How Intelligence Relates To Wealth

By Greg McFarlane | September 11, 2012 AAA
How Intelligence Relates To Wealth

Does intelligence equal wealth? If the question isn't rhetorical, then the answer is "no." Then again, it all depends on a number of factors. If you define intelligence as the ability to apply knowledge and skills, then intelligence certainly can equal wealth. Study hard, apply yourself and read. After all, having an education is the only guaranteed way to get ahead, right? Go tell that to the myriads of overeducated college graduates working at menial jobs with no advancement in sight.

Educated, but Underemployed
Educated people working in disappointing jobs isn't the result of dire recessionary times. Rather, it's because financial rewards are tied to what a producer has to offer. Every one of us has to accept the challenge of proving one's worth in the marketplace. Intelligence is only a limited part of that. The marketplace is nothing more than the exchange of people's accumulated wants and desires. Much of what consumers collectively place great value on in the marketplace has astonishingly little to do with intelligence as we understand it.

No one expects Magic Johnson to offer proof of the Riemann hypothesis anytime soon, yet his wealth is estimated to be half a billion dollars. In Johnson's case, he developed non-academic skills that he could use to obtain a high salary. By saving that salary and investing, Johnson earned far more money through passive income than by active means.

Contrast that with Chris Langan. His story is a classic example of how little correlation there can be between intelligence and financial reward. Raised in poverty by a single mother, Langan dropped out of two colleges and has worked a series of manual labor jobs ever since. This is despite being billed as "the smartest man in America," and having an IQ measured at 195. In between his shifts as a bouncer, Langan single-handedly devised a theory that unifies science and theology. That theory might have vast promise for human understanding, but it doesn't pay Langan's bills as efficiently as his current job as a horse rancher.

Applying Your Knowledge
That being said, it's clear that the most overwhelming force in the marketplace is that of applicable intelligence. Google creators Sergey Brin and Larry Page are adept programmers with plenty of credentials in mathematics and computer science. Upon graduation from Stanford, either could have had his pick of entry-level jobs at Microsoft or IBM. However, Brin and Page also had a mission. Their goal was to organize the world's information and make it available to everyone. Without intelligence, Google would have remained just a niche business instead of growing into the quarter-trillion-dollar market cap leviathan it is today.

Every market has an opportunity waiting to be exploited, and that exploitation doesn't necessarily require vast intelligence. Harvey House founder Fred Harvey never attempted to formulate a scientific theory, but he did notice that people disembarking at train stations often wanted something to eat and a place to spend the night. Armed with that knowledge, he became one of the hospitality industry's most successful entrepreneurs.

The Bottom Line
Exploiting opportunities is a form of intelligence that's often far removed from what's learned in a classroom. It's like the old joke about the two college mathematics majors. The "A" student brags about how he went to grad school, quickly got a lecturing job and became a fully tenured professor with a $100,000 salary. The "C" student casually mentions that he became a billionaire. "I found a product that I buy for $2 and sell for $5. It's amazing how much money you can make with that kind of markup," he said.

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