Why Dumb People Earn More Than Smart People
Summary
TLDRThis video explores a Swedish study revealing that top earners have lower intelligence than those just below them, challenging the notion that smarter people earn more. The script discusses the plateauing of cognitive ability's impact on income, noting that after a certain salary threshold, intelligence has less bearing on earnings. It also highlights the importance of ambition and risk-taking in business ownership as a path to wealth, while cautioning against the pitfalls of survivorship bias and the statistical complications of inferring career success from such data.
Takeaways
- 🧠 A Swedish study found that top earners have lower intelligence than those just below them in income levels, suggesting a plateauing of cognitive ability's impact on earnings after a certain income threshold.
- 📊 The relationship between intelligence and income is strong up to an annual earning of 670,000 Swedish krona (about 64,000 USD), beyond which intelligence becomes less significant in determining income levels.
- 💼 High prestige jobs like academics and research scientists may not pay as well as business ownership, which can lead to higher earnings but requires less genius-level intellect.
- 🏆 To be in the top one percent of income earners in the USA, an individual needs to make at least 597,000 USD before tax, which is typically achieved by business owners rather than highly intelligent professionals in other fields.
- 🤔 The study's findings should be taken with caution as they are based on a specific population and context, and may not be universally applicable.
- 📚 The video encourages viewers to critically assess their strengths and weaknesses and choose a career path that suits them best, rather than blindly pursuing high-income careers.
- 🎓 The script challenges the notion that dropping out of college is a path to wealth, emphasizing the importance of education and skill in achieving financial success.
- 📉 The video points out the risks of business ownership, where the average intelligence of successful business owners may be lower due to the higher likelihood of failure among those of average intelligence.
- 💡 The importance of being honest with oneself about one's abilities and choosing a career path that aligns with personal strengths is highlighted.
- 🚀 The video also discusses the role of luck and connections in achieving high income, factors that are beyond an individual's control.
- 🌐 It emphasizes the need to understand the wider context of career and financial success, including the influence of societal structures and personal circumstances.
Q & A
What was the main finding of the Swedish study on intelligence and income?
-The study found that top earners have lower intelligence than people at the income levels directly below them, with the plateauing of cognitive ability among top earners. This was based on data from 59,000 men who took a compulsory military conscription aptitude test, and their earnings were tracked over their professional careers.
What is the relationship between intelligence and income according to the study?
-The relationship between intelligence and income was found to be strong, with smarter people earning more money, but only up to a certain income threshold of 670,000 Swedish krona or $64,000 per year. Beyond this point, intelligence did not significantly affect income.
Why might highly intelligent people not reach the top one percent of income earners?
-Highly intelligent people often fill high prestige jobs with lower salaries, such as academics and research scientists. They may also be less likely to transition to business ownership because they are satisfied with their income and are less willing to take the risks associated with starting a business.
What is one reason why moderately intelligent people might be more successful in certain high-income fields?
-Moderately intelligent people with a desire for high income may be more willing to take the risk of starting their own business, as they may not have as many opportunities to earn high incomes through traditional well-compensated career paths.
What is the 'ceiling effect' mentioned in the script?
-The ceiling effect refers to what happens towards the extremities of data sets drawn on a scale like percentiles of wealth. It can skew the average intelligence of high earners if outliers, such as individuals who achieved high earnings through means other than intelligence, are included.
What is the issue with using the success of the top one percent as a model for career planning?
-Planning a career around the success of the top one percent is problematic due to statistical complications, such as the ceiling effect and survivorship bias. It also overlooks the fact that many factors contributing to their success are not replicable or controllable.
Why might the results of the Swedish study not be applicable to other countries?
-The study was conducted only on men in Sweden, and personal finance and career opportunities differ from country to country. Factors such as welfare, worker protections, average salaries, and the entrepreneurial environment can affect the relationship between intelligence and income.
What is the role of the Daily Upside in providing financial news?
-The Daily Upside is a free business and finance newsletter that aims to provide clarity and context on events shaping the world of business. It delivers a morning brief and detailed stories to help readers become smarter investors and business people.
What is the significance of the 'survivorship bias' in the context of the study?
-Survivorship bias refers to the tendency to focus on successful businesses when analyzing the income of business owners, overlooking those that failed. This can create a misleading perception that being a business owner of average intelligence is the best way to get rich.
