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Implicit is the presumption that the smartest people optimize for wealth, or that the smartest people are good at optimizing for wealth. Outside of Wall Street,

Implicit is the presumption that the smartest people optimize for wealth, or that the smartest people are good at optimizing for wealth. Outside of Wall Street, "smart" people - academics, doctors, lawyers, engineers, etc. - are just as likely to make bad personal finance decisions and/or to stay in labor (rather than management) positions for most of their careers (leave aside the dual-track IC/management ladder at a relatively small handful of companies). People don't bother to max out their earning potential because, after you earn enough to meet your needs, it quite frankly doesn't matter anymore compared to other means of personal fulfillment. This is besides the point that the ranks of upper management are typically filled with people who are socially/politically smart, and not necessarily STEM-style smart; the cognitive ability of whom may or may not be adequately captured by this study.

SnowHill9902 4y ago
Are they really smart then? You are using a straw man fallacy by redefining who’s smart.
- alistairSH 4y ago
  The study apparently used some flavor of IQ test, which already makes assumptions about what “smart” means. And is who “really smart then”? I knew plenty of people in college who were of similar general IQ as me but chose career paths specifically to maximize income (finance, largely). And I knew plenty who were smarter than me who went into fields such as education or PT/exercise science because that’s what they wanted to do. So it doesn’t surprise me in the least that IQ correlates with high income to a point, but beyond that point other factors (largely desire to be wealthy) play a larger role.
- deleted 4y ago
  [deleted]
- groestl 4y ago
  Maybe you're thinking of No true Scotsman? https://en.wikipedia.org/wiki/No_true_Scotsman https://en.wikipedia.org/wiki/No_true_Scotsman
  - groestl 4y ago
    Actually, thinking of it, https://en.wikipedia.org/wiki/Moving_the_goalposts https://en.wikipedia.org/wiki/Moving_the_goalposts is more fitting (since No true Scotsman is about redefining irrelevant criteria).
    - DonHopkins 4y ago
      When there are no true goalposts, it's time for moving the straw Scotsman.
sokoloff 4y ago
Plenty of Wall Streeters also make bad personal finance decisions.
mannykannot 4y ago
When you say, in your first sentence, that there are implicit presumptions, who is making them? I don't think the study itself is predicated on those premises. Maybe people who find the result surprising had such presumptions built into their preconceptions.
- ShamelessC 4y ago
  [flagged]
epistemer 4y ago
It also disregards the type of lottery game that is a part of wealth accumulation. Of course, it is not all luck but to believe wealth accumulation is a type of purely deterministic meritocratic game without a giant stochastic factor is ridiculous. That might even be the dumbest aspect of our society. Believing the powerball lottery winner is a genius for picking the numbers they picked is obviously stupid. Yet we basically have that view with everything else besides the actual lottery.
- onos 4y ago
  Yeah but presumably averaging over many people or situations in a study like this would reduce that noise.
  - Tade0 4y ago
    But that just averages to systematic error. The same mistake has much worse consequences if you don't have wealth.
    - Qem 4y ago
      Nailed it. If you're Elon Musk, do some dumb mistake and lose 200 billion, your life barely changes. If you live on minimum wage, and loses half of it, starvation ensues for your family. The impact of losses is disproportional between rich and poor.
      - onos 4y ago
        So you’re saying the poor have much more to gain through hard work and shouldn’t be discouraged?
        ss2003 4y ago
        You have it completely reversed. Hard work for the poor most likely means they will still be poor and therefore have very little to gain from it.
fsloth 4y ago
I believe that the sampling to enter the highest strata of top earners is also partly lottery. You get to a well paid engineering role by acing studies. But to transit from low-generational wealth to non-low generational wealth status requires you either to marry, found a company or be at the right position of an up and coming company. All of those are partly lottery - yes, you likely need to be of some talent to enter the lottery in the first place - but above that bar, which is tens of percents of society, chance has a quite a large effect on outcomes.
- WalterBright 4y ago
  > But to transit from low-generational wealth to non-low generational wealth status requires you either to marry, found a company or be at the right position of an up and coming company. Steve Jobs founded the biggest company in the world financed by selling his Volkswagon. Bezos started in a garage. Dell started in a dorm room. The last time I founded a company, it cost me $30.
  - fsloth 4y ago
    My intent was not to imply that founding a company is hard or expensive (just that creating a company that results in generational wealth is an unlikely proposition, if we take as the potential founder pool "those that statistically are likely to reach the swedish 60k limit"). It seems the above reads like something else - thanks for the clarification.
silvestrov 4y ago
Society pays CEO/music/football stars much better than Stephen Hawking and other good researchers. People like Stephen Hawking likely considers working as a CEO as a really boring job: just a lot of obvious decisions and tons of boring meetings. This kind of people will rather work as a badly paid researcher instead.
- zeroonetwothree 4y ago
  hawking probably made a lot of money from his books. As for research I think the fact is that 99% of research is useless and doesn’t matter in the long term. So it makes sense that it’s not rewarded that highly. Meanwhile every LeBron James entertains millions.
  - pas 4y ago
    even that 1% of research has almost infinite value (but let's discount it, saying that as time goes on even hard scientific questions become easier thanks to ambient progress in other fields), whereas sport events are completely ephemeral and very fungible. and, while I don't want to make assumption about your preferences, for me the value in sports is exactly that "being there in the moment" aspect. watching it through a screen? nah.
gghffguhvc 4y ago
This resonates with me. Once our household income hit a tipping point of being financially comfortable and secure we started making decisions on a different set of criteria that optimized for dealing with less crap rather than maximizing income. In the last 6 months we didn't play by that criteria for one key decision and I can't wait to have that decision rewound even though it will cost us financially.
VoodooJuJu 4y ago
>academics, doctors, lawyers, engineers Another presumption, that people who hold these jobs are necessarily smart. I used to be fooled into believing it. I think many people are fooled.
- Qem 4y ago
  In the pandemic I became astonished seeing how a lot of doctors were quick prescribing the likes of chloroquine, and other ineffective treatments, even after they were proven bogus. Really shaked my trust in the profession. Today I'm afraid of taking medical advice before I have the opinion of at least two and they agree.
onlyrealcuzzo 4y ago
> Outside of Wall Street, "smart" people - academics, doctors, lawyers, engineers, etc. - are just as likely to make bad personal finance decisions It's true in finance, too! Unless you define "smart" in finance as financially successful. It's implicit that you think finance is mostly skill based and not mostly luck based. There's a mountain of evidence that the vast majority of trading success can be explained by noise.
ip26 4y ago
the ranks of upper management are typically filled with people who are socially/politically smart I used to think this still meant a sort of philosophical brilliance, an high minded intellectual mastery of manipulation. I’ve started to realize it might be more of an instinctual animal cunning; they just have a sense of the right thing to do or say. The remaining question is whether they learned that sense or were born with it. It is curious to entertain the latter; perhaps a hundred people are born with a hundred different calibrations, and only one of the hundred is born with just the right instinct.

