How Intelligence Relates to Wealth

Does intelligence equal wealth? Not necessarily. If you define intelligence as the ability to apply knowledge and skills, then intelligence can certainly help someone to accumulate wealth. However, there are many hardworking people who have studied hard and applied themselves only to find that their pay is average, and there is no advancement in sight.

Key Takeaways

  • Intelligence appears to have no direct correlation with wealth. 
  • Key examples of this include famed NBA player Earvin "Magic" Johnson Jr. (who is wealthy) and Christopher Michael Langan, an American with a very high IQ (who is much less wealthy). 
  • Granted, there is some correlation, as Google founders Sergey Brin and Larry Page are considered very intelligent and have built a multi-billion company. 
  • The ability to exploit opportunities might have a higher level of correlation to wealth than intelligence, however. 

Educated but Underemployed

Educated people working in disappointing jobs is not a reflection of dire recessionary times. Rather, it's because financial rewards are tied to what a producer has to offer. Every individual competes in the labor marketplace, and intelligence plays a limited role. The marketplace is nothing more than the exchange of people's accumulated wants and desires. Much of what consumers collectively consider of great value in the marketplace has little to do with intelligence.

No one expects Earvin "Magic" Johnson Jr., retired professional basketball player and current president of operations at the Los Angeles Lakers, to offer proof of the Riemann hypothesis, yet his wealth is estimated to be half a billion dollars. In Johnson's case, he developed non-academic, unique skills that he could use to obtain a high salary. By saving that salary and investing, Johnson earned far more money through passive income than by active means.

Contrast that with Christopher Michael Langan, an American known for his high IQ. Langan's story is a classic example of how little correlation there can be between intelligence and financial reward. Raised in poverty by a single mother, Langan dropped out of two colleges and has worked a series of manual labor jobs ever since. This is despite being billed as "the smartest man in America" and having an IQ measured at between 190 and 210. In between his shifts as a bouncer, Langan single-handedly devised a theory that unifies science and theology. His theory might significantly advance human understanding, but it does not pay Langan's bills as efficiently as his current job as a horse rancher.

Applying Knowledge or Practicality

Applicable intelligence, however, is still a force in the labor marketplace. Google creators Sergey Brin and Larry Page are adept programmers with strong credentials in mathematics and computer science. Upon graduating from Stanford, either could have assumed entry-level jobs at Microsoft or IBM. However, Brin and Page also had a mission. Their goal was to organize the world's information and make it available to everyone. Without intelligence, Google, or its parent company Alphabet, would have remained just a niche business instead of growing into its massive market cap.

Leveraging a gap in the market does not necessarily require acute intelligence; perhaps just practical insight. Harvey House founder, Fred Harvey, never attempted to formulate a scientific theory, but he did notice that people disembarking at train stations often wanted something to eat and a place to spend the night. Armed with that knowledge, he became one of the hospitality industry's most successful entrepreneurs.

The Bottom Line

Exploiting opportunities is a skill often far removed from what is learned in a classroom. Take two college mathematics majors. The "A" student brags about his time at grad school, his rapidly acquired lecturing job and his fully tenured professorship with a $100,000 salary. The "C" student casually mentions that she became a billionaire. "I found a product that I buy for $2 and sell for $5," she said. "It's amazing how much money you can make with that kind of markup."