What is the main takeaway from the script regarding career planning and wealth accumulation?
-The main takeaway is that there is no one-size-fits-all approach to becoming wealthy. It's important to be honest about one's abilities and choose a career path that suits one's strengths and marketable skills, rather than blindly pursuing high-income careers.
Outlines
📊 Intelligence vs. Earnings: The Paradox
This paragraph discusses a Swedish study that challenges the common belief that smarter people earn more. It reveals that while there is a strong correlation between intelligence and income up to a certain point (64,000 Swedish krona or about 57,000 USD annually), beyond this threshold, the relationship plateaus. Interestingly, among the top 1% of earners, those with lower intelligence outperform their smarter counterparts. The speaker warns against misinterpreting this data to justify not pursuing higher education, emphasizing the importance of understanding the nuanced relationship between cognitive ability, career choice, and income.
🚀 The Myth of High Prestige, Low Pay Jobs
The second paragraph delves into why high-prestige, low-paying jobs like academia and research may not lead to the highest income brackets, despite requiring high intelligence. It explains that while doctors, lawyers, and financiers are well-compensated, they are often not among the top 1% of earners. To reach this elite group, one typically needs to earn at least 597,000 USD before tax. The speaker points out that business owners, who may not necessarily be the most intelligent, often make up a larger portion of the top 1% due to the nature of business ownership and its potential for high profits, as opposed to the more limited earning potential of high-prestige jobs.
🤔 Critical Analysis of Career Success Factors
In this paragraph, the speaker addresses the complexities of planning a career based on statistical data, highlighting the limitations and potential misinterpretations of such studies. They discuss the 'ceiling effect' and 'survivorship bias', explaining how these statistical anomalies can skew perceptions of what it takes to be successful. The speaker also touches on the importance of considering individual traits beyond intelligence, such as ambition and the willingness to take risks, in the pursuit of wealth. They caution against the oversimplification of success stories and emphasize the need for a realistic and honest self-assessment of one's abilities and potential career paths.
Mindmap
Keywords
💡Daily Upside
💡Intelligence
💡Income Levels
💡Cognitive Ability
💡High Prestige Jobs
💡Business Ownership
💡Top One Percent
💡Survivorship Bias
💡Ceiling Effect
💡Nepotism
💡Career Planning
Highlights
A Swedish study reveals that top earners have lower intelligence than those just below them in income levels.
The study analyzed cognitive ability and earnings of 59,000 men who took a military conscription aptitude test.
Intelligence and income have a strong relationship, but only up to an income of 670,000 Swedish krona or $64,000 per year.
Among the top 1% income earners, less intelligent people outperformed their smarter counterparts.
Highly intelligent people often choose high prestige, low salary jobs like academics and research scientists.
To be in the top 1% of income earners in the USA, one must make at least $597,000 before tax.
Most top earners are business owners, which require less intelligence than becoming a top surgeon.
Highly intelligent people are less likely to transition to business ownership due to job satisfaction.
Moderately intelligent people with high income aspirations are more willing to take risks in business.
The study's findings are not universally applicable due to cultural and economic differences.
The ceiling effect in data sets can skew the perception of intelligence among high earners.
Survivorship bias may lead to an overestimation of the success of average intelligence in business.
Traits of wealthy people extend beyond intelligence, including luck, connections, and business acumen.
The study's focus on men and the Swedish context limits its generalizability to other populations.
Honest self-assessment of one's strengths and weaknesses is crucial for career planning.
Pursuing a career path solely for its income potential without considering personal aptitude can lead to failure.
The video was sponsored by the Daily Upside, a business and finance newsletter.
