Genius does not equal money

By Legal Eagle

A US study reportedly shows that people with high IQs are just as likely to get into financial difficulties as those with average or below average IQs. I’m glad to know that just because I haven’t made my first million yet, this doesn’t mean I’m dumb…

The study confirmed previous research which has shown that smarter people tend to earn more money, but pointed out there is a difference between high pay and overall wealth.

“The average income difference between a person with an IQ score in the normal range (100) and someone in the top two per cent of society (130) is currently between $US6,000 ($A7,200) and $US18,500 ($A22,250) per year,” it said.

“But when it came to total wealth and the likelihood of financial difficulties, people of below average and average intelligence did just fine when compared to the super-intelligent.”

An irregular pattern of total wealth as well as financial distress levels – such as maxed out credit cards, bankruptcy and missing bill payments – emerged among the various degrees of intelligence, the study said.

My observation would be that knowing how to handle money has nothing to do with intelligence, and everything to do with whether you are the kind of person who likes to face up to problems, or whether you just like to ignore them.

Financial problems sometimes arise through misfortune (eg, an illness, a redundancy, a marriage break-up). There’s not much you can do about that. But other times, I think financial problems arise because people just don’t want to think through the consequences of their actions. They don’t imagine that disaster could ever happen to them – financial ruin is something which happens to other people. They overextend themselves with a huge loan, not thinking about what will happen if interest rates rise. They buy that expensive plasma television using a credit card, without thinking that they’re just deferring payment of the television – without thinking that if they don’t have the money to pay for it this month, what’s going to be different about next month or the month after? It’s so easy to spend on a credit card – all that lovely available credit there, waiting to be used…When I first got a credit card in my 20s, I fell into the credit card trap myself.

I met with some of my old colleagues today. At one point we all worked in banking litigation. We discussed again the “head in the sand” phenomenon, and agreed that this seemed to pervade the behaviour of many of those who defaulted on loans.

As I’ve discussed before, there may be a positive side to having unrealistic expectations – I suspect many entrepreneurs succeed because they do not see risks as other people do, and forge ahead regardless. However, this is also a reason why some entrepreneurs end up in trouble – they keep going when any prudent person would wind up the business.

I’m no psychologist, but I wonder if there’s a reason for this function of the human brain which makes us put our head in the sand and pretend there is not a problem. I guess it has evolved as a necessary personality trait because it helps humans survive against the odds in terrible situations. But it also has its downsides when it means people deny that there is a problem, and that problem desperately needs to be dealt with.


  1. missv
    Posted April 27, 2007 at 2:09 am | Permalink

    I think that people are also very influenced by their parents in relation to how they handle money, in terms of the behaviour that was modelled to them as a child.

    I really love this flickr photo, showing how one parent is teaching money handling skills to their young child. A jar each for spending, saving and giving.

  2. fairlane
    Posted May 2, 2007 at 12:54 am | Permalink

    Not to sound “elitist”, but I think there is something you are not considering. An extremely intelligent person is more likely to get distracted and bored. Intelligent people have a more difficult time choosing one path and sticking with it for the rest of their lives. “Less intelligent” people are more likely to choose a road and continue down it for the rest of their lives. Obviously if you are “marginally” intelligent your options are more limited.

    But an intelligent person has a lot of options, and that can be a problem. Finances are not that important, what’s more important is this new project or this new idea etc etc. It’s the old cliche about the “absent-minded professor”. Remembering the car keys or bills is inconsequential.

    I don’t know. I’m just bored and distracted. So I decided to post on your blog.

  3. Legal Eagle
    Posted May 2, 2007 at 2:05 am | Permalink

    Personally, I use the excuse that I am an absent-minded academic many a time. One of my old bosses used to say, “I can’t see how someone so clever can be so scatty!” Once I forgot my own birthday. I sometimes add up the simplest sums incorrectly, and often get my dates confused. There are many more stories about my scattiness.

