Why Most Intelligent People Are Not Rich

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May 1, 2018
There are factors that make this happen. It's true that most intelligent people can be good be innovations and championing an idea but most of them aren't rich because wealth leads to riches, and some wealth is inherited.

Natural talent plays little or no role in acquiring wealth through this means. You see it in the descendants of famous families: Even if the ancestor had some savvy, sometimes the grand-kids are smart and sometimes not. Every country on earth has its rich families, and most wealth is transferred through family inheritance, so this is probably the primary reason many wealthy people are not necessarily the smartest people in the room.

Some riches require hustle and salemanship, and not necessarily book smarts or intelligence, as conventionally recognized. For example, I knew a guy who loved cars, and his enthusiasm was infectious. He developed a successful car business, and he did it honestly. When it became worth a gazillion, he sold the business, and had fun thereafter being part of team racing Indy cars. Not a bad life if you can get it.

Social connections matter a great deal in generating access to some jobs that lead to riches — for example, in sensitive financial jobs. The very rich (understandably) mistrust those they do not know, and (understandably) are wary of hiring somebody who could embezzle cash or cheat them, then skip town. So they often hire trusted employees from families they have known for a long time. Some intelligence is required for many of these jobs, but not necessarily the super intelligence to do well on a graduate physics exam.

Rare events that lead to riches are random. Simply stated, rare events visit everyone, and some of those rare events lead to riches. The rare event hits the intelligent and not so intelligent with equal measure, and so the riches are rare with everyone. It is the lottery of life. For example, if you happen to have been an early employee for Microsoft or Google, even as an administrative assistant, then you are sitting pretty well today. If you happen to have owned the laundry-mat on the street where development took place, again, good for you.

Smart in a professional domain does not necessarily lead to easily recognizable intelligence. Or, to say it glibly, some professionals can achieve great accomplishments, get rich from those achievements, and do so without the ability to compose an essay. For example, most super-successful athletes are super smart about the requirements for success in their chosen sport, and, for the most part, most successful athletes have a rare gift for quick thinking and the discipline to develop their talent. But they do not have to quote Shakespeare to get ahead — i.e., their intelligence may not be easily recognizable. (And let’s not get started on super-star popular musicians and actors. Some of the best are incredibly smart, and some, well, not so much.)

Being right once does not lead to being intelligent throughout life, nor all the time. This is especially common. It can come about due to attribution bias — i.e., somebody makes a great bold decision in just the right set of circumstances, and it leads to riches, then develops overconfidence in their own abilities in all circumstances. For example, there is no doubt that Henry Ford had the right idea about how to produce an automobile, and well ahead of others, and it made him rich. But after that initial success he became an impossibly difficult person to deal with — arrogant, bigoted, and heavy handed.

And, lastly, the premise may be false in many important instances. Bill Gates, Warren Buffet, Andy Grove, Mark Zuckerberg, and many other tech entrepreneurs are super intelligent. Quite frankly, the list of smart executives in technology is pretty long. To be sure, high tech markets only make up a fraction of the total economy, and they may not be representative of all executives, and so it does not seem to have a big impact. That said, if you look at the richest people, many of them increasingly come from this domain, which suggests intelligence may be playing a larger role in the present era than in the past.

I hope you enjoyed reading