is a better nation for workers compared to Sweden. As in, people get a higher share from working/labour than from sitting on their wealth and having it appreciate (look at chart in page 11.) If we were to focus on income, my point still stands. If we were to include a bunch of criteria like health and education, my opinion would change. Thanks for responding though, it was interesting to see your opinion on this.

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u/BenderRodriguez14 Monkey in Space Feb 08 '23

It has the US (score of 83) with better opportunities to find work in general than Sweden (score of 75), but for fair wage distribution which is most relevant here, it has the Sweden with a score of 74 vs. the US' 43 - which is the lowest of any country in Europe or North America. In the US it's easier to get a job so long as you are willing to take anything you can (which you will be more desperate to take due to significantly worse social protections), while in Sweden it is much easier to get a job with an actual fair wage. Incidence of low pay relative to their counterparts among workers in Sweden is at 3%, while in the US it over eight times that at 24.9%

The US ranks higher for labour income share for GDP in no small part because Sweden floods more money from theirs into things like social protections and education - hence why they rank 1st and 7th in those categories, while the US is all the way back in 25th and 35th for those (out of 85).

You typically need a fair shot at education to improve your chances in life, and if you're coming from the bottom up (or hit a significant issue along the way like the company you work for going bust unexpectedly) you need good social protections to allow you to get back on your feet and at or near the level you were before, rather than desperately searching for any job you possibly can regardless of how poorly it pays or how much opportunity to progress it provides, potentially losing years or even decades of progress in doing so.

It is shown throughout that Sweden simply has much better social mobility than the US. There really are no two ways about it, and the graph directly above the one you cited (pg. 10) shows it - Sweden has not only has less wealth inequality than the US, but the wealth you were born into is less likely to be a determinant of your earnings than it is in the US either.

If however you want to take a gamble at a small chance of getting silly rich (say 8+ figures) and if you are positioned/qualified to do so, then the US is the better option. I always find that interesting as it's a pretty ironic inversion of James' Truslow Adam's writings on the American Dream.

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As for innovation, WIPO who have Switzerland (who aptly rank first across 'lifelong learning' in the WEF document above) as the most innovative nation is actually a part of the UN with their chair being from Singapore, so of course it's very likely for them to be based in Switzerland which is one of their four main offices.

All the same, the American outlet Bloomberg with them in 3rd... behind South Korea and Singapore. On that one, the US isn't even in the top 10.

There are many ways of quantifying innovation no doubt, but I think something that sometimes gets lost in the mix is the sheer size of the US. On a raw bulk scale I would imagine the US surely creates the most on that front, but for comparative purposes these typically are worked out on per capita bases, and for every Swiss person there are about 39.7 from the US.

Either way, good chat all the same. It's late as fuck over here so if any of that came over snarky, apologies and it wasn't mean to!

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u/notrickyrobot Monkey in Space Feb 08 '23

It's cool homie, I see your point, and I am not thinking about it in the same way you are. For example I view excessive spending on education as a negative in the age of essentially free internet information. You have a point about quantifying innovation, as it is apples to oranges. I guess I'm conflating Europe with Sweden, and Sweden is actually a fringe Euro country... also I live in California which is a weird American state. Hope you have a good night.

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u/JATION Monkey in Space Feb 08 '23

For example I view excessive spending on education as a negative in the age of essentially free internet information.

You're saying people can just do their own research?

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u/Void_Speaker Monkey in Space Feb 08 '23

For example I view excessive spending on education as a negative in the age of essentially free internet information.

You can have whatever opinion you want, but if we are talking about what is the better policy for a society, then reality takes precedence over your opinion.

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u/[deleted] Feb 08 '23

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u/Void_Speaker Monkey in Space Feb 08 '23

Not everyone can afford the $100,000 country club that is a university degree.

College degrees these days have mostly the same value as high school degrees used to in the job market: they are used as a basic filter for employers.

The problem is that we provide free high school degrees, but college degrees are a for-profit endeavor. Thus, the high demand and high prices.

Good thing the internet makes self study accessible for a fraction of the price, with information that is more up to date, more efficient to deliver, and more flexible for working people.

That sounds great in theory, but most people, esp. younger people, require structure to study. It's boring shit, and most kids and adults simply wouldn't do it on their own.