SnowHill9902 4y ago

Are they really smart then? You are using a straw man fallacy by redefining who’s smart.

alistairSH 4y ago
The study apparently used some flavor of IQ test, which already makes assumptions about what “smart” means. And is who “really smart then”? I knew plenty of people in college who were of similar general IQ as me but chose career paths specifically to maximize income (finance, largely). And I knew plenty who were smarter than me who went into fields such as education or PT/exercise science because that’s what they wanted to do. So it doesn’t surprise me in the least that IQ correlates with high income to a point, but beyond that point other factors (largely desire to be wealthy) play a larger role.
deleted 4y ago
[deleted]
groestl 4y ago
Maybe you're thinking of No true Scotsman? https://en.wikipedia.org/wiki/No_true_Scotsman https://en.wikipedia.org/wiki/No_true_Scotsman
- groestl 4y ago
  Actually, thinking of it, https://en.wikipedia.org/wiki/Moving_the_goalposts https://en.wikipedia.org/wiki/Moving_the_goalposts is more fitting (since No true Scotsman is about redefining irrelevant criteria).
  - DonHopkins 4y ago
    When there are no true goalposts, it's time for moving the straw Scotsman.

sokoloff 4y ago

Plenty of Wall Streeters also make bad personal finance decisions.

mannykannot 4y ago

When you say, in your first sentence, that there are implicit presumptions, who is making them? I don't think the study itself is predicated on those premises. Maybe people who find the result surprising had such presumptions built into their preconceptions.

