The link between IQ and income is overrated

Garett Jones was the one who first put me on to this idea, now it is in a Bloomberg column, excerpt:

The evidence is striking. One study of CEOs of large Swedish companies found that on average they ranked at the 83rd percentile of measured IQ (for CEOs of smaller companies, the rank was the 66th percentile). That’s above average, but it’s hardly a cluster at the top of the distribution. Many CEOs undoubtedly achieved their position through hard work, charisma, people skills and other abilities, not to mention luck.

In the broader distribution, the connection between IQ and income is also positive but underwhelming. One study concluded that moving from the 25th to the 75th percentile of IQ correlates with a 10% to 16% boost in earnings. That may feel significant when you get it, but it doesn’t push you into a whole new socioeconomic class.

The connection between IQ and achievement at the very highest tiers is in my view still an open question.  Here are some recent results, in my view not yet confirmed as the correct overall point of view:

One recent study, also based on Swedish data, showed two results of significance. First, much of the intelligence-earnings correlation weakens significantly and plateaus above salaries of 60,000 euros a year. Second, and perhaps more surprising, people in the top 1% of earners had lower IQs than the earners immediately beneath them.

Why that is the case, it’s hard to say. But one possibility is that the very smartest people prefer a more balanced life rather than working all the time. Or perhaps they prefer occupations with higher status and somewhat lower pay. Money isn’t the only thing you can enjoy. Maybe having a lot of it can make it harder to trust potential friends or spouses.

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