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It is just a coincidence, but the initials NNT are best known to me as Numbers Needed to Treat. This is a measure of the numbers of patients you need to give a drug to in order to get one cure. For example, an NNT of 5 means that you have to treat five patients in order to get one patient cured. Even very useful drugs do not help everybody, so several people need to take the drug before one of them benefits.

I do not know how many posts I need to write to convince one person that Nassim Nicholas Taleb is an unreliable guide to intelligence research. It might take 30 posts, but I still think it would be worthwhile.

One of NNT’s complaints was that intelligence test scores did not predict important real-world achievements, such as being a good investor. A very quick search immediately came up with a paper which showed that brighter people had more successful investment histories. Those authors found that by making better stock selections and achieving lower transaction costs high IQ subjects did 4.9% per year better than low IQ subjects. Given that real returns average 7%, this is a massive difference which will accumulate over time and result in far high net personal worth for brighter investors. By the way, intelligence was measured at conscription age, long before there is much investment history, so it is more likely to be causal.

https://www.sciencedirect.com/science/article/pii/S0304405X1100211X

In this post I will describe another paper which shows that an intelligence test predicts savings 40 years later. This is real-world skin-in-the-game of which NNT should approve.

Furnham, A., & Cheng, H. (2019). Factors influencing adult savings and investment: Findings from a nationally representative sample. Personality and Individual Differences, 151, 109510. doi:10.1016/j.paid.2019.109510

https://drive.google.com/file/d/10TFhHwSEUhrSIOCBNdZnNUhQxNstPb6-/view?usp=sharing

The authors review the cognitive and personality measures which affect savings rates: neuroticism and conscientiousness affect outcomes. Both these measures involve paper and pencil questionnaires designed by psychologists, yet are associated with real life outcomes.

The National Child Development Study 1958 is a large-scale longitudinal study of the 17,415 individuals who were born in Great Britain in a week in March 1958 (Ferri, Bynner, & Wadsworth, 2003). They were a representative sample of the country at the time. 14,134 children at age 11 completed tests of cognitive ability (response =87%).

At 33 years, 11,141 participants provided information on their educational qualifications obtained (response =72%). At age 50 years, 8210 participants provided information on their current occupational levels (response = 67%); 9790 participants completed a questionnaire on personality (response = 79%); 9762 participants provided information on their self-assessed financial situation (response= 79%), 9729 participants provided information on their savings and investment (response =57%). The analytic sample comprises 5766 cohort members (50% females) for whom complete data were collected at birth, at ages 11years, and the outcome measure at age 50years. Bias due to attrition of the sample during childhood has been shown to be minimal (Davie, Butler, & Goldstein; 1972).

3.2. Measures

1. Family Social Background at Birth Family social background includes information on parental social class and parental education. Parental social class at birth was measured by the Registrar General’s measure of social class (RGSC). Parental education is measured by the age parents had left their full-time education.

2. Childhood Intelligence Childhood intelligence was assessed at age 11 in school using a general ability test (Douglas, 1964) consisting of 40 verbal and 40 non-verbal items. For the verbal items, children were presented with an example set of four words that were linked either logically, semantically, or phonologically. For the non-verbal tasks, shapes or symbols were used. The children were then given another set of three words or shapes or symbols with a blank. Participants were required to select the missing item from a list of five alternatives. Scores from these two set of tests correlate strongly with scores on an IQ-type test used for secondary school selection (r =0.93, Douglas, 1964) suggesting a high degree of validity.

3. Educational Qualifications At age 33, participants were asked about their highest academic or vocational qualifications. Responses are coded to the six-point scale of National Vocational Qualifications levels (NVQ) ranging from ‘none’ to ‘higher degree level’: 0= no qualifications; 1=some qualifications [Certificate of Secondary Education Grades 2 to 5]; 2= O level [equivalent to qualifications taken at the end of compulsory schooling]; 3= A level [equivalent to university entrance level qualifications]; 4=postsecondary degree/diploma and equivalent; and 5=higher post-graduate degrees and equivalent.

4. Personality Traits Personality traits were assessed at age 50, by the 50 questions from the International Personality Item Pool (IPIP)(Goldberg, 1999). Responses (5-point, from “Strongly Agree” to “Strongly Disagree”) are summed to provide scores on the so called ‘Big-5’ personality traits: Extraversion, Emotionality/neuroticism, Conscientiousness, Agreeableness and Openness. Scores on each trait range between 5 and 50 with higher scores equating to higher levels of each trait, of which 10 items for each trait. A preliminary test showed that the associations between traits Extraversion and Agreeableness were not significantly associated with adult savings and investment, thus these two traits were excluded from the following analyses. Preliminary analysis which included these two traits in the SEM model demonstrated that they were not moderator variables. Alpha was 0.88 for emotionality/neuroticism, 0.77 for conscientiousness, and 0.79 for intellect/openness.

5. Occupational Prestige Data on current or last occupation held by cohort members at age 50 are coded according to the RGSC described above, using a 6-point classification.

6. Financial Assessment was assessed at age 50. Participants were asked to assess their personal financial situation on a 5-point measure (1 =Finding it very difficult, 2= Finding it quite difficult, 3=Just about getting by, 4=Doing all right, 5= Living comfortably).

7. Adult Savings and Investment. At age 50, participants provided information on the amount of savings and investment they had, which were logged in the following analyses. In addition, participants also mentioned the specific types of their savings and investment, of which bank or building society =70.2%, ISA=51.8%, premium bonds= 35.0%, stocks and/or other shares =32.9%.

All this is fine, though self-report on wealth could be a problem. Asking people about their wealth can be a tricky business in the UK. If anything, people might be tempted to downplay it to avoid any tax enquiries. One simple control would have been to study the postcodes of participants, from which it is easy to get wealth estimates. Worth doing as a further measure of the accuracy of self-reports.

The verbal and non-verbal scores have been added for an overall ability latent variable, which has more predictive power.

The strongest association was between personal financial assessment and adult savings and investment, followed by education and occupation. This is a well-established finding. However, what was particularly interesting was the correlation between IQ measured as age 11 and savings measured 39 years later.

 

 

To my eye the correlations are very low, so the effect sizes are small. In partial defence of this observation, they are a bit larger than the effects of paternal social class at birth, and even of parental educational levels at birth, both of which have long been touted as the major determinants in life. Not so. Particularly in the structured equation modelling, the effects of intelligence measured in childhood are apparent.

 

Although wealth is a good measure of real-life success, in the United Kingdom there is the considerable blunting effect of income tax, which reduces the ability to save. For example, using Office of National Statistics figures the Institute of Financial Studies has just shown that:

A unique IFS analysis of HMRC tax records reveals 43 per cent of adults do not pay income tax, up from 38 per cent in 2010. By contrast, the top one per cent of earners are now paying 27 per cent of the nation’s income tax.

As Thomas Sowell has always pointed out, and the Institute of Fiscal Studies figures now show, membership of the top 0ne Percent is pretty fluid:

Only around three-quarters of people in the top one per cent in one year will be there in the next year, while only half will still be in the top one % in five years.

