Why Dumb People Earn More Than Smart People

Summary

This 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.