Transcripts
this week's video was made in
partnership with the daily upside a free
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using the link in the description dumb
people make more money than smart people
and it took a study conducted by really
smart people to prove it
a study out of Sweden found that the top
earners have lower intelligence than the
people and income levels directly below
them the plateauing of cognitive ability
among top earners Drew on data from 59
000 men who had to take a compulsory
military conscription aptitude test it
then tracks their earnings over their
professional careers to find the
relationship between intelligence and
income wait this is interesting and
before Tai Lopez gets any ideas for more
shitty YouTube commercials or the hustle
Bros learn how to read Journal articles
and use this to encourage people to drop
out of college I want you to know how
this data really works the relationship
between intelligence and income was
strong smarter people earned more money
but only up to 670 000 Swedish krona or
sixty four thousand dollars per year
after that intelligence didn't mean much
anymore and at the very top end of
income earners the one percent Dumber
people actually did better we made all
that today well it was twice as much but
I had a bailout Cinnamon's kit thanks Mr
Peter this guy's the best yes so is this
a sign that watching Tick Tock in
reality TV is actually better for your
career than going to college well maybe
actually for two important reasons but
there are also two reasons why you
should probably ignore this and keep
studying hard if you want to get ahead
financially reason number one why dumb
people are doing better than smart
people is that smart people fill in high
Prestige jobs that don't have high
salaries academics and research
scientists are some of the smartest
people in the world but they don't get
paid well guys like yourself yeah how
come I can be successful though okay
well you could be a lot more successful
we had 30 points less IQ doctors lawyers
and Elite financiers also need to be
very smart to get through demanding
schooling and Emissions exams and these
professionals are typically compensated
very competitively but most of them
don't make it all the way to the one
percent in the USA to be in the top one
percent of income earners an individual
needs to make at least 597
000 before tax and that's just the
minimum to join the one percent Club the
average member of the one percent earns
1.4 million dollars before tax some
senior Executives certain doctors
lawyers and even Bankers can earn this
much money but they are in the minority
most people making this much money are
business owners and there is less of an
intelligence barrier to becoming a
business owner compared to the genius
level intellect a person needs to become
a top surgeon business owners earning
over half a million dollars a year in
income still need to be smart but they
don't need to be as smart as the very
few types of workers that an employer
would be willing to pay that much you do
not have to be smart to make money
people that are highly intelligent and
have a desire for high income are also
at a slight disadvantage to people that
are only moderately intelligent and
equally have a desire for high income
highly intelligent people that follow
well-compensated career paths are less
likely to make the transition to
business ownership because they will
reach a level of income that they are
satisfied with and won't want to take
the risky step of giving up their
well-paid job to start a business that
might not even succeed moderately
intelligent people with desire for high
incomes on the other hand won't have as
many opportunities to make incomes in
the top percentiles unless they go into
business for themselves so they are on
average more willing to take the risk
because they won't be giving up a career
that was difficult to get into and
equally difficult to get back into
no I am not going anywhere until you or
one of your Butlers or bimbos writes me
a check so by looking at the data if you
want to be wealthy the best thing you
can do is to be moderately intelligent
with a lot of ambition right well as the
great Mark Twain said there are three
types of Lies normal lies damn lies and
statistics so it's time to learn how
money Works to find out why dumb people
are earning more than smart people and
why this trend is completely meaningless
for your own career planning this week's
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let's say all you care about is making
as much money as possible and you are
trying to pick what person you want to
be to give you the highest chance of
achieving that goal the first problem
that you will have if you try to plan
your career around replicating the
success of people in the top one percent
is all of the statistical complications
that come with inferring outcomes Based
on data like this the ceiling effect is
what happens towards the extremities of
data sets that are drawn on a scale like
percentiles of wealth if a class of 10
students got given a 100 question
surprise quiz and three students in a
class got perfect scores and the Seven
other students got a random mix of
scores a statistician could conclude
that a perfect score was the easiest
result to get because it's the result
that happened the most often no matter
how smart the students taking this quiz
are they can't get more than a perfect
score no matter how high someone's
income is the top one percent is the top
of the scale if two of the three
students with perfect scores were the
smartest people in the class and the
third student was average but just
cheated on the quiz by copying the top
student in the class the average
intelligence of the students with
perfect scores would be lower than the
intelligence of the student who got 99
questions right most people earning in
the top one percent are very smart but
their average is brought down by the
people like the Kardashians dude I am so
disillusioned right most people in the
top two percent are also very smart but
they don't have outliers stuck to the
ceiling bringing down their average less
intelligent people earning the most
money out of a population also have a
problem with survivorship bias a person
of average intelligence starting a
business for themselves is statistically
