IQ: Still the Best Predictor of Upward Mobility

Yes, there people who are successful at business without having a high IQ, such as in retail or auto, by applying ‘social skills’ such as negotiation to get what one wants, but this is very few people. Trump used negotiating skills to build his real estate empire and to negotiate better terms for his loans, true. But he is another outlier. It certainly did not hurt that he inherited tens of millions of dollars from his father, which probably contributed much more to his socioeconomic rank in society than any aforementioned skills. For those without connections and substantial family wealth, IQ is still the best predictor of upward mobility:

For his study, Prof. Ganzach analyzed data from the National Longitudinal Survey of Youth, a survey of 12,868 Americans from 1979 through 2004. Participants underwent annual or bi-annual interviews in relation to promotions and earnings. From this group, he eliminated all participants who participated in any post-secondary education, ensuring that intelligence and SEB were the sole factors in the comparison.

 

Intelligence was calculated using the results of each participant’s Armed Forces Qualifying Test, and SEB was calculated based upon parental education, family income, and the occupational status of the parents. By tracking the participants over 25 years, from the beginning to the middle stages of their careers, it was possible to obtain an accurate picture of the influence of each factor on their economic success, says Prof. Ganzach.

 

Taking into account each participant’s rate of advancement throughout the career arc, the data confirmed that while both intelligence and SEB impacted entry-level wages, only intelligence had an influence on the pace of pay increases throughout the years. When looking at rates of advancement, intelligence won out over SEB in terms of career advancement.

From Wiki: https://en.wikipedia.org/wiki/Social_mobility:

Participants at midlife did not necessarily end up in the same social class as their fathers.[40] There was social mobility in the sample: 45% of men were upwardly mobile, 14% were downward mobile and 41% were socially stable. IQ at age 11 had a graded relationship with participant’s social class. The same effect was seen for father’s occupation. Men at midlife social class I and II (the highest, more professional) also had the highest IQ at age 11. Height at midlife, years of education and childhood IQ were significantly positively related to upward social mobility, while number of siblings had no significant effect. For each standard deviation increase in IQ score at the age 11, the chances of upward social mobility increases by 69% (with a 95% confidence). After controlling the effect of independent variables, only IQ at age 11 was significantly inversely related to downward movement in social mobility. More years of education increase the chance that a father’s son will surpass his social class, whereas low IQ makes a father’s son prone to falling behind his father’s social class.

Furthermore, blacks with top AFQT scores (a proxy for IQ), have roughly the same likelihood of upward mobility as high-scoring whites:

Individuals with higher test scores in adolescence are more likely to move out of the bottom quintile, and test scores can explain virtually the entire black-white mobility gap. Figure 13 plots the transition rates against percentiles of the AFQT test score distribution. The upward-sloping lines indicate that, as might be expected, individuals with higher test scores are much more likely to leave the bottom income quintile. For example, for whites, moving from the first percentile of the AFQT distribution to the median roughly doubles the likelihood from 42 percent to 81 percent. The comparable increase for blacks is even more dramatic, rising from 33 percent to 78 percent. Perhaps the most stunning finding is that once one accounts for the AFQT score, the entire racial gap in mobility is eliminated for a broad portion of the distribution. At the very bottom and in the top half of the distribution a small gap remains, but it is not statistically significant. The differences in the top half of the AFQT distribution are particularly misleading because there are very few blacks in the NLSY with AFQT scores this high.

Over the past few years, there are dozens of threads on Reddit [for some reason, people really care about this sort of stuff] asking about individuals who have escaped from poverty or grew up poor. From my own investigation, individuals who have a STEM or finance job and graduated with a high GPA from a good college–all indicative of having high IQ–do much better than their parents, have an upper-middle class income and lifestyle, and have money saved for retirement. Those with only average IQs maybe only attended college but didn’t finish, work in retail or some other low-paying job, are only modestly more successful than their parents, and have little or no money saved for retirement. The difference is stark. In terms of individual outcomes, the difference between an IQ of 90-100 versus 120 and above, is huge.

As another real-life example of how having a high IQ is so important for upward mobility, consider the remarkable story of J.D. Vance, as told by his best-selling autobiography Hillbilly Elegy. Vance grew up in Appalachia in the 1960s, but was able to pull himself out of poverty and graduate from Yale Law School. Although he downplays this accomplishment, to get an idea of how competitive Yale Law School is, it is the number-one ranked law school according to US News and World Report and requires a near-perfect LSAT to be considered, which is about equivalent to an IQ of 150. At just 34 he is a successful author, a venture capitalist, and effectively enshrined member of the ‘elite class’. He went from being dirt-poor from a dysfunctional family to being featured on Oprah and landing a (presumably) lucrative job at Peter Thiel’s Mithril Capital, as well as consulting, TV appearances, and other gigs. People who are that smart are voracious learners and retain a lot. They can cover years of material and grasp stuff in months what would take ordinary people years, which is how he was able not only advance so quickly, but far surpass his peers. Same for coding: You can grow up poor, learn how to code in a year, and get a six figure job. IQ is really that powerful.

‘Street smarts’ are overrated. This is not the 70′s New York where you need to know which alleys to avoid or which loan shark will give you the best rate. That’s not to say it is useless, but the scales have tilted in favor of book smarts in recent decades. A person who has street smarts but is not book smart has limited opportunities for advancement, and this can explain the allure of organized crime for such individuals. We’re living in an increasingly efficient, computerized economy that prizes intellectual ability and credentials, and for those who can cut it as Vance was, there is room for considerable advancement, and for those who cannot, are typically stuck at the bottom with wages that lag inflation and low status.

Social currency is tantamount to actual wealth…whether it’s followers on social media or graduating from a prestigious school that bestows connections, both of which necessitates having a high IQ. With the exception of low-paying, low-status jobs, gatekeepers of society have high IQs, so you think that someone with an average IQ stands a chance against someone who has a high IQ? Taleb is only looking at ‘Fat Tony’ outliers and ignoring the fact that for the vast majority of Americans, IQ largely determines one’s rank-status in society.