September 10, 2012

Felix Salmon on IQ and Financial Literacy

Felix Salmon writes about planning for retirement in "Who is speaking for the poor?:"
IQ also helps. Check out this chart, for instance, from a very long and detailed paper about the likelihood that a person of given intelligence will be invested in the stock market.

The distribution is clear: the smarter you are (as measured by IQ), the more likely you are to be invested in the stock market. And this distribution is independent of wealth: it applies to the rich as much as it does to the poor. Or, as the paper puts it, “IQ’s role in the participation decisions of the affluent is about the same as it is for the less affluent. The definition of affluence—net worth or income—does not affect this finding.” 
Most impressively, check out this paper from 2007. It asked just three “simple mathematical questions” of couples to judge the numeracy of each one. If neither got any questions right, the total wealth of the couple, on average, was $202,000. If they both got one question right, it was $505,000. If they both got two questions right, it was $853,000. And if they both got all three questions right, their average wealth on average was a whopping $1.7 million. (If they got different scores from each other, the wealth ended up somewhere in between.) 
And similarly, at the other end of the spectrum, there’s huge amounts of research showing that if you’re particularly financially illiterate, or you’re not good at numbers, then you’re much more likely to be ripped off by predatory lenders or other scams, be they legal or otherwise. 
There are various conclusions to be drawn here, one of which is that if we do a better job of financial education, then Americans as a whole will be better off. That’s true. But at the same time, financial illiteracy, and general innumeracy, and low IQs, are all perfectly common things which are never going to go away. It’s idiotic to try to blame people for having a low IQ: that’s not something people can control. And so it stands to reason that any fair society should look after people who are at such a natural disadvantage in life.

95 comments:

Anonymous said...

Steve, this is spot-on

people born with genetically low IQs tend to get ripped off financially.

This effect will become more pronounced as IQ gets more stratified, as you have often writtn

When you look at it in terms of IQ, the mixing of various elite groups makes more sense

"paranoid jews" like the SPLC or the ADL desperately want jews in America to feel threatened by the white elite. The more threatened american jews feel, the more afraid they are, the bigger the donations to the SPLC and ADL.

So the anti semites want to make white americans afraid of the jews, and the "paranoid jews" want to make american jews afraid of the white americans.

In my opinion both the "paranoid jews" and the anti semites will be very disappointed in the direction that things are going. The high IQ jews are rapidly melting in to the general high IQ elite of American society. High IQ jews and high IQ whites mix and mingle at the ivies and at other elite colleges. Then when they get out of school they tend to join the same elite law firms and investment banks and accounting firms. I don't know how eager the average white elite family is to have their son or daughter marry someone Jewish (how much did Trump and Clinton approve of their daughters decisions? Do we know) but at the end of the day, kids these days choose for themselves who they are going to marry.

Probably sooner than anyone realizes, the elite of the USA will sort of be a melting pot of high IQ groups. Most elite families will get the majority of their DNA from old line white Europeans, but also some DNA from Ashkenazi jews, with some mixed in DNA from high IQ northeast europeans (japanese, chinese, etc)

Anonymous said...

Yes, we smart people should look after the poor disadvantaged ones. If you fail an IQ test you should not be allowed to invest into what we smart people define as "legal scams". Better yet, we take all your money, invest it the way we see fit, and give you a fixed allowance. This is what fair society means.

Luke Lea said...

So what are the three questions?

Seth said...

The stock market is a measure of funds flowing into it. With the establishment of a the 401(k) as a public subsidy of the equity market, people began automatic paycheck deductions to provide price supports for equities. With money continuously flowing into the market it is no wonder that it went up starting in the early 90s.

That being the case it never seemed to me like a smart place to put money.

Anonymous said...

Financial iliterates is the reason Obama have the chance of being reelected.

Anonymous said...

"hat being the case it never seemed to me like a smart place to put money."

Where do you put it then?

JustAClown said...

the grad school scam and in particular the law school scam is ripping off tons of high-IQ folks every year.

Matthew said...

"So what are the three questions?"

I didn't spot them in the RAND paper. I did find them here:

1) 1) “If the chance of getting a disease is 10 percent, how many people out
of 1,000 would be expected to get the disease?”

2) “If 5 people all have the winning number in the lottery and the prize is 2 million dollars, how much will each of them get?”

Third question is asked only if respondent answered at least one of the first two correctly:

3) “Let’s say you have 200 dollars in a savings account. The account
earns 10 percent interest per year. How much would you have in the account at the end of two years?”