As a result, someone has a much higher chance of being in the top 1% at some point in their lives than they do in any given year. 3.4% of all people (and 5.5% of men) born in 1963 were in the top 1% of income tax payers at some point between 2000–01 and 2015–16.

In fact, among the high earning top 1% only 6% of income comes from non-work-related earnings, showing that accumulated wealth is a minor addition to work age incomes.

The authors, having shown the correlations and done some structured equation modelling say:

It demonstrated that childhood intelligence, much more than adult personality is a predictor of saving forty years later. Although related to Conscientiousness, it was how intelligence effected education and also occupation (social class) that explains its importance in adult financial success.

Intelligence leads to higher scholastic attainments which lead to a higher propensity to save. The effect is small, but it is larger than social class of origin. The effect might possibly be reduced by sharply redistributive taxation. Overall, intelligent kids go on to being good savers.

 
• Category: Science • Tags: Finance, Intelligence, Nassim Nicholas Taleb, Wealth 
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  1. jb says:

    Of possible interest: Competent Elites.

    I was shocked, meeting Steve Jurvetson, because from everything I’d read about venture capitalists before then, VCs were supposed to be fools in business suits, who couldn’t understand technology or engineers or the needs of a fragile young startup, but who’d gotten ahold of large amounts of money by dint of seeming reliable to other business suits.

    One of the major surprises I received when I moved out of childhood into the real world, was the degree to which the world is stratified by genuine competence.

  2. Anon[910] • Disclaimer says:

    Would it be possible to replace the diagrams in the post with higher-resolution versions? It’s almost impossible to read the coefficients on the SEM models.

    • Replies: @James Thompson
  3. @Anon

    I agree. Something has gone wrong, and I wasn’t able to sort it out. Will try again.

    • Replies: @Anonymous
    , @niteranger
  4. @jb

    Ditto the few admirals, generals and federal judges I’ve met.

  5. dearieme says:

    Parental education is measured by the age parents had left their full-time education.

    I suppose they settle for whatever rough age the children can guess?

  6. TheJester says:
    @jb

    One of the major surprises I received when I moved out of childhood into the real world, was the degree to which the world is stratified by genuine competence.

    Years ago I had a life-altering experience that supports the above thesis. It was one of the formative events of my life:

    There was a meeting of CEOs and venture capitalists from various US high-tech sectors that focused on economic development in a Third World country. Since I was already present in the country, my company directed me, a middling manager, to represent it.

    The first thing that captured my attention was the high intelligence of the assembled CEOs and VCs. They could get to the root of economic development problems with prescient one-liners. My favorite was that it does nothing for a country to develop industries (especially prestigious industries) that require importing large numbers of immigrants to do the work. These industries help immigrants … not the country.

    I also noticed that the assembled moguls were not pretentious. They projected what they knew, not how they looked. (It was as if they spoke a private language that they collectively understood.) I noticed one with dandruff on his shoulder. Another, allegedly one of the major VCs on the east coast, had a rough countenance. He was dressed in a cheap suit and wore a Mickey Mouse watch.

    My assumption is that the original planning meetings for the Apollo Space Program contained a stratified assemblage of similar personalities and competence.

    • Replies: @Truth
  7. Realist says:

    I would classify saving more as wisdom than intelligence. Some people are fortunate enough to have both attributes.

    • Agree: freedom-cat
  8. I was just reading Taleb’s _Skin in the game_ yesterday and found myself laughing out loud in merriment. He is a smart and insightful and pleasure to read. (It was the part where he said you that *other things being equal*, you should go to the surgeon who looks like an aging butcher, not the surgeon who dresses in stylish and expensive clothing and who stresses his elite education).

    In this sense, The Jester’s comment above is making basically the same point.

    = – = – = – =

    Taleb seems to be contrarian by nature. This may lead him to “double down” on his assertions, even where he is out of his domain of competence. Most possibly that’s the case when he discusses intelligence research.

    • Replies: @Dieter Kief
  9. @charles w abbott

    Yep, Taleb seems to have (at least) to different sides.
    At times he is unreliable and quite childish even (self-centered to the nth degree).
    But at times, he is on the spot and interesting. See this analysis of him of fragile and stable banks – here, he is clear and – – a team player, even (he lauds the risk-analysis of the ETH Türich and praises it, with a number of sound arguments see this long interview with him in Swiss Television I –

    https://www.srf.ch/play/tv/sternstunde-philosophie/video/nassim-taleb—der-mit-dem-schwarzen-schwan-tanzt?id=6d03b632-38e5-4445-9073-b3b3c93605a9

    19 minutes in

  10. Children of parents who invest in the markets are more likely to invest in the markets.

    • Replies: @freedom-cat
  11. A Goy says:

    “It demonstrated that childhood intelligence, much more than adult personality, is a predictor of savings 40 years later.”

    What about role models?

    My mother was what we might call middle lower class, i.e. daughter of tenant farmer. My father was lower class i.e son of farm labourer.

    However.
    My mother was a saver, opened savings accounts for all her children on their first birthday , often referred to it as we were growing up as well as diverting birthday gifts of money to the account. Unsurprisingly I also am a saver, but my income is so small now at the age of 74 that I am classified as living in poverty, but still saving😉

    What about interests other than the pursuit of money.?

    A few people have commented that I seem to have had an interesting life. The principal reason for that, as I see it, is because I have always had a high disregard for money and possessions believing that quality of life and experience is preferable to the obsession of the majority which as Mark Twain informed us are always reason to ‘pause and reflect’

  12. Брат says:

    Investing is so jewy.
    It’s all about sitting back and scheming ways to make money off of money. Essentially it’s about free money, aka theft. But someone, somewhere down the line will be paying the difference, always. Whether it’s some sweatshop worker in SE Asia, a slave on a coffee plantation in Latin America, or some drug-addict prostitute in Eastern Europe. Their blood, their sweat, and their tears will be on you. At the end of your life, when your karma is reckoned before God, if you are found wanting, then as sure as the sun rises, you will be reincarnated into a much worse life in the hereafter.
    It’s no shock that Abrahamic religions are really vague about the after life, what more could you expect from religions which place so much emphasis on prospering on the material plane? Even Christians get super touchy over karma. Cause and effect couldn’t possibly be real, Jesus will forgive anything! But then again, an Abrahamic religion denying something as simple as cause and effect is nothing shocking. Just look at what Islam brings to the world *kaboom!*
    Eternal things are not for the jews and their gentile imitators.
    I will work for my money, thanks.
    I don’t want anything I do not deserve.

    • Agree: Parfois1
    • Replies: @Jester
    , @advancedatheist
  13. Lets see.

    1. Steve King (Nazi-Iowa) getting kicked to the curb for racism.

    2. Alexandria Ocasio-Cortez is ripping it up and has republicans running scared.

    3. Deplatforming of right wingers continues to happen everyday.

    4. Most young people are People of Color

    5. Islam is growing and getting respect.

    6. Christian supremacy is getting criticized

    7. most white people are old and dying off

    8. white birth rates are low

    9. white girls are increasingly having Children of Color with Men of Color

    10. Open borders immigration is about to be a reality

    Darn it feels good to be a progressive!