ShamelessC 4y ago
[flagged]

epistemer 4y ago

It also disregards the type of lottery game that is a part of wealth accumulation. Of course, it is not all luck but to believe wealth accumulation is a type of purely deterministic meritocratic game without a giant stochastic factor is ridiculous. That might even be the dumbest aspect of our society. Believing the powerball lottery winner is a genius for picking the numbers they picked is obviously stupid. Yet we basically have that view with everything else besides the actual lottery.

onos 4y ago
Yeah but presumably averaging over many people or situations in a study like this would reduce that noise.
- Tade0 4y ago
  But that just averages to systematic error. The same mistake has much worse consequences if you don't have wealth.
  - Qem 4y ago
    Nailed it. If you're Elon Musk, do some dumb mistake and lose 200 billion, your life barely changes. If you live on minimum wage, and loses half of it, starvation ensues for your family. The impact of losses is disproportional between rich and poor.
    - onos 4y ago
      So you’re saying the poor have much more to gain through hard work and shouldn’t be discouraged?
      - ss2003 4y ago
        You have it completely reversed. Hard work for the poor most likely means they will still be poor and therefore have very little to gain from it.

fsloth 4y ago

I believe that the sampling to enter the highest strata of top earners is also partly lottery. You get to a well paid engineering role by acing studies. But to transit from low-generational wealth to non-low generational wealth status requires you either to marry, found a company or be at the right position of an up and coming company. All of those are partly lottery - yes, you likely need to be of some talent to enter the lottery in the first place - but above that bar, which is tens of percents of society, chance has a quite a large effect on outcomes.

WalterBright 4y ago
> But to transit from low-generational wealth to non-low generational wealth status requires you either to marry, found a company or be at the right position of an up and coming company. Steve Jobs founded the biggest company in the world financed by selling his Volkswagon. Bezos started in a garage. Dell started in a dorm room. The last time I founded a company, it cost me $30.
- fsloth 4y ago
  My intent was not to imply that founding a company is hard or expensive (just that creating a company that results in generational wealth is an unlikely proposition, if we take as the potential founder pool "those that statistically are likely to reach the swedish 60k limit"). It seems the above reads like something else - thanks for the clarification.

silvestrov 4y ago

Society pays CEO/music/football stars much better than Stephen Hawking and other good researchers. People like Stephen Hawking likely considers working as a CEO as a really boring job: just a lot of obvious decisions and tons of boring meetings. This kind of people will rather work as a badly paid researcher instead.

zeroonetwothree 4y ago
hawking probably made a lot of money from his books. As for research I think the fact is that 99% of research is useless and doesn’t matter in the long term. So it makes sense that it’s not rewarded that highly. Meanwhile every LeBron James entertains millions.
- pas 4y ago
  even that 1% of research has almost infinite value (but let's discount it, saying that as time goes on even hard scientific questions become easier thanks to ambient progress in other fields), whereas sport events are completely ephemeral and very fungible. and, while I don't want to make assumption about your preferences, for me the value in sports is exactly that "being there in the moment" aspect. watching it through a screen? nah.

gghffguhvc 4y ago

This resonates with me. Once our household income hit a tipping point of being financially comfortable and secure we started making decisions on a different set of criteria that optimized for dealing with less crap rather than maximizing income. In the last 6 months we didn't play by that criteria for one key decision and I can't wait to have that decision rewound even though it will cost us financially.

VoodooJuJu 4y ago

>academics, doctors, lawyers, engineers Another presumption, that people who hold these jobs are necessarily smart. I used to be fooled into believing it. I think many people are fooled.

Qem 4y ago
In the pandemic I became astonished seeing how a lot of doctors were quick prescribing the likes of chloroquine, and other ineffective treatments, even after they were proven bogus. Really shaked my trust in the profession. Today I'm afraid of taking medical advice before I have the opinion of at least two and they agree.

onlyrealcuzzo 4y ago

> Outside of Wall Street, "smart" people - academics, doctors, lawyers, engineers, etc. - are just as likely to make bad personal finance decisions It's true in finance, too! Unless you define "smart" in finance as financially successful. It's implicit that you think finance is mostly skill based and not mostly luck based. There's a mountain of evidence that the vast majority of trading success can be explained by noise.

ip26 4y ago

the ranks of upper management are typically filled with people who are socially/politically smart I used to think this still meant a sort of philosophical brilliance, an high minded intellectual mastery of manipulation. I’ve started to realize it might be more of an instinctual animal cunning; they just have a sense of the right thing to do or say. The remaining question is whether they learned that sense or were born with it. It is curious to entertain the latter; perhaps a hundred people are born with a hundred different calibrations, and only one of the hundred is born with just the right instinct.