So, 1) 100 people; 2) $400k; 3) $242.

Or are these trick questions, because they all seem rather simple.

socks said...

My dad was good at numbers. My mom isn't. My dad's side of the family was long lived... until my dad wasn't. An aunt and a financial advisor talked my mom into an investment she didn't understand. The last thing I said to her before leaving for a couple of months was "If you're not going to do what I suggest, don't do anything". Well...

I plan to play by the same rules of the game, and the rules of the game are stupid people are allowed to make choices that effect me. I'm an outlier to most of the family I've known. To say that it's stressful would be an understatement.

JustAClown said...

take it from someone who scored high enough on 2 standardized IQ tests to get into MENSA: IQ is bogus as hell. Life lesson.

Anonymous said...

The secret to playing the stock market successfully is to appreciate that it reflects perceptions of future value, not value itself, and certainly not current value.

Very few people ever master the art of consistently understanding whether these perceptions are correct or mistaken.

Most investors just passively rise and fall on the tide, and suffer the predatory deprivations of "managers". In the past, if you stuck around long enough, there was a reasonable chance you might be rescued by inflation, scientific progress and demographics.

But nowadays, only inflation is working in your favor as an "ordinary" (ie honest) investor.

The mass immigration designed to keep the Ponzi scheme afloat will prove a failure, since the immigrants seem overwhelmingly wealth destroyers rather than wealth producers.

It is now reasonable to hold any asset that will benefit from inflation.

Anon.

Anonymous said...

This thread is spot - on. People with average IQ make poor financial decisions compared to people with high IQ.

Even when a millionaire has two sons, the son born with higher IQ is much more successful in life than the one born with average IQ.

Success is based on the IQ a person is born with

Aeoli Pera said...

Are you saying the strong oughtn't prey on the weak? How quaint.

In seriousness, I disagree with your fundamental assertion that "knowledge is good". Knowledge is power, which is good when I have it.

Steve in Greensboro said...

"...And so it stands to reason that any fair society should look after people who are at such a natural disadvantage in life..."

but not let them vote.

Once you admit to being unable to manage your own life by going on government relief of any kind, then you lose the right to vote, in the same way felons lose the right to vote.

Truth said...

"Success is based on the IQ a person is born with"

Then why are there so many poor whiners "with 170 IQs" on this blog?

Anonymous said...

So it is OK to steal the hard earned life savings from the less intelligent or less savvy?

Anonymous said...

Are you saying the strong oughtn't prey on the weak? How quaint

So I gather you have no problems with muggings, rapes etc either?

Henry Canaday said...

I finally found a Burger King where all the workers are white, competent, friendly and speak English perfectly. Yes, I am in Koblenz, on the Rhein.



Anonymous said...

"It’s idiotic to try to blame people for having a low IQ: that’s not something people can control."

Considering the strong - but not inevitable - link between IQ and success, I've always wondered how much of the "nurture" side of the debate is about tacitly blaming the poor for their predicament.

After all, if you *can* improve IQs, then it has to be their own fault for not breast feeding, or not being obsessive about their childrens' educations, or not going into fields they can't handle and which are going to immigrants anyway.

But if there are people who just can't handle things to the extent that the high(er) IQ people can, then you have to work around that. Manipulating them is just mean.

eah said...

And so it stands to reason that any fair society should look after people who are at such a natural disadvantage in life.

Uhh, "fair" is not the right word.

Anyway, assuming you go along with what he says here, can we at least please stop importing people who need 'looking after'?

IHTG said...

This is excellent. IQ realism on the left is something that needs to be strongly encouraged.

Anonymous said...

The stock market is a measure of funds flowing into it. With the establishment of a the 401(k) as a public subsidy of the equity market, people began automatic paycheck deductions to provide price supports for equities. With money continuously flowing into the market it is no wonder that it went up starting in the early 90s.

That being the case it never seemed to me like a smart place to put money.


Yes! Yes! Yes!

This is exactly what I thought.

But now with so many unemployed, they can't contribute. Also, higher taxes and higher costs for everything means less can be saved/invested. So those $$ are drying up. And old people are selling selling selling because they need the money to live alone in their 4 bedroom house or a super expensive assisted living facility. Banks no longer need deposits. We know that because they will not pay interest on deposits. Bernanke just prints the money. We are going down.

Anonymous said...

