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.

Outlines

00:00

📊 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.

05:00

🚀 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.

10:01

🤔 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.

Keywords

💡Daily Upside

The Daily Upside is a free business and finance newsletter mentioned in the video script as a partner. It is described as providing clarity and context on events shaping the world of business, delivering a morning brief and detailed stories every weekday. The video script promotes it as an informative and witty source of financial news, suggesting that it is a valuable resource for both financial professionals and those looking to stay informed about market-moving news.

💡Intelligence

Intelligence, in the context of the video, refers to cognitive ability or mental capacity, which the script discusses in relation to income levels. The script mentions a study from Sweden that found a plateauing of cognitive ability among top earners, suggesting that beyond a certain income level, intelligence does not necessarily correlate with higher earnings. The video uses this concept to challenge the assumption that smarter people always earn more money.

💡Income Levels

Income levels are the financial thresholds that categorize individuals based on their earnings. The video script discusses a study that analyzed the relationship between intelligence and income levels, finding that the top earners have lower intelligence than those just below them. It also mentions specific income figures, such as 670,000 Swedish krona or $64,000 per year, as a point where the relationship between intelligence and income plateaus.

💡Cognitive Ability

Cognitive ability is a person's capacity for learning, understanding, and thinking, which is measured in the study mentioned in the script through a military conscription aptitude test. The video discusses how cognitive ability is related to professional success and income, but also points out that it does not necessarily correlate with being in the top one percent of earners.

💡High Prestige Jobs

High prestige jobs are occupations that are respected and admired in society, often requiring a high level of education and skill. The script notes that smart people often fill these roles but may not necessarily earn high salaries, such as academics and research scientists, which contrasts with the stereotype that intelligence directly leads to wealth.

💡Business Ownership

Business ownership refers to the act of owning and operating a business. The video script suggests that business owners, who may not need to be as highly intelligent as certain professionals, can still earn substantial incomes. It highlights that there is less of an intelligence barrier to becoming a business owner, and that moderately intelligent individuals with ambition may be more willing to take the risks associated with starting a business.

💡Top One Percent

The top one percent refers to the highest earners in the income distribution. The video script discusses the challenges of interpreting studies on wealth and success, using the top one percent as an example. It points out that the average intelligence of this group may be skewed by outliers and that many successful business owners fall into this category.

💡Survivorship Bias

Survivorship bias is the tendency to focus on the survivors or successful cases while overlooking those that have failed. In the context of the video, it is used to explain why the average intelligence of the top one percent of earners might be lower than expected, as many businesses owned by people of average intelligence fail and are not counted in the statistics.

💡Ceiling Effect

The ceiling effect is a phenomenon where data points at the extremes of a scale are limited, which can distort statistical analysis. The script uses this concept to explain why the average intelligence of top earners might appear lower, as there is a limit to how high one can score on a test or earn within a certain percentile.

💡Nepotism

Nepotism is the practice of favoring relatives or friends, especially by giving them jobs. The video script mentions that some individuals may earn high incomes not because of their intelligence or hard work, but because of family connections that can provide them with well-paying jobs, thus affecting the average intelligence of high-income earners.

💡Career Planning

Career planning involves making decisions about one's professional path based on skills, interests, and market demand. The video script emphasizes the importance of being honest with oneself about one's abilities and choosing a career path that aligns with one's strengths and the potential for success, rather than blindly pursuing high-income careers that may not be a good fit.

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

business and finance newsletter sign up

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

lesson was made possible by the daily

upside most Financial media businesses

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Financial insecurity and fear into

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nine percent plus inflation is eating

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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