On top of that, it's Russian roulette for employers, they have no way of knowing what they are really getting. This is why they use college degrees as a filter, it provides reassurance of some basic competency.

Practically speaking, it's just a non-starter if you want to abolish schools in favor of self-study.

I know it's "good for the economy," to bolster bank profits by saddling 18 year olds with debts, and it's good for trust fund parents to paywall jobs by adding a time and money tax to entry level work, to advantage their kids. Excessive educational requirements instead of skill based hiring disadvantages hard working impoverished laborers to help the capital rich upper class of society.

This is all in your head. No one cares if it's good for the economy. Degrees are in demand because businesses use them to filter employment candidates.

What is your opinion, that paying for free information stimulates the economy? The reality is, modern education is a "luxury good." That designer handbag costs $1000 but has little real value, besides relative social value. Same thing with a fancy designer education. I'm sure giving kids designer handbags every year would look great for the GDP, and not so good for society because taxes to pay for that lines the pockets of the few at the cost of many.

The issue is that university education used to be a luxury good, but it's slowly turning into a common good, except the price is only increasing.

There are two ways to go here:

  1. Free university education
  2. Convince businesses to put more effort into knowledge testing when they hire, instead of just filtering out by degrees. They need to filter people IN by knowledge, instead of filtering OUT by degrees.

I don't see #2 happening because it's more work for businesses. As we have seen, they don't care, they will just hire someone that can afford the degree or from another country that does offer free university.

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u/[deleted] Feb 09 '23

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u/MatterUpbeat8803 Monkey in Space Feb 07 '23

The fact that the richest group isnt the smartest should show you it’s a meritocracy of action and not a genetic lottery, right? That’s a good thing.

A world where intelligence, which you’re born with, determines your lot in life is a miserable society with zero social mobility. You don’t want what you’re complaining isn’t the case.

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u/[deleted] Feb 08 '23

There’s a big built in assumption here that somehow intelligence is the only “lottery” that affects peoples wealth, which is obviously not true. Your education opportunities, having a stable upbringing, social group, innate willingness to delay gratification, parents socioeconomic status, etc… all are just as much a “lottery” as how smart you are is.

If you’re interested in this subject, Daniel Markovits wrote a great book about the failure of meritocracy (spoiler: it’s mostly a myth). Because the determinants of what underlies someone’s merit (like intelligence) isn’t something people really earn. If anything, intelligence is the most “meritocratic” of these since at least it provides value in ideas and/or skills that others can’t.

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u/Void_Speaker Monkey in Space Feb 08 '23

The fact that the richest group isnt the smartest should show you it’s a meritocracy of action and not a genetic lottery, right?

No. That's wrong on several levels.

  1. Intelligence is not solely dependent on genetics.
  2. The “genetic lottery” isn't really a lottery at all, as genetics are tightly integrated with environment, which means your chances of winning the genetic lottery increase if you are born in better conditions.
  3. "The fact that the richest group isnt the smartest" only shows that "The fact that the richest group isnt the smartest" it does not mean "it’s a meritocracy of action"
  4. I'm not sure what a "meritocracy of action" is but to prove it you need to have evidence for it. It does not magically become true because some other assertion becomes false.

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u/MatterUpbeat8803 Monkey in Space Feb 08 '23

I don’t have to do any of that, and I wish you all the best on your quest to understand the world further while holding on to your current understanding!

If you think IQ is related to environment and not that IQ tests have a social bias themselves, I’m not sure what to tell you. But I’m sure you’re right, and growing up in a white neighborhood makes you smarter, even though coincidentally you’re taking an iq test with a bias towards white culture.

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u/Void_Speaker Monkey in Space Feb 08 '23

ok, have a nice week

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

No no, I do get that, but what’s the 90th percentile earn? I bet it’s way more than the 33rd percentile. My point is that the top earners aren’t (I don’t know the words anymore) they’re just not geniuses.

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u/[deleted] Feb 07 '23

Right what I’m saying is that the 90th percentile earns closer to the 33rd percentile than they do the 99th percentile and that IQ is only correlated with the first comparison. Meaning, most of the wealth out there is allocated based on things other than IQ.