Then why are there so many poor whiners "with 170 IQs" on this blog?

And why are the folks at the NYTimes always whining?

Well? What is your point?

Is every discussion of disagreeable material whining?

Everyone who wishes to discuss anything is whining?

Stupid comment.

Jeronimus said...

The high IQ jews are rapidly melting in to the general high IQ elite of American society. High IQ jews and high IQ whites mix and mingle at the ivies and at other elite colleges. Then when they get out of school they tend to join the same elite law firms and investment banks and accounting firms. I don't know how eager the average white elite family is to have their son or daughter marry someone Jewish (how much did Trump and Clinton approve of their daughters decisions? Do we know) but at the end of the day, kids these days choose for themselves who they are going to marry.

Probably sooner than anyone realizes, the elite of the USA will sort of be a melting pot of high IQ groups. Most elite families will get the majority of their DNA from old line white Europeans, but also some DNA from Ashkenazi jews, with some mixed in DNA from high IQ northeast europeans (japanese, chinese, etc)


So do you think the Ashkenazic Eurasian overlords will be more benign to the rest of us? I hope so, and I think it's possible.

I think the whole anti-white thing and not letting us have any white identity is something that was profitable for a few decades, becuase whites controlled a lot of resources which they guilted us into sharing.

But at some point, hopefully sooner rather than later, we become like an oil well that requires 2 barrels of inputs to get one barrel of output. Hopefully we find ways to outfox their redistribution schemes, and live for ourselves and not as milch cows for the grievance groups.

Anonymous said...

It’s idiotic to try to blame people for having a low IQ: that’s not something people can control.

I almost fell out of my chair when I saw that a Scots-Irishman named Felix MacSalmon had said that.

But then I looked him up on Wikipedia, and it appears that he might not be Scots-Irish but instead actually Scottish.

Anonymous said...

@Anonymous 3:20

"And why are the folks at the NYTimes always whining? Well? What is your point? Is every discussion of disagreeable material whining?Everyone who wishes to discuss anything is whining? Stupid comment."

Holy strawman, Batman! No one is suggesting that all dicussions of "disagreeable topics" are whining. Just the whining Omega males who whine about how, with their supposed Superman IQs, they can't get all the sex, adulation of money that's supposed to fall into their laps.

Pat Shuff said...

While the official number from the FMS is not out yet, according to an advance look by the CBO, the August deficit soared from a modest $70 billion to a whopping $192 billion, the highest August deficit in history, and coming at a time when traditionally the US Treasury does not generate substantial deficits. It also means that "that" $59 billion budget surplus in April, coming after 42 straight months of deficits, and which surprised so many, was just as we suspected, nothing but a play on the temporal mismatch between treasury receipts and outlays. Most importantly, with one month left in the fiscal year, a month which, too, will likely come well above last year's $63 billion, the US has now spent $1.165 trillion more than it has received via various taxes. Finally so much for the year over year improvement: at $1.23 trillion deficit in the LTM period, this is only 3.2% less than the August 2011 LTM deficit which was $1.27 trillion, despite nearly 2 million more workers employed (at least according to the BLS) and generating tax revenue. Expect the US to end Fiscal 2012 with a total deficit of well over $1.2 trillion, which in turn means that the average burn rate of $100 billion in new debt issuance each month, will continue into the indefinite future.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

To paraphrase the comedic Ms. Tomlin's classic one-liner 'no matter how cynical you get you just can't keep up with it'...no matter how big number innumerate you get you just can't either.

Innumeracy matters at the household level, big number innumeracy at the national level probably helps explain the slow motion train wreck in progress that has gained considerable speed post-2008. The relationship between numeracy and wealth also helps explain the dizzying vertigo experienced standing on the precipice of the hole dug all the way to China behind the doors of the US unTreasury.

Popular general financial illiteracy assists the fatal attraction of state financing via the printing press on both sides of the Atlantic ongoing for so many years now that it has become a feature not a bug, a temporary stopgap cum permanence. It is how the world is now. There is no exception in history to the tearful ending. There is poesy in the justice being dealt already to those most (ir)responsible and who are experiencing the tearful beginnings of devil take hindmost.

Anonymous said...

This is why we need Financial Advisors. Financial Analysts, and Financial Planners.

sunbeam said...

Maybe I'm wrong, but I've always thought I had a little grey matter and I wouldn't touch the stock market with a 10 foot purple marital aid.

