from Steve Hsu:
Does being smart help you become rich?
Folksy Warren Buffett once said that an investor with IQ of 150 should sell 30 points to someone else, as anything above 120 is unnecessary.
Igon Model: IQ correlates positively with wealth, but the effect goes away for IQ > 120. IQ above 120 provides no advantage, relative to IQ=120, for acquiring wealth.
Were this model to be true, one would expect with overwhelming probability to find that the vast majority of rich people have IQ around 120, but not much higher. This is because IQ is normally distributed: as you go further out the tail the population decreases exponentially. To be specific, IQ = 120 corresponds to the 90th percentile, whereas IQ = 135 is 99th percentile (i.e., only 1 in 10 people with IQ > 120 have IQ > 135) and IQ = 145 is 99.9th percentile (i.e., only 1 in 100 people with IQ > 120 have IQ > 145).
Now let's look at the 2009 Forbes list of richest people in the world:
1 William Gates III 53 40.0 United States
2 Warren Buffett 78 37.0 United States
3 Carlos Slim Helu 69 35.0 Mexico
If the Igon Model were correct, we would not expect to find this list dominated by people with IQ much higher than 120. But in fact we do. Note these three made their money in different ways: Gates founded a software company, Buffett is primarily an investor, and Carlos Slim is an oligarch ;-)
Bill Gates scored 1580 on the pre-1995 SAT. His IQ is clearly >> 145 and possibly as high as 160 or so.
Warren Buffett graduated high school at 16 ranked in the top 5 percent of his class despite devoting substantial effort to entrepreneurial activities. Most people who know him well refer to him as brilliant, that folksy quote above notwithstanding. I would suggest the evidence is strong that his IQ is above 135, perhaps higher than 145.
Carlos Slim studied engineering and taught linear programming while still an undergraduate at UNAM, the top university in Mexico. He reportedly discovered the use of compound interest at age 10. I would suggest his IQ is also at least 135.
So it would appear that the three richest men in the world all have IQs that are higher than 90 percent or even 99 percent of the > 120 IQ population. (Relative to the general population they are all likely in the 99th or even 99.9th percentile.) The probability of this happening in the Igon Model is less than 1 in 1000.