    • Replies: @anonymous
  14. gotmituns says:

    I’m an old man now. I never gave a damn about money and things and now that I’m old, I’ve got some money. It’s good to know that when I do want something or my wife wants something, we just go and get it.

  15. @A Goy

    I am pleased to hear of your mother’s wise advice.
    The structured equation model is perhaps hard to see: I have had difficulty getting it displayed full size, but the effect of family social status at birth is very small, so role models per se do not appear to have a strong effect. The strong effect is childhood intelligence at age 11.

    So, you have lots to thank your parents for.

  16. Anon[424] • Disclaimer says:

    if the ” investor ” invests in what is useful for the common welfare he desserves a lot of recognition , if the ” investor ” is just a parasitic speculator he is just a thief .

    • Replies: @Realist
    , @Wally
    , @onebornfree
  17. Given that real returns average 7%….

    Nominal returns, perhaps. Real returns are adjusted for inflation and are somewhat lower. A risk-aware portfolio, i.e. diversified, might have historically achieved 7% in the past, but those days are numbered, and you might be lucky to get 4% to 5% nominal returns going forward, and since TPTB bullshit us about inflation, your real return is considerably lower. I would also posit that much of the additional outperformance is attributable to risk-aware investing rather than “better stock selections.”

    … in the United Kingdom there is the considerable blunting effect of income tax, which reduces the ability to save.

    UK tax rates are not much worse than most other developed countries. If there is a strain on saving, it is more likely attributable to consumption. Housing costs in the UK, for example, severely constrain savings potential.

  18. Herald says:
    @jb

    So much competence, that the vaunted money grubbing suits have brought the world to near certain short term disaster. Get it spent, there is no medium or longer term.

  19. @jb

    the world is stratified by genuine competence.

    In what we euphemistically refer to as “polite company” here in the U.S., one cannot so much as hint at this notion without being permanently banished. It’s absolute apostasy and grounds for depersonning.

    As a result, it’s somewhat difficult to determine how widespread the notion actually is. That this should be the case with an assertion exhibiting prima facie legitimacy is probably grounds for despair.

    Separately, I’ll add my congratulations to the contributor upthread whose parent enforced the habit of saving. A simple matter like that can make all the difference.

    Dickens’ famous quote from Bleak House comes to mind. But we’re taught nowadays that everything I’ve just described (and much else) is as nothing, and the only possible culprit is White Privilege.

    • Replies: @Truth
  20. @The Alarmist

    Yes, should have said nominal.

  21. Truth says:
    @TheJester

    Yes, pulling off a fraud of the Apollo magnitude would have taken a great degree of manpower.

  22. Truth says:

    …edit, “brainpower.”

  23. Truth says:
    @HammerJack

    So if being a “rich white guy” is grounds to agree one is intelligent, is being a “poor white guy” an indictment that one is stupid, or is “duh man just holdin you down?”

    • Replies: @Anon
  24. It is always amusing to read these articles with their charts, hypotheses and studies all of course touted and pimped by another expert. Dr Giggles has a good laugh at these experts selling their books on whatever for $49.95 plus tax. They build THEIR wealth not by investing but by telling you how.

    When I peruse the book store there are racks and racks of books on how to do just about everything not the least of which is how to get rich for example.

    Yet I have never seen a country with so many “investment experts” and “financial professionals” and yet so many struggling, broke and bankrupt people.

    Here is Dr Giggles advice for free on “How to become financially independent”.

    STOP BUYING S##T YOU DO NOT NEED.

    Save every penny you can and invest it to earn passive income.

    Becoming financially independent has nothing to do with the amount you earn. If you earn $1M a year and spend it all and I make $50K and save half, I will surpass you. This is a mathematical certainty.

    You may never be Howard Hughes but you will accumulate enough F/U money to do and say as you please and that is a goal worth attaining.

    The “ignorant and uneducated” pioneers who built this country accumulated wealth without all the hocus pocus of charts, lofty texts and flowery words and exhortations. You can do the same !!

  25. Realist says:
    @Anon

    if the ” investor ” invests in what is useful for the common welfare he desserves a lot of recognition , if the ” investor ” is just a parasitic speculator he is just a thief .

    Sadly many are the latter.

  26. Maddaugh says:

    Many of us will never be “rich” but becoming financially independent is all about common sense. Spend less than you earn and save the difference.

    Our grandparents did this without any books or any of the advice of the “experts”.

    Today, people buy really expensive stuff they do not need not only for themselves but for their kids, relatives and others.

    All the diagrams and hypotheses in the world will not help you if you blow every paycheck.

    Ultimately, the man who can do as he pleases with $X has as much or more power than the CEO earning $1000X but who is a slave in the corporate world and a prisoner of his own ego.

    • Replies: @Wally
  27. Jester says:

    Keep tuning in to experts and buying their books and you will be taking public transit while they tool around in their Euro SUVs.

  28. onebornfree says: • Website
    @The Alarmist

    The Alarmist says: “….you might be lucky to get 4% to 5% nominal returns going forward, and since TPTB bullshit us about inflation, your real return is considerably lower”

    Exactly the point I was going to make.

    The ability to first save is certainly an absolute necessity, but at the same time it is absolutely no guarantee that what is saved is actually going to be worth more [ in real world purchasing power], over the medium to long term than what it was when it was initially put aside as savings.

    See: “The World’s Best Kept Investment Secret”:
    http://onebornfreesfinancialsafetyreports.blogspot.com/2019/07/the-worlds-best-kept-investment-secret.html

    Regards, onebornfree

  29. Wally says:
    @Anon

    “if the ” investor ” invests in what is useful for the common welfare he desserves a lot of recognition , if the ” investor ” is just a parasitic speculator he is just a thief”

    So says the lazy, unproductive, power hungry Communist.

    • Replies: @Anon
    , @Брат
    , @anonymous
  30. Wally says:
    @Maddaugh

    You started off well, but blew it with this silliness:

    “Ultimately, the man who can do as he pleases with $X has as much or more power than the CEO earning $1000X but who is a slave in the corporate world and a prisoner of his own ego.”

    As if the CEO is being forced into his job.

    Without corporations most people would have no retirements or most of the goods & services they want & need.

    And who were our grandparents ‘slaves’ to?

    Everybody works for somebody.

    • Replies: @jester
    , @Philip Owen
  31. onebornfree says: • Website
    @Anon

    Anon[424] • Disclaimer says: “if the ” investor ” is just a parasitic speculator he is just a thief .”

    A speculator is a thief? Yeah right!

    As someone who teaches safe speculation methodology, I naturally, and completely, disagree 🙂 .

    “Regards” [?], onebornfree

  32. Agent76 says:

    2019-07-27 Currency Baskets Have Their Advantages But Gold is Still Superior

    During the lengthy discussions which led to the 1944 Bretton Woods Agreement, economist John Maynard Keynes opposed fixed exchanged rates via-a-vis a gold backed US dollar.

    https://eurasiafuture.com/2019/07/27/currency-baskets-have-their-advantages-but-gold-is-still-superior/

    Jul 12, 2019 Stock Market Bubble Expands: Collusion Between Trump and Powell?

    President Trump wants The Fed to flood the economy with (even more) credit.