very likely to fail and end up in the
lower end of the income range at that
point they can either train start
another business or go back to a regular
job if they are successful though a
business doesn't need to get that large
before it can generate enough profit to
put the owner in the top one percent of
earners a highly intelligent person
starting a business will have slightly
better odds of being successful but
statistically it's still likely to fail
because there are less highly
intelligent people than there are people
of average intelligence there are going
to be more successful businesses run by
average people than run by intelligent
people and if you remember highly
intelligent people already earning good
money in a position as an employee are
less likely to start a business of their
own in the first place they're even less
likely to end up as a successful or
unsuccessful business owner there will
also be many more business failures
owned by people of average intelligence
but because only the businesses that
survive get counted in the one percent
of income earners it changes the
expectation that the best way to get
rich is to be a business owner of
average intelligence the second problem
with interpreting this study and all of
the other studies you hear about is that
the traits of wealthy people goes well
beyond just statistics to begin with the
study was conducted on men only men have
different career earnings and work in
different vocations than women so the
results could be very different if the
other half of the population was
included does that make sense you see
you see the difference measuring
intelligence is very difficult in a
military entrance exam is more likely to
be focused on the type of intelligence
that would make people good at following
orders like comprehension rather than
free thinking and creative intelligence
that would provide a competitive
advantage in the boardroom but not on
the battlefield the study was also done
in Sweden and I know thanks to the
invasive power of Google's data
collection that only 0.9 percent of you
watching are Swedish
personal finance and careers in Sweden
are different from here in the States
because they have stronger welfare and
worker protections they also pay lower
salaries on average to top employees
Sweden is also surprisingly more
entrepreneurial than the states it has
20 startups per 1 000 people while
America only has five so what does this
mean basically this means to get into
the top one percent where the study was
done you need to be a successful
business owner but in most other places
there is a high chance that you will get
there with one of the extremely well
paid jobs that go to extremely
intelligent people it's starting to look
bad for the Dropout of college hustle
Bros and that's before even considering
other things that can give people a high
income some people get a high income not
because of luck intelligence or hard
work they get it because they're a nepo
baby and have family connections which
can land them a job that pays well as
unfair as it may be to someone without
these advantages giving rich kids with
connections jobs can be worth it if they
keep using their connections to bring in
more business some of these privileged
individuals will be smart some of them
not so smart but they won't need to be
as intelligent as a top doctor to earn
their money so they will bring down the
average of the percentile they land in
so before that you think that this whole
investigation was just a big waste of
time and that it doesn't reveal the
secret to becoming a member of the one
percent you should know that it actually
does let me show you how there are some
factors that can put dumb people into
one percent that you can't control you
don't get to choose if you are born to a
wealthy family that can get you a fancy
job by calling in a few favors
like a little
100 Mil
a little hundred mil
I also only do so much to control
whether your business is highly
successful just breaking even or a
complete failure a lot of it is just
luck
but here is something else you can't 100
control how intelligent you are either
you can practice certain skills learn
new things but some people will be able
to absorb and apply knowledge better
than others you can't copy traits and
expect a similar outcome you have to be
able to critically assess your strengths
and weaknesses and choose a career path
that suits you best rich people eat a
lot of caviar and fly first class but
flying first class and eating caviar
won't make you rich just like being of
average intelligence won't make you a
member of the one percent by itself the
first real step is to work out what you
are good at and what you are bad at this
may involve admitting to yourself that
you are not as smart as you think you
are it might hurt your ego but being
honest with yourself about your
weaknesses will bring you much further
than believing you're good at things
that you're not highly competitive
Industries reward High performers but
they are also equally punishing
underperformers becoming a doctor will
almost guarantee an upper middle class
or upper class income for the rest of
your working life but feeling out of med
school will leave you with hundreds of
thousands of dollars of student loans
that will put you far behind people who
were more realistic with their career
Ambitions an electrician that does the
best work in their area and has a good
reputation with Builders and businesses
will make more money than a lawyer that
is average or below average that doesn't
mean drop out of college it means be
honest with yourself about what
marketable field you could excel in and
do that instead of trying to chase
career paths that just have a reputation
for earning a lot of money because if
you do you might end up like the people
that rushed into tech jobs to chase big
paychecks just before the biggest
companies in the space announce record
layoffs to find out why tech companies
that are only running a website need so
many employees to begin with go and
watch my video on why tech companies
hire in fire so much a special thanks
again to the Daily upside for making it
possible for everybody to keep on
learning how money works
well you made it Peter you're a big shot
in charge of a whole bunch of people
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