Can High IQ Make You Rich?

Robert Roy Britt

Date: 20 April 2009 Time: 01:01 PM ET

Smarter people are better at earning and managing money, a new study of wannabe truck drivers suggests.

While it may not seem like rocket science, the UK research puts some data behind the notion that people with higher IQs make better choices and therefore enjoy more financial prosperity.
The reason behind this link: Intelligent folks are better equipped to make complex decisions that make money, the researchers say.

However, the finding is in direct contrast to a U.S. national survey in 2007 that showed individuals with below-average IQ were just as wealthy as those with high IQs — with an important caveat: providing they lived in similar circumstances.

One might also argue that while driving trucks is a perfectly worthy pursuit, it is not in most cases a fast track to wealth, and therefore the sample chosen for the new study may not be all that representative of society in general.

What might be concluded: Brains can make you rich, if you have opportunity, too. And those with financial opportunity can easily squander it if they aren't sharp. Oh, and an underlying factor: IQ does not equal smarts in every sense, as anyone with good common sense knows.

Truck drivers in training

In the new study, researchers surveyed 1,000 truck drivers in training. There was a written IQ test, plus complex social experiments designed to test their economic decision-making prowess.
Those with higher IQs tended to be better at judging risks, predicting other peoples' behaviors and planning ahead. By comparison, those with lower IQs struggled to make sound economic decisions.

The upshot, the researchers say, is that public policies should encourage enhancing smarts with such things as early education programs, all with an eye toward ironing out social inequalities and improving national wealth.

"Having a higher IQ has generally be seen as a supplementary factor that may help to improve a person's chances of enjoying economic success, but these results suggest that it is decisive," said professor Aldo Rustichini, from the University of Cambridge's Faculty of Economics and one of the report's authors.

In a risk-taking experiment that was part of the study, subjects in the top tier of IQ ratings were 25 percent more likely to make consistent choices based on an assessment of the merits of a scheme involving fixed payments vs. a lottery. In a test of patience, the smarter subjects 15 percent more likely to opt for later, larger payments.

"Crucially, better cognitive skills seem to go hand-in-hand with the other qualities needed to make the right economic choices," Rustichini said. "We believe that this may be because people with a higher IQ are better equipped to cut through complex situations and understand their options.”

Real-world test

In addition to the experiments, the researchers examined actual data from the human resources department of the company that was administering the truck driver training program.

This provided insight because the firm trains new employees at a cost to the trainees themselves. If the employees stay with the firm for a year, the debt is cancelled, but if they leave, the debt remains payable.

Taking the job therefore required the employee to be able to anticipate whether they would want to stay for a year. By examining which subjects quit before the year was out, the researchers were able to test whether their employment plans were economically sound. The researchers found "a strong and significant relationship" between an individual's IQ and his or her ability to make good economic choices.

"Individuals with a higher IQ are better equipped to evaluate a complex set of options, enabling them to make better choices," Rustichini said. "Because they can cut through complicating factors, such as the possible outcomes of a lottery or a delayed payment, they can predict the impact of their actions more precisely. This means that they are also more likely to reap the economic rewards."

The findings are detailed in April 20 issue of the journal Proceedings of the National Academy of Sciences.

Robert Roy Britt is the Editorial Director of Imaginova. In this column, The Water Cooler, he looks at what people are talking about in the world of science and beyond.