    Funnily, in terms of academic thought, I am not at all scatty. I am known for being very organised, and I try to make legal concepts which I am teaching clear and straightforward. My father says this is a choice – I’m putting all my organisational energies into my job and none into working out whether I’ve got my shoes on the right feet or not. I think he might be right. There’s just too many other interesting things to think about, and phooey, I don’t want to have to think about shoes and birthdays and other stuff. But don’t tell him that he’s right!

    Guess what? I’m bored and distracted at work too…but I’ve got to go and teach a class…

  4. fairlane
    Posted May 3, 2007 at 2:09 am | Permalink

    I have the same problem. I can remember what someone said ten years ago, but has anyone seen my car keys?

    Possibly it’s a “choice”, but I think that’s over simplifying it. In my case I also have ADD, which obviously exacerbates the problem, but I think it’s how some minds work. I don’t lose my keys out of laziness or defiance. My mind is just elsewhere when I put them down.

    I often tell my friends if you could be in my head for a couple of hours you’d understand why I remember what happened last Tuesday, but have no idea where I put my glasses.

    I think this is part of the reason I enjoy writing so much. It’s more controlled than conversation and there are fewer tangents. It’s concise, and straightforward. (For the most part). Also when people speak to me I’m anticipating where they’re going, finishing their conversation for them, and moving on to the next one. People are too Damn slow!

  5. Legal Eagle
    Posted May 3, 2007 at 5:51 pm | Permalink

    I tell my husband all the time that if he was in my head, he’d understand why I forget where I put things. There’s so many other things to think about. And sometimes I imagine doing something so vividly that I forget to do it (eg, picking up a carton of milk at the supermarket).

    It sounds like your mind is similar to mine – darting around all the time, thinking of a million things at once.

  6. fairlane
    Posted May 4, 2007 at 3:02 am | Permalink

    I know exactly what you mean about thinking about things “vividly” and then not following through. So far, I’ve written 5 books, 3 plays, 2 Manifestos, and even a ballet. Yet, only one of them has ever seen the light of day. The rest are still stuck in my head.

    This is off topic, but would you mind if I put a link to your blog on mine? I like your writing style and most of the blogs I’ve come across so far are morbidly dull.

    I would ask to do a link exchange, but I may be a little too acerbic.

  7. Legal Eagle
    Posted May 4, 2007 at 11:43 am | Permalink

    No, that would be great! I will add your link to my blog roll too. I don’t mind acerbic – variety is good. I had a look at your blog and enjoyed it, particularly that post about who are those 30% who still support George Bush!

  8. Legal Eagle
    Posted May 4, 2007 at 12:11 pm | Permalink

    Forgot to say – I have written novels in my head too, as well as songs. I have ideas all the time for stuff – so many ideas, so little time to do it.

    Also, as my Mum says, once you’ve thought of the idea, often it’s difficult to be bothered with following through on the nitty gritty of it. There’s no doubt from whom I inherited my mindset!

    Actually I work best in spurts – a spurt of enthusiasm in which I’m incredibly productive, then a long period of doing nothing much, then hopefully another spurt of enthusiasm. It didn’t suit being a lawyer very much – we’re supposed to work steadily for 6 hours, billing clients as we go.

  9. fairlane
    Posted May 4, 2007 at 3:01 pm | Permalink

    Yeah, I remember those good old days of billing every second. I was a counselor and case manager. I hated that, and eventually I started making stuff up. Obviously, as an attorney that would be more difficult. When dealing with the state things are a little more lax. I probably could have gotten away with billing bathroom breaks for at least a couple of months.

    I added you to my “blog”. I’m trying to find interesting people with different perspectives. But like I said, it’s like rummaging through broken glass trying to find a contact lens.

    This may sound strange unless you know about the concept of the “inner child”. I know you’re neither male nor a cartoon character but I picture your avitar sitting at a candlelit desk, with a feather quill pen and a bottle of ink, hammering out your posts. My “kid” thinks that’s cool.

  10. Legal Eagle
    Posted May 4, 2007 at 11:28 pm | Permalink

    I love the image of the candle and quill pen! Alas, the truth is so much more prosaic. I am presently sitting at a desk surrounded by journal articles for my thesis. And, as this comment shows, I am procrastinating…

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