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The plateauing of cognitive ability among top earners

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Re: The plateauing of cognitive ability among top earners

#61

Post by fwlr »

It’s tempting to theorise why this might be, but it’s most likely just a simple statistical feature inherent to correlations themselves. I’ve heard it called “the tails come apart” - in a scatter plot of two correlated variables, the highest y value will not have the rightmost x value, and the rightmost x value will not have the highest y value. Ellipses don’t come to a sharp point at their tips, if you overlay them on a square the tips bulge out past the edges of the square.

This diagram might help http://images.lesswrong.com/t3_km6_3.png

There’s more explanation on the page that diagram comes from, it even talks about this case of intelligence and wealth. https://www.lesswrong.com/posts/dC7mP5nSwvpL65Qu5/why-the-ta...

Re: The plateauing of cognitive ability among top earners

#62

Post by fsloth »

solatic wrote: post #28

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…

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.

Re: The plateauing of cognitive ability among top earners

#63

Post by metacritic12 »

maegul wrote: post #7
metacritic12 wrote: post #4

It's not a surprise that cognitive ability (the paper seems to define it as relatively close to classical IQ) is not highly correlated with earning ability or even value production for society. I would argue that a much better correlant of both production value and capture value is conscientiousness, or vaguely synonymously, hardworking, diligent, etc. A brilliant world observer who tweets their witty one-liners all…

I’d add that there’s also somewhat of a random evolutionary walk in the way an individual’s intrinsic qualities end up aligning (or not) with the skills, values, temperaments and opportunities of their environment. Even how they match the needs and values of their historical time and culture can matter. This is beyond just plane nature-nurture, but stressing the importance of random “right place right time” dynamics…

As Warren Buffett famously said, he's so wealthy because he happens to be born into a society with a well-developed but modestly inefficient stock market, and that's the area he likes to obsess about. He reckons that less than 10% of historical humanity has had such a chance.

Would Bill Gates be anywhere near his earnings if his dad made him go to law school and he had a good time suing people? Would Carl Icahn just been a happy doctor if he wasn't so afraid of germs to drop out of medical school?

Re: The plateauing of cognitive ability among top earners

#64

Post by ResearchCode »

sokoloff wrote: post #48
stuaxo wrote: post #46

Given that the majority of wealth is inherited, how smart you are doesn't need to be related at all.

Citation needed. The references that I looked for suggested that around 30-40% of wealth is inherited. No citation that I found suggested that it was a majority. Do you have any sources that I could additionally review to support the majority claim?

That's in the US. Old money in Europe is older than US as a country.

Re: The plateauing of cognitive ability among top earners

#65

Post by maegul »

bnralt wrote: post #24
maegul wrote: post #7

Earlier quoted context omitted.

I’d add that there’s also somewhat of a random evolutionary walk in the way an individual’s intrinsic qualities end up aligning (or not) with the skills, values, temperaments and opportunities of their environment. Even how they match the needs and values of their historical time and culture can matter. This is beyond just plane nature-nurture, but stressing the importance of random “right place right time” dynamics…

It's a good point. Also being slotted into the proper path when your capabilities are still forming and you know very little about the world. I know a lot of extremely smart and capable people that ended up stuck in dead end jobs because they were pursuing the wrong thing as a young adult (often, their "dreams"), and by the time they realized it no one was interested in giving them a chance to prove themselves in ano…

Yep, agreed. Kinda alluded to in my "random walk" metaphor.

On the "Einsteins", you could go further and ask what happens to the ones that just lucked out and couldn't get the patent job? What if they needed to eat and therefore took whatever job they could get which happened to pay well? It feels trite to me to point out life vagaries like this, but as we're all stressing, it really is fundamental, IMO, to understanding the lack of correlations between "success" and "intrinsic quality".

Finding and getting on a good path for yourself is tricky, and, on the personal side of things, sure as hell was not stressed nearly enough in my youth.

Re: The plateauing of cognitive ability among top earners

#66

Post by ProjectArcturis »

fwlr wrote: post #61

It’s tempting to theorise why this might be, but it’s most likely just a simple statistical feature inherent to correlations themselves. I’ve heard it called “the tails come apart” - in a scatter plot of two correlated variables, the highest y value will not have the rightmost x value, and the rightmost x value will not have the highest y value. Ellipses don’t come to a sharp point at their tips, if you overlay them…

Very insightful, thanks for sharing. It's always nice to add another tool to the mental toolbox.

Re: The plateauing of cognitive ability among top earners

#67

Post by silvestrov »

solatic wrote: post #28

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…

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.

Re: The plateauing of cognitive ability among top earners

#68

Post by onos »

epistemer wrote: post #58
solatic wrote: post #28

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…

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 ba…

Yeah but presumably averaging over many people or situations in a study like this would reduce that noise.

Re: The plateauing of cognitive ability among top earners

#69

Post by DonHopkins »

groestl wrote: post #52
groestl wrote: post #49

Earlier quoted context omitted.

Maybe you're thinking of No true Scotsman? https://en.wikipedia.org/wiki/No_true_Scotsman

Actually, thinking of it, https://en.wikipedia.org/wiki/Moving_the_goalposts is more fitting (since No true Scotsman is about redefining irrelevant criteria).

When there are no true goalposts, it's time for moving the straw Scotsman.

Re: The plateauing of cognitive ability among top earners

#70

Post by gghffguhvc »

solatic wrote: post #28

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…

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.
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