Being really rich does not make you a genius

Now, you might be a genius, and you are surely more likely than the average person to be a genius, but, honestly, more than anything it probably proves that you are lucky.   Love this post from Brian Klass last year that I recently came across:

The first problem is that many still falsely believe we live in a meritocratic society, in which riches are purely a marker of talent rather than of luck or generational wealth.

If someone is a billionaire, they must be a genius. But there are serious reasons to doubt that claim. Wealth is not normally distributed, like height. While there’s never going to be someone who is even 3x shorter or 3x taller than you, Elon Musk is about three million times richer than the average American. That means that the super-rich are extreme outliers, and that creates some major statistical irregularities that are not tied to talent.

Talent, in the way that it is often defined within Western society at least, is, like height, normally distributed. That creates a mismatch. Someone who is marginally smarter than you could become 100,000 times richer, rather than marginally richer. (It’s also clearly the case that people vastly less smart than you could become substantially richer. See: Trump, Donald, and especially, Trump, Donald Jr.). [emphases mine]

This is the world of what are sometimes called “fat tails,” where the bulk can be found at the extreme. In the sea of poor people, a few grotesquely rich people bob on the top while millions drown in misery.

A recent research study, involving a collaboration between physicists who model complex systems and an economist, however, has revealed why billionaires are so often mediocre people masquerading as geniuses. Using computer modelling, they developed a fake society in which there is a realistic distribution of talent among competing agents in the simulation. They then applied some pretty simple rules for their model: talent helps, but luck also plays a role.

Then, they tried to see what would happen if they ran and re-ran the simulation over and over.

What did they find? The most talented people in society almost never became extremely rich. As they put it, “the most successful individuals are not the most talented ones and, on the other hand, the most talented individuals are not the most successful ones.”

Why? The answer is simple. If you’ve got a society of, say, 8 billion people, there are literally billions of humans who are in the middle distribution of talent, the largest area of the Bell curve. That means that in a world that is partly defined by random chance, or luck, the odds that someone from the middle levels of talent will end up as the richest person in the society are extremely high…

The authors conclude by stating “Our results highlight the risks of the paradigm that we call “naive meritocracy”, which fails to give honors and rewards to the most competent people, because it underestimates the role of randomness among the determinants of success.”

Indeed.

Perhaps this is something you’ve long suspected, and there are plenty of studies that have made similar arguments, but this research shows that with a few relatively simple assumptions, you can recreate our real-world distributions, showing how randomness and luck are crucial to success.

Some billionaires are smart. All have been extremely lucky.  

Of course, most super-rich people manage to convince themselves that it’s all their brilliance and merit, and not any luck.  But the best evidence strongly suggests the contrary. It’s a shame that our society doesn’t realize this and most people far-too-easily buy into the myth of the brilliant genius.  

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