This thing is totally rigged. And I'm not one of the people it is designed to benefit.

Only way I'd go in the market is with an index fund in a time where I was reasonably confident the mania would push it higher.

Or follow Value Line religiously. Graham style stuff should still work though it isn't as sexy as what the grifters at the big houses like Goldman peddle.

But in this day and age, why should I tackle anything like Graham intellectually? Value Line is where I would wind up anyway.

And I need stuff to do it the other way that isn't written down in books as a feature.

Not getting the brains/market linkup.

I'm sure everyone who reads and posts here is above average just like in Lake Woebegon.

Let's have a contest and see how people do. The control group will be a monkey throwing darts at a wall with the stocks listed.

My guess is our returns mirror the general direction of the market, nothing more, nothing less.

Though brains usually tend to somehow let you pick up the epic fail. Funny how that works. Ask any doctor who has gotten the urge to play the market with his excess cash, and the knowledge that he is special, darn it.

Bill said...


Anonymous said...
Yes, we smart people should look after the poor disadvantaged ones. If you fail an IQ test you should not be allowed to invest into what we smart people define as "legal scams". Better yet, we take all your money, invest it the way we see fit, and give you a fixed allowance.

Yes, Social Security is a good idea. Exactly because it protects morons from themselves. Similarly, banning payday lenders would be a good idea. Re-establishing usury laws more generally would be a good idea.

You're smart enough to know not to use payday lenders or revolve a 29% APR credit card, right? You get that there are people who are not smart enough or self-controlled enough to avoid these, right? It is OK for them to get ripped off every day of their lives?

You don't need anything as dopey as giving people IQ tests and then banning them specifically from doing stuff. Much the same thing can be accomplished by just banning things only idiots would do.

J.G. Wentworth and Sheldon Adelson divide their time
between their yachts, laughing at their moron customers, and laughing at their clever-silly "conservative" enablers.

Anonymous said...

macbond

The Legendary Linda said...

Or are these trick questions, because they all seem rather simple.

Yes but most people are amazingly bad at mental arithmetic. Arithmetic, unlike many other measures of IQ, appears to have not shown any Flynn Effect. I would estimate that less than 10% of white adults could correctly answer all three questions, and the odds of both members of a couple being in the top 10% would probably be less than 3% (less than 1% of there was no assortive mating)

Matthew said...

"That being the case it never seemed to me like a smart place to put money."

Why wouldn't you put it there, with all that money absentmindedly flowing in?

That's the problem with the stock market: there are lots of fundamentally irrational desions affecting stock prices. You have to factor those in, too, and realize that an irrational market is a place you can make money.

For my part, I pulled my money out of the market back when the Dow was around 12500, assuming that a crisis in the EU or declining growth in China would hit hard. As of yesterday I'm staring at what could have been a 6.4% increase for me, but wasn't becaue I inaccurately timed the market.

Trying to decide whether to get back in or to stick with my earlier decision.

Anonymous said...

"Or are these trick questions, because they all seem rather simple."

The trick is for both spouses to answer them all correctly. My parents would both have answered these correctly and their net worth is over $1 million. Also, note that the numbers they gave were the averages.

The trick is also the ages of respondents. Two young married professionals could both answer them all correctly, but they aren't old enough to have saved.

Anonymous said...

So will the market correct with a loss of about 20% before or after the election?


Discuss

Anonymous said...

Seth: "That being the case it [matket] never seemed to me like a smart place to put money"

What IS a smart place to put money into then? Jar under the bed?

Camlost said...

But "financial illiterates" are causing a big boom in several industries, such as Payday and Title Loans:

http://blogs.wsj.com/economics/2010/09/14/report-blames-big-banks-for-payday-loan-growth/

http://www.bizjournals.com/atlanta/print-edition/2012/04/13/title-loan-lender-tmx-hits-the-gas.html?page=all

Jesse Torres said...

See the work being undertaken in East L.A. to create a college-going culture. http://www.youtube.com/watch?v=rC2HrPnJppE&feature=g-user-u

Seth said...

Seth: "That being the case it [matket] never seemed to me like a smart place to put money"

What IS a smart place to put money into then? Jar under the bed?


I'm not saying the stock market is a bad place to put money. Just that you shouldn't congratulate yourself for being smart by doing so.

To me this notion that your smarts will grant you agency in regard to markets is the ultimate dupery. The game was set up for people to imagine that they could win it through their intelligence...same way the proles in Orwell's 1984 spend all their time doing complicated analysis of the recent lottery numbers.

