Decision Making Is Not Correlated With Intelligence
August 23rd, 2007Money, Matter, and More Musings has an interesting article about the lack of a relationship between net worth and intelligence. By intelligence the study means IQ, which is a rather imperfect measure. For examples, see Jim Loy’s IQ test and IQ Test: Where Does It Come From and What Does It Measure?. The suggestion is that understanding finance has absolutely nothing to do with smart financial choices.
Does this surprise anyone? The post suggests that there intelligent people do not posses traits that are required for fiscal responsibility, including the following:
- Ambition
- Energy, Willpower, and Discipline
- Emotional Stability
This is a good way of looking at it, but to me it seems like the biggest reason is a combination of attention and poor impulse control.
Attention
I use attention here to mean whether or not people invest the time and energy to keep track of their finances. If they don’t care, then they aren’t going to invest much effort in trying to manage their money or build wealth. Building net worth is not a priority for some people, and there is no reason to think that people with higher IQ’s should behave any differently.
Impulsive Purchases
I like the term “poor impulse control” because it implies something bad. Granted it can lead to bad decisions, but all of us makes tons of impulsive decisions every day, and they mostly turn out well. In fact, I’m reading Blink: The Power of Thinking Without Thinking
And yet, there is something to be said for being able to resist buying something that you know you don’t want. Short term versus long term thinking is something that varies from person to person, and again doesn’t seem to have any relationship to intelligence.
Short term and long term thinking is an interesting subject, I’ll make a post about it soon.
-zot
Support The Decision Strategist.Popularity: 8%
