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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

#141

Post by [deleted] »

jandrewrogers wrote: post #106
sidlls wrote: post #90

Earlier quoted context omitted.

Because few people are objective enough to put aside their deep emotional attachment to the notion that their particular bit of hard work and skill meant nothing without that luck. I’m wealthy now: very wealthy by any standard (mid 7-figure net worth). I came from humble beginnings (nearly homeless frequently as a youth with a single mom), but I am quite intelligent (PhD in physics) and I worked hard. I would have re…

Many people with your net worth grind it out without any windfalls, the product of consistent hard work and reasonable choices over decades. It was always a possibility. Most people don't require an IPO to achieve that. Luck can accelerate that outcome but it is not necessary in any meaningful sense. It requires significantly greater extremes of wealth before luck plays a more frequent role. I know people well into 8…

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Re: The plateauing of cognitive ability among top earners

#142

Post by onlyrealcuzzo »

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…

> 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.

Re: The plateauing of cognitive ability among top earners

#143

Post by friedman23 »

Zircom wrote: post #135
friedman23 wrote: post #116

Earlier quoted context omitted.

> Not accounting for luck as a factor of success is one of my pet peeves. Why do you model life as a single bet where you have a 1 or 2% chance of winning? In reality you are making bets every day, each with a range of odds of succeeding and each success can produce a range of outcomes. Look at poker, a game that has a massive "luck" component, people still consistently win.

Poker is a well studied, and more importantly, closed system where all of the variables are either known or known unknowns. We literally have bots now that can play poker better than any human. The amount of decisions you make in a game of poker vs the amount you make in a lifetime are not even remotely comparable. And unlike life, in poker there's no risk in making bad decisions during the game while you're still le…

> We literally have bots now that can play poker better than any human.

This is not true but will be at some point.

> And unlike life, in poker there's no risk in making bad decisions during the game while you're still learning

You haven't met most poker players, they almost all start playing with real money before they even have a clue. What make s poker a truly terrifying game is that you can win a lot while making all the wrong decisions and get hooked for life while being a terrible player.

> Worst case scenario you just start a new game until you get the hang of it. Life is not like that. There's no practice run, and when you make what turns out to be the wrong decision it can follow you around for the rest of your life.

Yes, there are many unfortunate people that have made life altering decisions while young and the decisions follow them forever. Thankfully not all failures in life hold such dire consequences, in fact some failures seem like the end of the world but in reality the consequences are not as big as you expect (eg getting fired from your first job or failing an exam).

Re: The plateauing of cognitive ability among top earners

#144

Post by 1659447091 »

jandrewrogers wrote: post #106
sidlls wrote: post #90

Earlier quoted context omitted.

Because few people are objective enough to put aside their deep emotional attachment to the notion that their particular bit of hard work and skill meant nothing without that luck. I’m wealthy now: very wealthy by any standard (mid 7-figure net worth). I came from humble beginnings (nearly homeless frequently as a youth with a single mom), but I am quite intelligent (PhD in physics) and I worked hard. I would have re…

Many people with your net worth grind it out without any windfalls, the product of consistent hard work and reasonable choices over decades. It was always a possibility. Most people don't require an IPO to achieve that. Luck can accelerate that outcome but it is not necessary in any meaningful sense. It requires significantly greater extremes of wealth before luck plays a more frequent role. I know people well into 8…

> They worked hard and smart for decades with nothing that you could identify as being particularly lucky.

Being born in, or allowed passage into, a society that allowed one to do so in the first place is considerably lucky.

Re: The plateauing of cognitive ability among top earners

#145

Post by phendrenad2 »

yafbum wrote: post #76

I worked for managers with outstanding cognitive ability, and for others who were certainly smart but not as much. The ones with high cognitive ability didn't necessarily make the best business leaders - they had so much cognitive bandwidth that they got nerd sniped into deep dives on every aspect of the business, and although they were familiar with the whole business operation, they didn't do the important stuff we…

Thank you for mentioning "nerd sniping", which I had forgotten about. That is the perfect explanation for the effect I was trying to come up with a way to explain. All of the smartest people I know get stuck solving hard problems that don't actually matter. And people let them go do it because who's going to stop the genius? And heck, maybe they'll square that circle.

Re: The plateauing of cognitive ability among top earners

#146

Post by dane-pgp »

manimino wrote: post #112
jononor wrote: post #91

Earlier quoted context omitted.

Interesting. 2.2 million seems to be around the top 10% in the US, and around 20x the median (Federal Reserve data from 2016). It also places one in the global top 1%.

Sounds right. Around 2.2 million, your money starts to generate more income than your labor can, unless you have an exceptionally high paying job.

So maybe people with a net worth above 2.2 million should be paying a wealth tax instead of an income tax.

Re: The plateauing of cognitive ability among top earners

#147

Post by dasil003 »

This makes sense intuitively because the bulk of very high paying jobs are in large companies where responsibilities are diffuse and opportunities to leverage the brilliance out outlier geniuses are few and far between. Good leadership needs decent cognitive ability to process a high volume of inbound information and maintain a sufficiently accurate mental map of what's happening, but IQ has diminishing returns as the bottleneck really becomes high-bandwidth communication and coordination across a large org structure. In this environment, EQ is more important since a higher IQ only helps local decision making. Cascading those decisions and the reasoning behind them is entirely its own skill, grossly constrained by the attention span and background context of the diverse set of people receiving the message. At the end of the day, understanding and influencing people will get you much further than IQ alone. Combining both with enough experience and domain expertise to sniff out bullshit is the holy grail.

Re: The plateauing of cognitive ability among top earners

#148

Post by dabinat »

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…

I prefer to think society doesn’t believe this because they are innocently misguided but because those with wealth and power have an incentive to push such narratives. If people think you’re rich because you’re a genius, they’re more likely to accept that you “deserve” your wealth and success and be less likely to think it should be redistributed. It’s also a useful way of downplaying all the other factors like social status, family connections, etc.

Re: The plateauing of cognitive ability among top earners

#149

Post by pompouNsIGGER »

jononomo wrote: post #19

Extremely high cognitive ability allows a person to find success in life without taking on as much risk. In my opinion this explains why the highest earners and most successful individuals with the most prestigious jobs are drawn from the ranks of those with B+ cognitive ability rather than A+ cognitive ability. The A+ people don’t need to swing for the fences as much, which means they’re less likely to end up with h…

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Re: The plateauing of cognitive ability among top earners

#150

Post by pompouNsIGGER »

jcampbell1 wrote: post #74
mizzao wrote: post #5

The idea that salary is a measure of self-worth is an unfortunate lie that our modern society perpetuates.

No one thinks it is a measure of self-worth, but an approximation of the value the work creates for others. Some people do feel having the marketplace value their labor and effort provides a sense of self-worth. Wanting to feel valued by family, friends, and the marketplace is normal.

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