  33. I visited my cousin in June. I said that if gold goes above fifteen hundred dollars an ounce I will be a multimillionaire again. She frowned slightly and asserted, “Jesus said the love of money is the root of all evil.” I swallowed carefully, being sure to remain calm, and replied, “That’s a mistranslation. I wrote a book once, about Jesus. It required a lot of research. In retranslating part of it, I discovered that’s not what he said at all. What he is actually reported to have said was,’Don’t be greedy, because greed causes many problems.’ Anyone can figure out that some evils have nothing to do with money or the love of it, and some aspects of loving money resolve a lot of evils.” She didn’t say anything else all day long. Later we went out to dinner and changed the subject.

  34. Anonymous[408] • Disclaimer says:
    @James Thompson

    Anon[910] already recognised the nature of the problem and the cure.

  35. Or good old insider information and trading.

    Most of the rich made their money with connections and the info that comes with.

    • Replies: @Amerimutt Golems
  36. Anonymous[408] • Disclaimer says:

    Cognitive power leads to monetary accumulation

    Among the little people – sure. The real monetary accumulation already happened at the top of the globalist pyramid and that’s a fairly dumb crowd.

  37. it is obviously true, hence the mantra of “You can’t beat the market”, to convince people to keep buying index funds. very smart guys regularly outperform the market average. life experience would tend to tell you this. smart guys accumulate more money, dumb guys go broke. but for some reason, this has to be demonstrated academically over and over in finance, for people to disbelieve the index fund marketing which is routinely broadcast about you not being able to do better than average over the long term.

    not only do the big players routinely beat the market, once their very fast trading computer algorithms were written to make trades in less than 1 second, the computers traded all day, rarely taking a loss. anybody in serious finance understands this, and knows what a quant is. quants are based on very high intelligence, or at least very high mathematical ability, so any arguments to the contrary are simply flat out wrong. the smarter you are, the more money you can make in finance.

    index funds ARE a great tool for the average or below average intelligence person because they WILL do better simply buying an index fund than trying to trade themselves. Jack Bogle did a great service for millions of people.

    • Replies: @The Alarmist
  38. Anon[424] • Disclaimer says:
    @Wally

    Soviet socialism was a failure , we already know that . But would`t you say that we too , the USA-EU , are full like you say , of :

    ” lazy, unproductive, power hungry Communist. ” ??

    if people are unproductive and eat at the expense of others , they are thiefs too , there are many types of thiefs .

    If someone does not wants to work , he must not eat ( Saint Paul )

    • Replies: @Wally
  39. @SaneClownPosse

    IQ is interesting. But no matter how many studies are done to quantify or qualify life based on IQ measurement, it doesn’t change the fact that life is uncertain, unpredictable, insecure, with innumerable variables. Man tends to think he can control everything, including nature. In particular, Western Man imagines himself as separate from nature, and the big-3 religions of the West all support and encourage this type of thinking.
    The move toward high-tech civilization is moving humanity to its final debasement and decline. But it’s necessary. J.Robert Oppenheimer and his crew in Los Alamos, created a monstrosity with their High IQs. There are way towards a High-tech civilization where Man is put in his place among nature, however, that is not the direction we are going.
    I’m sure if someone has a higher IQ than others AND has the desire to invest well and make money, they will more often succeed, but that is beside the point when we put Man back in his place with the rest of nature.

    • Replies: @freedom-cat
  40. @A Goy

    I know a guy that buys all the gold he couldp get his hands on with left over money after expenses. He has earned about 250% over twenty years.

    Waaaaaay better than any savings account by a few million miles.

    Don’t save, invest.

  41. Agent76 says:

    Jul 6, 2014 Century of Enslavement: The History of The Federal Reserve

    What is the Federal Reserve system? How did it come into existence? Is it part of the federal government? How does it create money? Why is the public kept in the dark about these important matters?

    12/20/2010 $24.5 Trillion In US National Debt, $144 Trillion In Unfunded Liabilities In… 2015

    Should one of the bolded predictions hit, the travails of Greek and Irish bondholders will be nothing compared to what those unlucky enough to be in possession of US debt in 2015 will have to go through.

    http://www.zerohedge.com/article/245-trillion-us-national-debt-144-trillion-unfunded-liabilities-2015

    • Replies: @obwandiyag
  42. @Брат

    Investing is so jewy.
    It’s all about sitting back and scheming ways to make money off of money. Essentially it’s about free money, aka theft.

    Not if the invested money goes towards producing real wealth that wouldn’t have been produced otherwise absent the investment.

  43. @James Thompson

    Dr. Thompson– I don’t know if I agree with any of the data from anyone on wealth accumulation which I think is a better term—ACCUMULATION. For example, many groups of people make or “accumulate” fortunes by illegal networking (inside info on stocks etc.). This is especially true of the Jews. The Jews also control economic pathways which lets them monopolize certain areas of the economy. How does any of this play into the data?

    Mennonites have massive cash reserves which enable them to buy large farms in areas of the country. They also network together. Most of their business is CASH. Many people inherit money. Some of it is not reported and is passed on under the table.

    I know tons of highly educated people who are in massive debt. The rich and super rich are able to accumulate more money due to tax laws and borderline illegal accounting practices. For instance the Kennedy fortune was made on 1) illegal booze–bootlegging ( many have tried to filter this by saying Joseph just had the liquor stocked piled til prohibition but Kennedy was associated with the Irish Gangsters of their time) 2) insider stock market investing 3) shady real estate deals 4) Hollywood movie deals.

    Joseph Kennedy’s quote on making money:

    “Being educated is not the marking of a true man. Play sports, know business and politics, dress well, and know how to invest money is what it took”

    Making money especially in quantities is as much luck as it can be education or anything else. Being in the right place at the right time matters. Locally a fellow I was acquainted with inherited an old house. He barely fixed it up to rent it. He wouldn’t sell it and let it get run down so he lost his renters. Some people consider the guy a bit of low life. He didn’t bother anyone but one might say he wasn’t an outstanding citizen. One day Walmart came into the area. Of course, once Walmart goes in businesses want to go right next to it. He sold the property and land for around $650,000.

    Another family in the area inherited their grandmother’s little house. It was just a little two bedroom house in a tract of little houses. When they started to remodel it and tear down the walls they found a number large safe boxes and metal containers in the wall and floor boards. The stocks certificates which were still good were valued at over 1 million and their was a lot of cash (supposedly there was close to a million in cash but the family said there was only 50,000).

    I also think the data are misleading because of where you go to school. Getting a Ivy League education for instance in many areas is not about what you know but who you know. Jared Kushner is a prime example of that. That’s why many people believe the Ivy League degree is worth something not because what they learned but for the people they meet and how they can get connected.

    Taleb insults anyone who is not a risk taker or investor. He condemns anyone who doesn’t own a business and anyone in academia. Some of this may be warranted but Taleb lives in a world that most people don’t live in. Most people are too busy “Milking the Cow” in their every day job to really delve into owning a business or take risks as he does. His graph which he posts about IQ and Wealth is also a joke because he has fallen into his own trap. How were the data derived? The data are aggregates from other areas. He condemns IQ test data for being aggregates of different tests but he doesn’t seem to mind it in his own analysis.