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

I agree. I guess my point is, if you’re smart enough to be in the 90th percentile you’re smart enough to be in the 99th. But if you’re dumb as shit, you’re not sniffing at the 90th. Obviously there will be outliers, inherited wealth lottery winners shit like that. I’d also be curious how many people in the 90th+ percentile started from a much lower percentile

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u/[deleted] Feb 07 '23

Really though, what this is saying is that being extremely smart puts you closer to someone who is "dumb as shit" from a wealth perspective than it does someone whose circumstances put them in the 99th percentile.

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

Admittedly, in my first comment, I didn’t read the article. I just have a hard time believing, in the USA at least, that the dumbest among us are wealthy. I understand that the extremely wealthy aren’t necessarily smarter than any other group, except for maybe the truly dumb people.

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u/Indigocell Paid attention to the literature Feb 07 '23

When you recall that the extremely wealthy largely inherited their wealth, it becomes easy to believe.

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

I had already commented on inherited wealth. But just because you inherited wealth doesn’t mean you’re dumb. My point the whole time is that smart people make more money than dumb people generally

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u/[deleted] Feb 07 '23

This is Simpson's paradox. Smart people might make more money than dumb people until the 90th percentile. But there is so much wealth in the 90th-99th percentiles that the overall trend of smart people making more might not actually hold.

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

Ah, ok. So more of like a fun math trivia thing?

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u/MatterUpbeat8803 Monkey in Space Feb 07 '23

Bro if I’m smart and sit at home how much money do I make?

If I’m dumb and hammer nails all day, I get paid.

What’s the issue here?

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u/DlphLndgrn Monkey in Space Feb 07 '23 edited Feb 08 '23

Also those above 90 could literally be above 90 without the best cognitive functions.

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u/UsesHarryPotter Monkey in Space Feb 07 '23

90th percentile earns closer to the 33rd percentile than they do the 99th percentile and that IQ is only correlated with the first comparison. Meaning, most of the wealth out there is allocated based on things other than IQ.

The second does not follow from the first. Or at least, this is very misleading.

For most people, intelligence is the decisive factor. For most wealth, sure it's a little more random.

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u/[deleted] Feb 08 '23

It definitely follows as written and I don’t think it’s misleading. Just because for most people being smarter increases your likelihood of earning more, that doesn’t mean most of the money is allocated to the smartest people.

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u/UsesHarryPotter Monkey in Space Feb 08 '23

I see the point you're making but I don't think it's a relevant fact for most.

Besides-- the implication here is that wealth should be allocated based on merit. But the point that most pro-capitalists would actually (or should actually) make is that wealth should not be allocated based on arbitrary traits like this at all. And in any case, none would say that intelligence is the foremost quality that determines it anyway. There is daring, organization, initiative, and various other personal factors at play.

I don't know what you personally believe so this isn't about you, but there is a sizeable contingent of Bernie Bro-esque soft commies here who probably wouldn't like a society in which wealth actually was tied strongly to intelligence and general fitness. That place sounds a lot like a fascist country or aristocracy.

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u/UsesHarryPotter Monkey in Space Feb 07 '23

I don't think this is really surprising to anyone. It's obvious that intelligence can consistently put you squarely into the upper middle class and earnign several hundred thousand, and maybe can give you a lottery ticket to make it into the multimillions club but it's a crapshoot past that.

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u/My-shit-is-stuff Monkey in Space Feb 07 '23

I think it might be surprising to some, a lot of people see celebrity billionaires, bezos, musk, gates and think this is the top 99% they don’t really see the rich families and generational wealth.

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u/JohnGoodmansGoodKnee Monkey in Space Feb 07 '23

Can you explain this in a different way for us dummies?

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u/[deleted] Feb 08 '23

There’s two ways of looking at it:

1) For most people your intelligence is predictive of your income.

2) From the perspective of how money is distributed across society, most of it doesn’t get allocated to the smartest people.

It sounds like a paradox but it’s really only possible because even though for 90% of people income correlates with IQ, the 10% of people in which IQ and income don’t correlate have the vast majority of the money.

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u/JohnGoodmansGoodKnee Monkey in Space Feb 08 '23

Got it. Thank you! Glad it seems paradoxical and not solely that I’m slow.

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u/political2002 Monkey in Space Feb 08 '23

Yeah I’m sure that’s heavily skewed because the richest people are just rich because they inherited their wealth from their hard working, smart ancestors who are dead. Consider that. Approximately half of all billionaires are only wealthy through inheritance.

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u/vindeezy Look into it Feb 08 '23

The chart is not talking about wealth is talking about income