Tags
Bill Gates, billionaires, Google, homeless, income, IQ, Jonathan Wai, Lion of the Blogosphere, Mark Zuckerberg, net worth, presidents, WAIS
Since intelligence can be defined as the cognitive ability to adapt (to turn situations to your advantage; problem solve), it’s only natural that IQ and money should be correlated. For what could be more adaptive in a capitalist society than getting rich? On the other hand, there’s a lot more involved in making money than just IQ. Hard work, ambition, family connections, greed, luck, looks, health, personality, ruthlessness and special talents can all also play important roles. Thus while there’s reason to expect IQ and income to be correlated, the correlation should be modest given all the other factors. Indeed only about 16% of the variation in income can be explained by IQ.
But even small correlations can have big effects at the extremes. At the poorest extreme you have the homeless. For example, a 1986 study of homelessness in Chicago found that panhandling income averaged $7.00 per month. Adjusted for inflation (that study is 28 years old) that’s $15.14 a month or about $182 a year (a three figure income).
Meanwhile, a study of 90 Milwaukee homeless men found they had an average IQ of about 84 on an abbreviated version of the Wechsler Adult Intelligence Scale. In other words, Americans at the bottom of the economic ladder (those earning three figures a year) average IQ 84. By contrast the median American earns five figures a year and by definition has an average IQ of 100. Extrapolating from these two data points, one can estimate that average IQ increases by 8 points for each figure of individual income. In other words:
Three figure income (i.e. homeless): Average IQ 84
Four figure income (i.e. part-time minimum wage worker): Average IQ 92
Five figure income (i.e. middle class): Average IQ 100
Six figure income (i.e. potential self-made millionaire): Average IQ 108
Seven figure income (i.e. potential self-made decamillionaire): Average IQ 116
Eight figure income (i.e. potential self-made centimillionaire): Average IQ 124
Nine figure income (i.e. potential self-made billionaire): Average IQ 132
Ten figure income (i.e. potential self-made decabillionaire): Average IQ 140
Note: these are individual incomes, not household incomes.
Some people may question the wisdom of extrapolating IQ differences between the middle class and the homeless all the way up to the highest levels of income. For example, the Lion of the Blogosphere argues that IQ is a better predictor of poverty than it is of wealth. However the linear extrapolation seems to yield valid results. For example, based on their academic credentials, scholar Jonathan Wai estimates that 45% of billionaires have IQ’s in the top 1% of America (IQ 135) which implies the typical billionaire has an IQ somewhere in the low 130s. Since billionaires have ten figure net worths, it seems reasonable to assume they have roughly nine figure incomes (since earning hundreds of millions a year, should eventually translate into amassing over a billion) and my model estimates that nine figure earners should average IQ 132. U.S. presidents resemble billionaires or nine figure income earners, because although presidents have “only” a six figure income, their lifestyle of living in a colossal mansion with servants, secret service protection, stratospheric power and flying by private jet, resembles the life of a billionaire. Evidence suggests U.S. presidents also average IQ’s in the low 130s.
The only people who may rank higher than U.S. presidents, nine figure earners, and most billionaires, are people who earn ten figures a year. These are people who amass eleven figure net worths (in other words, the self-made decabillionaires). It may seem outrageous to suggest that even the highest economic class has an average IQ as extreme as 140 (above the 99.5%ile of Americans) but this level of self-made financial success is dominated by people like Bill Gates, Mark Zuckerberg, the Google co-founders…in other words, math and technology types, often from extremely prestigious universities.
Lion of the Blogosphere said:
Billionaires are outliers. 3 million Americans have IQs in the top 1%, and maybe 150 of them are billionaires? Also, one should be dubious about how the IQs of the billionaires are being estimated. Unless all of their SAT scores are public records, we don’t really know.
pumpkinperson said:
Billionaires are indeed outliers but my point is that this simple mathematical model might estimate the average IQ of every income level, from homeless to Bill Gates. Yes the correlation is modest, but my point is that even modest correlations can have huge effects at the extremes. For example, I estimate that the average self-made decabillionaire would score 56 IQ points higher than the average homeless person.
But I agree we don’t have good data on (self-made) billionaire IQ’s so this model is still quite speculative.
IC said:
Too simple model, sports and entertaiment stars might give your theory problem. But IQ should help to become rich.
pumpkinperson said:
IC, I don’t think sports and entertainment people are problematic. Very few people get rich in those fields and a significant number of them are very smart (especially entertainers). For every dumb person who gets rich as an athlete or entertainer, there’s probably a super genius who got equally rich off computers or investment banking, so the IQ’s should hopefully average out as my model predicts. More data is always needed though.
taransula said:
this doesn’t make sense to me lol. i’m sitting at 140 IQ and i make less than 6 figures. i also only work 2 days per week, but i’m in a creative industry and it’s not easy to go from game development to publishing your novel or what have you… ugh.
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Thomas said:
Successful, intelligent athletes tend to accumulate wealth. Successful professional athletes who are not intelligent tend to wind up bankrupt.
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Walter Cicha said:
My WAIS-R has been measured to be 151 +/- 2 (based on 3 official measurements over 20 years). I have a Ph.D. in Chemistry and have worked for the likes of DuPont and GE as Senior Scientist, and now am a Senior Advisor for a Federal Government. Yet, I have a 108 IQ income. I think this is more the norm than the exception for people with my “highly gifted” intellect.
pumpkinperson said:
But that’s exactly what we should expect statistically. Because the correlation between IQ and income is far from perfect, people with super high IQ should regress to the mean on income, just as people with extremely high incomes regress to the mean on IQ.
Walter Cicha said:
True enough… My wife sure wishes it wasn’t so 🙂
pumpkinperson said:
What were you doing taking the WAIS-R three times over 20 years? Most people don’t even take that test once
Truth teller said:
Thats your fault.You can very well patent ideas if your as intelligent as you say.Or start a consulting firm.Or even a real estate investment gig.Instead you’re comfortable or just dont want to take the risk or simply not as intelligent as you think you are.
pet said:
Chris Langdon, was a high IQ guy that was a construction worker, and bouncer, and farmer. Only towards the end of his life did he gain some recognition and make a little dough. He claims there is no correlation between IQ and income.
Truth teller said:
His claims are against the grain obviously.
He never stated that anyways.He said the majority tends tends to become leaders,which in turn leads to wealth. 100 percent correct.
He also stated thats why the world is the way it is.
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iq117futuremillionaresomehow said:
So you are telling me that i will become a decamillionare?
nice
Truth teller said:
I agree 100 percent.Despite many people(of average intellect of course) state that IQ has nothing to do with it.Studies prove.I sure ass have not a dumb wealthy individual(self made)
Hannah said:
As a person who has been homeless in CA and has an IQ of 127, I would suggest you adjust your figures. Self made millionaires have an average IQ of 118 as reported by several other sites. And pan handling now gets at least $30 a day and at best $150…
pumpkinperson said:
I revised this article on my other blog:
how much would you estimate homeless people earn in a year? I assume they take days off which would lower income.
C said:
Majority of billionaires did not earn
A 9 figure salary that is stupid. Their stock
Holdings went up in value or real estate holdings did so as well. What garbage
pumpkinperson said:
Having your assets increase in value by 9 figures in one year is like earning a 9 figure salary.
Anonymous said:
This seems pretty accurate to me. Of course most people with an IQ of 124 do not make 8-figures a year, but I think it’s reasonable to say that they are capable of achieving that. An an entrepreneur with an IQ around 125, an 8-figure income is a goal of mine that seems realistic, although 9-figures feels pretty far fetched.