    An old farmer who had a lot of money once told me about making money. He said, “It’s a simple lesson. You buy a million widgets for $1.00 and you sell them for $3.00 each.” And of course he believed in the axiom about cash which no one said better than Randy Moss:

    “Straight Cash Homey”

    • Replies: @jester
  44. jester says:
    @Wally

    I have to agree with the MAddaugh. You are right, no CEO is forced into the job but these fellows cannot stand anonymity. Hence whether you want to admit it or not, they jump to the tune of shareholders, the Government, their employees and the public. Witness a CEO earning $85M a year pulling a brand because 10% of a minority population being offended. When these fellows finally retire they are lost because no one gives a damn what they think or feel. The power they had was, they find out, an illusion. Even their wifes and kids can barely stand them.

    Secondly, while they make a lot of money, they spend all their lives working and when they go on “holiday” they are still working. The man with $100 in his pocket can chill in a restaurant with his family and friends. The CEO can chill in a restaurant with $10,000 but he has to keep careful watch on his guests. You never know what is going on in the mind of all the envious toadies eating your food and laughing with your corny jokes. That is power ??

    “Without corporations most people would have no retirements or most of the goods & services they want & need.”

    Perhaps so but again the world is rife with corporations who abscond with the pensions. Any thinking man should provide for his own pension rather than trust his future in the hands of others. My parents and grandparents did it ! Your great grandparent did the same. Pensions are a relatively new thing given the time man has been on this earth.

    And as for provision of goods and services how much do we need. Man lived for thousands of years without large scale manufacturing. How many clothes do we need ? How many cell phones ? How many cars ? The fact of the matter is that most of the goods and services provided serve not the customer but the corporation. When a man pays $1200 for a cell phone Mr Cook at Apple thanks him profusely even though the fellows antique Samsung phone that cost $25 back in the day works perfectly well.

    Our grandparents, at least mine were slaves to no one in the sense. First they worked for others until they got the capital to start their own businesses. Even if they had to continue all their lives as employees they would have had the money to walk away from any job they had. The fact is anyone could do the same. However people today spend and spend meaning that they MUST do as they are told or else. THAT my friend is slavery.

    There is nothing wrong with working for somebody. What is wrong is when you have no savings and must kow tow to the boss, unreasonable customers, moron co workers etc.

    That is the situation many people find themselves in. They must have the most and the best of everything they want and little of what they need. That is why we have the corporate subservience we have with I might point out, a horrendous amount of mental problems in the workplace.

    You would be surprised how many CEOs there are who crave a simple life bt are unable to deal with the anonymity.

    You need to think more deeply Wally. We live in a complex world and your thought processes are somewhat superficial.

    • Replies: @The Alarmist
    , @Wally
  45. @prime noticer

    not only do the big players routinely beat the market, once their very fast trading computer algorithms were written to make trades in less than 1 second, the computers traded all day, rarely taking a loss. anybody in serious finance understands this ….

    They aren’t “beating” the market, they are essentially front-running trades by milli- and in some cases micro-seconds by literally plucking data of orders being transmitted to the exchanges out of the air by intercepting microwave feeds to the exchanges and getting their own orders into the system before the full market impact of the original order has been realised in the markets. In that respect, HFT is just another form of tax for the benefit of a few who for some odd reason are allowed to engage in a practise that would otherwise be illegal if it was timed in minutes.

  46. @jester

    You would be surprised how many CEOs there are who crave a simple life bt are unable to deal with the anonymity.

    I’ve met plenty of CEOs and gotten to know enough of them to know that the vast majority of mid- and large-Company CEOs are sociopaths, and more than a few are outright psychopaths … FWIW, the DSM lumps both those types into one diagnosis of Antisocial Personality Disorder.

    • Agree: jester
    • LOL: Wally
  47. @jb

    Great article. But the author, who absent a yarmulke still appears to be wearing one, set my stomach to churning with his very special tikkun olam ending

    Such is the hideously unfair world we live in, which I do hope to fix.

    after apparently declaring that he imagined a software solution to the communication range, a problem that anyone who can count should immediately recognize as mathematically intractable.

  48. @jb

    You, a liar, quoted a liar.

    Yeah, right, “Competent Elites.” My ass.

    You never met one. Competent at really really sucking.

    You pathetic peasant sucker.

  49. @Agent76

    The Federal Reserve is created run and upheld by IQ geniuses.

    Thank god for them. What would we do without them.

    • Replies: @Agent76
  50. Yeah, right. Sociopath idiot savants who destroy the world are geniuses.

    You got one weird definition of genius, IQ fool.

    Taleb, by the way, is almost infinitely smarter than you.

    I notice that you cannot deal with his actual statistical, probability oriented arguments, the real meat of the matter, because it is too intelligent for you.

    (And then you mischaracterize his argument as a kicker.)

    So you pick on his off the cuff non-mathematical common-sense remarks with, surprise, statistics!

    Category mistake. Look it up.

  51. The individuals with the highest inevestment returns are the United States’ congressmen and senators.

    Nancy has more than 100 million dollars.

    Almost none of them were listed in their respective year in the annual 20,000 ‘best academic performance’ graduates from high school.

    Warren Buffet, etc, have been rescued several times in the amount of trillions by the least smart and docile American people.

    • Replies: @Брат
  52. Wally says:
    @Anon

    Socialism / Communism has failed everywhere it has been tried. There are no exceptions.

    Indeed, the current trend of Communism in the EU & USA is faltering as well.
    As usual, it is not sustainable. Hence the growing desire by productive Europeans to leave the EU, the outcry by taxpayers in the US.

    So why do you say that those who invest for profit are “just a parasitic speculator he is just a thief”.

    Without profits there are no innovations, goods, & service we all want. There are no jobs.
    And ultimately there is nothing to pay for all the free stuff that the unproductive & lazy want.

    Profits only occur when the marketplace votes for the offered goods / services with it’s spending choices.

    • Replies: @Брат
  53. Брат says:
    @Wally

    > quotes Margaret Thatcher
    The woman who wrecked blue collar Britain wants to lecture people on productivity lmfao.

    • Replies: @Wally
    , @jester
  54. Брат says:
    @Rafael Martorell

    At it’s highest levels investment is all about privatizing the profits and socializing the losses while keeping the masses as ignorant as possible by speaking in the foreign language of the Wall Street Journal.

    Can’t wait until we hang speculators again. That is too kind though. They deserve their heads cut off with a butter knife.

  55. Брат says:
    @Wally

    Socialism did not fail in Germany in the 30s. Afterall, Hitler called it the National SOCIALIST German Workers Party.
    And German was wildly succeeding and productive while the capitalist world nosedived into a depresssion. So much for socialism not working.
    Though the biggest factor isn’t ideology; it’s more about getting rid of jews and parasites. The Renaissance happened at a time when jews were kicked out of northern Italy. Imagine my shock.

    • Replies: @anonymous
  56. @freedom-cat

    I meant this to be a stand alone comment. I must have accidentally hit a reply button.

  57. Agent76 says:
    @obwandiyag

    Well, since all Wars are Bankers Wars the world could breath easier after they have all been eliminated across the globe. “It is easier to rob by setting up a bank than by holding up a bank clerk.” Bertolt Brecht

  58. bjondo says:

    Give me the investor
    who has an inside track,
    who is dishonest.
    This sort is the best investor.
    Being a low down crook
    some sort of intelligent.

