IQ and Entrepreneurship

I have argued that entrepreneurship is one of the few things that can make you rich and does not require outlier ability (as acting or elite athletics does), in which high-IQ people are not at such an absolute advantage compared to average-IQ people. High-IQ people are still at an advantage but not as high as activities such as coding, chess, or math. Coding and math tend to be dominated by high-IQ people whereas business and entrepreneurship are not. John Schnatter, the founder and former CEO of Papa Jon’s, is a billionaire, but few would probably consider him a genius as far as IQ is concerned, compared to someone who is a coder at Google. The reason why IQ is so important for coding and why learning to code is often a ticket out of poverty, is because all the tools to become successful at coding are contained within the rules of the programming language itself, so there is no randomness, and it does not cost much money to learn how to code: all you need is a computer and an internet connection, which almost everyone has. This levels the playing field considerably as far as socioeconomic variables are concerned.

On Reddit and Hacker News it is not uncommon to read stories in the comments of people who grew up in poverty or in the lower-middle-class, who rose out of poverty in part by learning how to code and or getting a STEM degree.

(Of course, coming from a wealthy family helps greatly, as was the case of Bill Gates, whose father, William Henry Gates II, was a wealthy lawyer. Bill Gates started coding at the age of 13, when he attended an elite private prep school, presumably paid for by his rich dad, which in 1968 was probably the only high school in the world to have a computer. And his mother, Mary Maxwell Gates, had connections with IBM, which helped her son land his first Microsoft contract, with IBM.)

Although having a high IQ helps in regard to entrepreneurship, high-IQ people are not at such a huge absolute advantage compared to average-IQ people, unlike coding, and environmental factors such as family wealth are more important. Whereas coding is cheap to learn, creating a business is often very expensive. There is also the randomness factor, in that it is hard to predict which businesses will succeed or fail. Programming languages are predictable, same for the rules of math and physics, which never change, but consumer tastes and industry trends are always changing. Hence, entrepreneurship introduces two major variables/factors that lessen the absolute advantage of IQ: costs and randomness. Costs include start-up costs, which is why having family wealth is so important for entrepreneurship because it means you have more attempts/spins at the ‘roulette wheel of life.’ Even if entrepreneurship has a positive expected value, there is considerable path dependency. Striking out on your first attempt or even multiple attempts is survivable if you have enough money to keep trying over and over again. The less capital you have to work with, the closer you are to the absorbing barrier, which is set at $0 (ruined). This can be made precise mathematically with probability distribution functions function.

So if not IQ, what about grit? A common argument is that grit is also innate, similar to IQ. I dunno how true this is, because I think grit, unlike IQ, is also a behavior, not only a trait. In regard to entrepreneurship, like IQ, the two factors–costs and randomness–still apply. It is not like billionaires work 1000x harder harder than people who only become millionaires. Zynga is largely irrelevant whereas Facebook is bigger and more powerful than ever despite both companies having an equal serving of grit by their respective founders.