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The one per cent are not as clever as they think (FT)

4 March 2023

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Financial Times title: The one per cent are not as clever as they think
FT subtitle: The brainiest people and the biggest-earners are two largely separate groups says new research
By: Simon Kuper
Date: 16 February 2023

“I used to know an investment banker who went around saying he was writing a novel. Obviously, this was self-marketing, but he also genuinely believed he could write a better novel than actual novelists. After all, he reasoned, he must be smarter than they were, because he earned more money.

This man was suffering from the Davos Fallacy: the notion that very high earners are also very clever. But at the top end of incomes this isn’t true, according to a new study of 59,000 Swedish men. The highest-earning 1 per cent and the brainiest 1 per cent seem to be two largely separate groups, with little overlap. If that’s so, how should we treat each elite?

The study, “The plateauing of cognitive ability among top earners”, by sociologists Marc Keuschnigg, Arnout van de Rijt and Thijs Bol, uses an unusually rich dataset. When military service in Sweden was compulsory, and almost all native-born men enlisted aged 18 or 19, they were tested on cognitive ability. There were “separate paper and pencil tests for verbal understanding, technical comprehension, spatial ability, and logic”. The paper analyses the future earnings of men tested from 1971 through 1977, and from 1980 until 1999.

Up to wages of about €60,000, cognitive ability did predict income: the cleverer you were, the more you earned. But above €60,000, the relationship broke down. In fact, the top 1 per cent of earners had slightly lower cognitive ability than the men two percentiles below them, despite being paid more than twice as much.

Similarly, an earlier study of the Swedish data, led by Renée Adams, found that “the median large-company CEO [in the top 0.1 per cent of incomes] belongs to the top 17 per cent of the population in cognitive ability.” And that’s in Sweden, where relatively inclusive higher education gives clever people from poorer backgrounds a door into the 1 per cent.

In less fair countries, you’d expect top earners to be even less cognitively impressive. True, some very rich people are very bright: Mark Zuckerberg, Google’s co-founder Sergey Brin and Stefani Germanotta (now the singer Lady Gaga) were all identified and enrolled as adolescents by Johns Hopkins University’s Center for Talented Youth, notes Jonathan Wai of the University of Arkansas. But they are exceptions.

It’s no wonder that cleverness barely predicts top incomes, because so many other factors matter more in working life. There’s luck, family background, motivation, self-regulation, skill at office politics and even height.

In addition, some people simply care more than others about getting rich, and devote their careers to that goal. That may be especially true of those well-educated people who have no particular vocation to distract them.

If the rich aren’t exceptionally smart, that’s one (albeit only one) strike against the rightwing argument that they deserve their money. It also implies that we shouldn’t credit them with special insight. Billionaires prancing around Davos pretending to be “thought leaders” can be ignored.

But how should we treat the cleverest people? Their braininess is mostly luck – some windfall combination of nature and nurture – and we don’t need to reward it with top salaries. Nobody wants a society stratified by intelligence (however measured).

Anyway, brilliant people often aren’t driven by money. Many of them are intrinsically motivated: they love learning, and they make that their career goal. The Study of Mathematically Precocious Youth, led by David Lubinski and Camilla Benbow of Vanderbilt University, found that students in the top 0.01 per cent of ability earn doctorates at around 50 times the base rate. Very clever people are overrepresented in academia, other research, engineering, law and programming (“software is an IQ business”, said Bill Gates). When they do get rich, it’s often an unintended consequence of their passion. They seldom thrive in large organisations because they struggle to deal with those of more ordinary intelligence.

Rather than funding clever people’s bank balances, we should subsidise their work. We want them to do the thinking, imagining and inventing for our societies. We should do more to stimulate them at school, and we should spend more on blue-skies research. When few of the world’s PhD programmes pay a living wage, brilliant twentysomethings are pushed into socially less useful jobs, for instance working as quants in finance houses.

A beautiful mind, honed by a lifetime’s study, specialised in one subject, remains highly fallible. But it’s the best we humans can do.”


Source:
https://www.ft.com/content/f716bea0-21eb-4ac5-923e-e268d307f3e6

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