  59. Anon[258] • Disclaimer says:
    @Truth

    Poor whitey drops the knowledge. “I know I’m not the smartest white dude ever been born but a dumb as fuck white guy is supposed to be smarter than a medium smart black guy, right? Since I’m not even that stupid there’s gotta be a reason for me livin in this here mobile vehicle park and earnin my pay breakin rocks in half for Mr. Ratner.” “The Democrat Party gives the coloreds and Mexicans and people like that the breaks in life that an honest white dude like me used to get.” “So yeah for sure duh man be holdin me down.” “I’ll tell you what tho, duh man should be holdin them Mexicans and negroes down cause he gotta be holdin somebody down, but it shouldn’t be me cause I’m not fuckin stupid like they are!” “It’s bullshit.” “Reverse racism for middle smart but honest white folks and marxist communism for brown and black retards is what it is!” “It ain’t fair.”

    • Replies: @Truth
  60. @Anon

    Unexpected. Still enjoyed. Yasuharu Takanashi is amazing

  61. Anon[202] • Disclaimer says:

    What’s the NNT for those toenail fungus creams? Asking for a friend.

  62. anon19 says:

    A fool and his money are soon parted.

  63. Wally says:
    @Брат

    Except she didn’t.

    Outsourcing jobs, massive ‘immigration’, and lazy ‘gimme for free’ Communists did.

    • Replies: @Брат
  64. Wally says:
    @jester

    Like all delusional Marxists you ignore:

    – Those share holders, which anyone can become, can fire their CEOs anytime they wish
    – Those same shareholders approve of CEO’s salary.
    – There are problems in all workplaces, always will be, it’s the nature of the human condition.
    – Investments in those same corporations provide retirements that previous generations of workers could only dream of.
    – Those same corporations provide goods and services that make workers live easier.

    – Your grandparents certainly were “slaves” / beholden to others.
    As you admit: “They worked for others”, hence in your mind, they were slaves” to those “others”.
    And the money that made they put where? A bank, that’s where. LOL. Now that’s a corporation with a CEO.

    – People who over spend can only blame themselves. If they are “slaves”, they are so to their own foolishness. It’s their on fault and no one else’s, aka: personal responsibility.

    On the whole you’re just mindlessly using typical juvenile, uninformed, leftist strawman arguments because you are ignorant of reality. I suggest you remove your self from your Disneyland, the world is not the superficial fantasy you imagine.

    Another Marxist utopian bites the dust.

    • Replies: @jester
  65. Брат says:
    @Wally

    Go read the latest unz article on Margaret Thatcher. Then cringe at your ignorance. I can help with that too.

  66. FKA Max says: • Website

    What It Means to Be a Value Investor, with Lauren Templeton and Scott Phillips

    Why Women Are Better At Investing

    “Men traded 45% more frequently than women
    Women outperformed men by 0.94% per year”

    https://www.forbes.com/sites/michaelcannivet/2018/12/29/why-women-are-better-at-investing/

    Family Wealth–Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations

    Generational family wealth conversation between Ilze Alberts and James Hughes

    [MORE]

    Understanding Your Values with Dr John Demartini

    Social Media: FKA Max Freedom Through Financial Literacy https://twitter.com/fka_max & https://gab.com/FKAMax

    Source: https://twitter.com/fka_max/status/1107569304969445376

    • Replies: @FKA Max
  67. anonymous[248] • Disclaimer says:
    @Wally

    https://www.aish.com/jw/s/Margaret-Thatcher-and-the-Jews.html

    [MORE]

    A new book explores her deep connection with the Jewish people.

    Four years ago, following the death of former UK Prime Minister Margaret Thatcher, Robert Philpot, a British journalist, noticed an interesting pattern: almost every article noted that Thatcher was famous for her affinity with the Jewish community.

    Intrigued, Philpot decided to research Thatcher’s relationship with the Jewish People. What he found out is detailed in his new book: Margaret Thatcher – the Honorary Jew.

    “If you ask most people who remember Thatcher what made her connect so strongly with the Jews,” Philpot said in an interview with Aish.com, “they will say: ‘Well, she was the MP for Finchley.” Thatcher’s political career began in 1959 when she was elected Member of Parliament for Finchley, a constituency in north London with a large Jewish community.

    “It seemed plausible to people that Thatcher cared about Jewish concerns because her voters cared about them. But when I stated researching I found out that her strong affinity with the Jews predated her political career.”

  68. anonymous[248] • Disclaimer says:
    @Anti Racist

    Darn it feels good to be a progressive!

    And the very intelligent, very hard working (((investors))) bankroll all these developments.
    And the useful idiots like “Wally” celebrate, because (((investors))) are so smart that they are always right.
    It must really feel good to be an (((investor)))!

  69. anonymous[248] • Disclaimer says:
    @Брат

    Socialism did not fail in Germany in the 30s. Afterall, Hitler called it the National SOCIALIST German Workers Party.
    And German was wildly succeeding and productive while the capitalist world nosedived into a depresssion. So much for socialism not working.

    Yes. Tiny country without any resources, and whole world had to unite to defeat her, and today, after 80 years, still need to paint them as the greatest devils that ever lived.
    Why? What exactly are they afraid of, if the nasty Natzies were so inefficient and incompetent?

    Wally really makes me sad. Someone who sees through the “holocaust” “moon landings” “9/11” and other BS that is told us, repeats like parrot all the “free market” Ayn Rand crap. Shame.

  70. jester says:
    @Wally

    Judging your intellect from your writing I doubt you ever held a position higher than scabbing cigarette butts from the parking lot. You sound really ignorant like a red neck from the most remote backwoods.

    Your logic is all over the place.

    What you have written exists is utter nonsense and not in the real corporate world.

    And delusional marxists existing in a capitalist world. Listen to what you are saying and writing. It makes for sheer drivel !

    For example, anyone can become a shareholder I agree. But Wally the commentator who buys 100 shares has no say in how the business is run. You, as a mickey mouse investor have no power ! The big shareholders have the say and generally the CEO and his friends ARE the big shareholders or control the holding company with the large shareholdings.

    Shareholders approve the CEO salary ? Rarely…the CEO also owns large blocks of shares or his close associates do. And if any company wants a particular CEO they must approve what the man wants. Proof: CEO salaries increased 1000% while the wages of the average worker remained stagnant or declined. What approval are you talking about here ?

    Investments in those same corporations provide retirements that previous generations of workers could only dream of.

    What investments ? The average american lives paycheck to paycheck. To have such a retirement you would need a portfolio of $1M to draw down a mere $40K a year. before taxes The average person does not have enough money for a brake job on their car. Today’s employees don’t dream of any retirement. Just look around, many of them are still working to make ends meet.

    Finally, corporations exist to make a profit not to make anyone’;s life easier. How do they do this ? By convincing buyers they must have their goods. Lets look at a company that produces shirts for example. One year stripes are in fashion, the next checks and the following year floral. Companies cater to a buyer’s WANTS and in so doing make their lives HARDER because the buyer struggles to keep up with the fashion. Life for the American consumer is not easy because the advertising convinces them they are always behind the in thing. The poor fellow ends up with 50 shirts, all out of fashion from one year to the next when in fact there are just 7 days in the week and one is wash day !

