In most cases of highly intelligent people who are not rich, they have applied their brains to analytic reasoning. That’s a skill that might help calculate the odds of winning, but will not tell you what the other person is thinking.
smart people will be far wealthier than no-so-smart ones.
But still, when it comes to investing in stocks or managing money in general, there doesn’t seem to be much correlation between being extremely smart and being extremely rich.
Why is it so?
Talking about what is required to actually succeed in investing, he says:
Investors often sabotage their results when they try to get fancy. And rest assured, I have done my MBA from a good college and I can vouch for the fact that you don’t need an MBA to manage your money well or to reach your financial goals.
People think that MBAs (from good colleges) are smart and can do anything. That’s bullshit. 🙂
Investing successfully and achieving your financial goals is not about being smart or having the highest IQ or being popular. Rather, common sense and becoming incrementally wise (on a daily-basis) will get you there.
Some people are too smart to be rich. They give a lot of importance to what they know. But unfortunately and due to their personality (or maybe arrogance), they chose to ignore what they don’t know.
And that is exactly what does them in. And as Charlie Munger says:
“If you think your IQ is 160 but it’s 150, you’re a disaster. It’s much better to have a 130 IQ and think it’s 120.”
We all know that we are simply supposed to buy low and sell high. But that doesn’t happen. Majority have trouble following that sequence and instead end up buying high and selling low. And then there are those who become wise and find the right questions to ask themselves – but only when its (almost) very late.
Why? Not because they have less IQ or are not intelligent. But because they let their emotions and biases take over. A wise one will listen to his emotions but will act as the rational section of the brain advises.
When I was writing this post, I got a call from my childhood friend. On being asked, I told him about what I was writing. Now this friend of mine (based in US) is a successful entrepreneur himself. Being a Y-Combinator alumni, he told me about something which Paul Graham (founder of Y-Combinator) wrote in 2009. Though it was in context of successful startups, some of it made sense in this discussion of (You + Smartness = Rich)’s context as well. This is what Paul wrote:
We learned quickly that the most important predictor of success is determination. At first we thought it might be intelligence. Everyone likes to believe that’s what makes startups succeed. It makes a better story that a company won because its founders were so smart. The PR people and reporters who spread such stories probably believe them themselves. But while it certainly helps to be smart, it’s not the deciding factor. There are plenty of people as smart as Bill Gates who achieve nothing.
But that’s about investing (and startups) in particular.
What about money (and getting rich) in general? I came across an interesting Q&A on Quorawhere a responder said:
Getting rich requires dealing with other people. Smart people spent a lot of time beefing up their IQ and not their EQ.
IQ won’t give you the social EQ to turn a competitive situation into a cooperative one.
Don’t play chess at a poker game.
I think the last line nails it. 😉