    You can apply the same logic to any other product. Cell phones is a classic example with folks changing their phone every 6 months. How does Apple make their lives easier. Oh I know, the average nobody red neck like you can have call waiting, call conferencing, call forwarding, data, internet, camera, scheduler, email, voice mail and this and that app all for an extravagant amount per month plus a phone that will be “out” in six months. Check out the nearby apple store and look at the people buying the latest of what they do not need.

    Corporate CEOs don’t give a shit about making anyone’s life easier. If you believe that you need to stop drinking that moonshine and get out of the backwoods. Corporate CEOs care about Corporate CEOs

    Finally, I was a senior VP of Finance in a large multinational. What I have forgotten about the corporate world you have not and will never know and my salary was never dictated by the shareholders but by myself. They paid me what I demanded or they could find someone else. My level of expertise was rare. Unlike you there were hundreds of jobs and just me. With you there are hundreds of Wallies and just one job. My annual bonus I would bet was more than 10 years of your salary.

    Before you mouth off, you need to know what you are talking about. be logical and watch your grammar. You come across as ignorant, uninformed and uneducated !

  71. jester says:
    @Брат

    This Wally fellow is a genuine moron. Everyone is a marxist and communist. Wally, this a a great blog spot and we need comments with ideas and perspectives we can ponder. Your comments are neither logical, useful or tasteful. Try to elevate yourself and your intellect.

    You come across as really dumb!

    • Replies: @Wally
  72. FKA Max says: • Website
    @FKA Max

    Financial literacy: An epic fail in America

    “U.S. ranks only slightly higher than Botswana in adult financial literacy”

    https://www.investmentnews.com/article/20190302/FEATURE/190229936/financial-literacy-an-epic-fail-in-america

    In another study, researchers found in 2015 that only 30% of Americans were able to answer three simple financial questions about inflation, interest compounding and risk diversification. The academics who conducted the study, Annamaria Lusardi of George Washington University and Olivia Mitchell of the University of Pennsylvania, called that success rate “discouragingly low” in light of the complex financial decisions Americans face.

    Yet another study shows a downward trend in financial literacy. In 2015, 37% of individuals correctly answered four out of five financial questions, down from 42% in 2009, according to the Financial Industry Regulatory Authority Inc.’s Investor Education Foundation’s most recent study of financial capability in the U.S.

    “Americans are struggling and at times they’re clueless — and that’s a disaster recipe right there,” said George Barany, director of the America Saves initiative at the Consumer Federation of America.

    Why so many Americans in the middle class have no savings

    “PBS NewsHour
    Published on Jun 1, 2016
    Could you come up with $2,000 in 30 days if you had to? As many as 40 percent of American families can’t, despite the improving economy. Among them is Neal Gabler, who is frequently broke despite his successful career as a writer. As part of a collaboration between The Atlantic and the PBS NewsHour, Judy Woodruff looks at why Gabler and so many other Americans are struggling with savings.

    • Replies: @FKA Max
  73. Wally says:
    @jester

    LOL You simply dodged my points.

    It’s understandable that you would be desperately name calling since I’ve slapped your nonsense silly.

    Cheers.

  74. Factorize says:

    After rereading The Millionaire Next Door, I would tend to question the cognition connection to wealth accumulation: the most important characteristic identified in this book is the frugality factor. It is astonishing to realize how completely wrong the mainstream view of wealth is and how this suggests that the ongoing image distortion of the super-rich is nothing more than politicizing by communists and socialists. The book unequivocally refutes the illusion of the rich having highly refined and expensive tastes.

    The delicious irony is that the popular perception of luxury (fine European automobile, expensive vintages etc.) is actually much more of a characterization of poverty than wealth. Among the American wealthy this lifestyle is almost non-existent. Of even greater irony is that the most successful ethnic group in America for wealth accumulation are Russians. Why did they ever bother with communism when they are super-capitalists? Number two were the Scottish. It is almost hard to believe that people could be that frugal. They were what were called prestigious accumulators of wealth.

    One other highly interesting insight from the book was the extent to which parent’s money management approaches impacted on the lives of their children. Those parents who were more in the spender than saver category, caused profound harm to the lives of their children by oftentimes providing them with life long financial support enabling them to also live well beyond their means and in addition creating the conditions for drug abuse in their offspring.

  75. CanSpeccy says:

    Here’s the proof that IQ correlates with wealth — Not.

    From: Zagorsky, 2007. Do you have to be smart to be rich? The impact of IQ on wealth, income and financial distress. Intelligence, 35: 489-501.

    Regression results suggest no statistically distinguishable relationship between IQ scores and wealth. Financial distress, such as problems paying bills, going bankrupt or reaching credit card limits, is related to IQ scores not linearly but instead in a quadratic relationship. This means higher IQ scores sometimes increase the probability of being in financial difficulty.

    • Replies: @res
  76. FKA Max says: • Website
    @FKA Max

    IQ and Stock Market Participation
    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1441512

    Abstract

    Stock market participation is monotonically related to IQ, controlling for wealth, income, age, and other demographic and occupational information. The high correlation between IQ, measured early in adult life, and participation, exists even among the affluent. Supplemental data from siblings, studied with an instrumental variables approach and regressions that control for family effects, demonstrate that IQ’s influence on participation extends to females and does not arise from omitted familial and non-familial variables. High-IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios. We discuss implications for policy and finance research.

    Make the Stock Market Work For You [Enough is Enough]

    “Capitalism vs. other Economic Systems [00:49] – What drives the stock market? [05:36] – How do I use these concepts to grow my money?(3 tips) [07:59]”

  77. @Wally

    Those of my colleagues who made it to the top of large corporations were very driven with wives who supported their ambition. However, if you are freelance or owner of a small business you are more of a free man. Customers are always a frustration. They never do it right but projects end.

  78. A few things seem to be getting mixed up here.

    Acquisition of wealth is not the same as investment performance.

    Neither is necessarily particularly enhanced by intellect. The best sales people are not IQ 130 types. They are IQ 105. Not so bright that they see the disadvantages of their product. Conscientiousness and just going out and doing it also count. Learning from experience can be the easiest path. The overly intelligent can paralyze themselves with analysis.

    In my time, I have been in the top 0.25% of income earners in the UK. I even held it for a few years. I have also been near bankrupt. I suggest both conditions were IQ driven, plus a certain appetite for challenge that owed nothing to IQ.

    When it comes to stock market investment, there are many proofs that no one can outperform the market deliberately. Fooled by randomness says it all there. Taken himself had a wonderful example of 10,000 fund managers being recruited into The City. All those with below average performance were sacked each year. The 250 or so left after 5 years would of course be regarded as geniuses. Their books would sell. They would be forgiven a bad year. Their methods would be regarded as infallible. Yet a high IQ would have contributed nothing except perhaps exam passing ability to get recruited in the first place.

    • Replies: @CanSpeccy
    , @James Thompson
  79. CanSpeccy says: • Website
    @Philip Owen

    Acquisition of wealth is not the same as investment performance.

    Neither is it necessarily particularly enhanced by intellect.

    No. Great fortunes, and small ones too, are usually acquired more by luck than judgement. The fastest way to make money is to gamble — and win.

    But those who luck out on a big gamble are more likely to attribute their success to inspired judgement than luck, which can lead on to further bets resulting often in disaster.

    And, in any case, who says intelligent people think getting money is the most important thing to do with their time and intelligence. James Thompson, for example, surely does not write here for the the money?

    As Sam Johnson observed, one may seldom be more usefully engaged than in getting money, but only the most dull witted can think that getting as much money as possible is a worthwhile way to spend a large portion of one’s life.

    • Agree: Philip Owen
  80. @Factorize

    I enjoyed the book, and often quote its findings, yet I am not sure that their methods are sound enough to support that, though it is written in an engaging way.

  81. @Philip Owen

    Not fooled by randomness. Investment wealth can accrue to some particular investors who follow sensible methods, particularly if you look at performance over more than 8 years. There will be random good performers every year. If you are among the top performers for more than 8 years, you are probably doing something right.

    https://www8.gsb.columbia.edu/sites/valueinvesting/files/files/Buffett1984.pdf

  82. res says:
    @CanSpeccy

    Since I don’t enjoy out of context quotes, let’s include the abstract from that paper in full.

    How important is intelligence to financial success? Using the NLSY79, which tracks a large group of young U.S. baby boomers, this research shows that each point increase in IQ test scores raises income by between $234 and $616 per year after holding a variety of factors constant. Regression results suggest no statistically distinguishable relationship between IQ scores and wealth. Financial distress, such as problems paying bills, going bankrupt or reaching credit card limits, is related to IQ scores not linearly but instead in a quadratic relationship. This means higher IQ scores sometimes increase the probability of being in financial difficulty

    Here is some summary data for the three primary variables. Note that income includes entitlements (e.g. welfare, food stamps) which likely mutes the IQ correlation for it.

    Variable | Mean | SD | Correlation with IQ test score | Correlation with income | Correlation with net worth
    IQ test score 100 15 1.00 0.30 0.16
    Income $43,699 $47,709 0.30 1.00 0.39
    Net worth $145,837 $447,814 0.16 0.39 1.00

    The largest correlation with net worth was “Times inherit” at 0.2 which tells us something. Second largest was “Amount inherit” at 0.18. That 0.16 does not look so bad when considering that. One thing that intrigued me is that “Wealth at 28” only correlated 0.13 with net worth here (mean age 36.7).

    It’s worth noting that your graphs omit subjects with a net worth over $230,000. The summary statistics above indicate they are important statistically (the net worth graph cap is at about +0.2 SD).

    Here’s an excerpt from the paper:

    Table 2 shows the median income and net worth held by young baby boomers broken down by IQ scores. The numbers suggest that IQ scores are directly related to both income and wealth. Comparing individuals in the bottom of the IQ score distribution to those in the highest shows their net worth is over twenty three times lower, while their income is 3.6 times lower.

    Table 2 sounds interesting, so let’s include it here.

    Table 2
    Median income and net worth of young baby boomers by IQ test score
    IQ test score Net worth Income
    75 & below $5775 $15,020
    80 $10,500 $18,467
    85 $24,250 $27,700
    90 $37,500 $30,881
    95 $52,500 $34,985
    100 $57,550 $36,826
    105 $83,918 $40,628
    110 $71,445 $40,884
    115 $94,500 $45,675
    120 $127,500 $48,681
    125 & above $133,250 $55,555
    Overall $55,250 $35,918
    Correlation 0.156 0.297

    Wow. Clearly no relationship at all between IQ and net worth. Not.

    The abstract quote relies on the regression results. Looking at Table 3; Age, Education, and Times inherit $ (and income, see below) dominate the positive net worth coefficients while “Ever divorced” and race dominate the negative coefficients. I’m guessing the correlated variables are an issue in the regression. Let’s take a look at some of their correlations with IQ:

    Black -0.35
    Hispanic -0.16
    Education 0.62 (! Bingo!)
    Ever divorced -0.08
    Times inherit $ 0.32

    In addition, I think including income and net worth as explanatory variables for each other adds some confusion. I understand why they would do that, but I think it would have been more informative to include some models without them. Recall that Income correlates 0.3 with IQ.

    Also, most here probably realize this, but when interpreting those regression coefficients it is important to remember what sort of variables one is dealing with. For example, those income coefficients are multiplied by income in dollars so are very large even though they don’t look it at first glance. It is also worth noting from the Table 3 footnotes that Times inherit $ only covers from ages zero to thirteen. Seems likely that inheritances from age thirteen on are as or even more important.

    I think Table 2 serves as an effective rebuttal to your assertions.

    P.S. Thank you for including the paper link.

    P.P.S. This page looks at the variables which probably went into net worth.
    https://www.nlsinfo.org/content/cohorts/nlsy79/other-documentation/codebook-supplement/nlsy79-appendix-23-revised-asset-and

    P.P.P.S. The NLS Investigator: https://www.nlsinfo.org/investigator
    indicates family net wealth is being updated every four years (last in 2016). A quick look at citing papers did not show an update to the net worth work, but Ian Deary was coauthor of a 2015 paper using this data: Intelligence in youth and health at age 50
    https://www.sciencedirect.com/science/article/pii/S0160289615001014
    It would be interesting to see what the net worth and income correlations look like now.

    • Replies: @James Thompson
  83. @Factorize

    As far as I recall, they did not measure intelligence, so have nothing to say about the matter!

  84. Factorize says:
    @Factorize

    The book offers so many penetrating insights into common patterns of spending that occur in the community and the significant intergenerational effects that such spending can have. It had never occurred to me that anyone could become so trapped into the deeply immoral profligate hyperconsumerism outlined in the book. Everyone needs to read this book to protect themselves against such behavior; otherwise it is all too possible that you will become a sugar daddy to these overspenders. You do not want to marry into these families with their children who possibly also have overconsumption behaviors along with potentially drug issues and/or AIDS.

    The psychometric regression to mean then merely compounds their problems as they try to live a life which they are intellectually incapable of managing. Shutting down the psychometric conveyor belt of wealth that naturally flows towards the upper middle class (without any awareness by those drawn to them of their grossly dysfunctional financial status) might be one of the only mechanisms that could help move them toward financial sanity.

    There is clearly a large potential for this message to become a central player in the political dialogue. It is not difficult to imagine that much political argumentation is simply those with grossly unrealistic consumption patterns demanding that prudent savers finance their lifestyles. By peering behind the headlines and observing the actual balance sheets of people in the community, a more informed discussion can occur in such we can demand others behave with financial responsibility. Politicians that were unable to demonstrate long term ability to accumulate wealth should be disqualified from public office. We need role models that understand the lifestyle required for wealth accumulation.

  85. @res

    Thank you so much for your detailed reading. Raw data are always so informative! Income data very useful. I tire of models which allow sleight of hand “corrections”. Tiresome how often authors correct for education, or even for social class itself. The sociologist’s fallacy once again.

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