If you have money, stick it in a low-fee index fund I guess, why not? As long as everyone else is doing it then the numbers will go up, until they stop.

It is easy to be smart about the stock market while it's going up.

Kylie said...

"'Success is based on the IQ a person is born with'

Then why are there so many poor whiners 'with 170 IQs' on this blog?"


RIF.

"Based on" is not synonymous with "guaranteed by".

P.S. Guess what classic movie I saw recently?

Otis McWrong said...

Truth said...
"Success is based on the IQ a person is born with"

Then why are there so many poor whiners "with 170 IQs" on this blog? "

Truth, I admire that you hang around on this website and periodically (well, rarely but I was trying to be polite) post something intelligent. But way too often its something inane like above. I don't know if this is a function of the American black's overwhelming need to "talk trash", but all it does is render you a less serious person. At least to me, but my opinion is all that matters to me.

Anonymous said...

I wouldn't say that IQ is bogus; but the tests don't measure skill in flattery, ability to tell lies with a straight face and willingness to tell them to get ahead.

-Risto

And it appears that the data used in the study is from Finland, where there are relatively few low-IQ individuals.

pat said...

take it from someone who scored high enough on 2 standardized IQ tests to get into MENSA: IQ is bogus as hell. Life lesson.

The real lesson here is that Mensa is not all that elite a group. It is the High IQ group with the lowest standards.

I got a note from a woman on a dating site yesterday who told me her IQ was 184. I was sceptical. Not because it's impossible but it is certainly unlikely. I have known a couple people with IQs in that range but unlike her, they were world famous.

What is Steve's IQ? From what he has written I would venture about 160ish. Yet Steve isn't rich. I know this because if I were rich I wouldn't work as hard as he does. He has merely found a writing niche that doesn't pay very well. The universities are full of non-rich smart guys.

Smart guys don't always do all that many more smart things, but they do do tend to do fewer dumb things. That's enough.

Albertosaurus

Truth said...

"P.S. Guess what classic movie I saw recently?"

The one that's been inspiring fantasies deep within you for 35 years; G.W.C.T.D.

Aeoli Pera said...

Anonymous,

Good grief. Take a cold shower, reread my comment twice, and call me in the morning.

prole accounting said...

Sentinal. MF Global. PFG.

Where the "smart" money is. Glad I have a low IQ and my money is safe in my mattress.

charming gallicism said...

The question is, do you believe John Bogle or don't you? If he's right, that since 1982 most people without a (ahem) conflict should have done in a passive index fund, then the problem isn't financial literacy at all, just intellectual curiosity. That is to say, if you're interested, you go to the library or bookstore, and pick up one of his books. No math ability needed.

Anonymous said...

What IS a smart place to put money into then? Jar under the bed?

How about investing it in YOURSELF?

Study and pass the CPA exams or the Actuarial exams.

Start your own S-Corporation.

Go back to school and get training as an RN or as a pharmacist or as an interventional cardiologist.

Start an import/export bidness.

Go long and bet it all on that patent you've been kicking around in your head all these years.

Who knows? Whatever you're good at. Whatever opportunity presents itself.

Seriously - why invest your money in OTHER people when, in all likelihood, it would be much wiser to invest it in the person you know best?

TontoBubbaGoldstein said...

"It's easy to grin
When your ship comes in
And you've got the stock market beat

But the man who's worthwhile
Is the man who can smile
When his shorts are too tight in the seat!"



I, too, have been watching a classic movie.


"Hit it, Pookie."

e-Mao said...

Affinity fraud is another social justice problem that will "ruin society" so it's only reasonable to look after people so targeted. It's unfair that through no fault of their own they're Jewish or senior citizens or Quebecois, etc.; I feel a blue-ribbon panel coming on

Norville Rogers said...

I just feel sorry for the busy but highly credentialed journalists who are cursed to ponder whichever Aspen Ideas Fest pastiche draft Salmon is maundering over next week. They're uniquely susceptible to that type of thing, you know, "However will I protect my IPO from the trademark trolls in the Web 2.0 flash crash"

Anonymous said...

Then why are there so many poor whiners "with 170 IQs" on this blog

Yet you're the one who believes there are "many" (usually taken to mean "more than 2"). Now who's delusional...

Anonymous said...

"This thread is spot - on. People with average IQ make poor financial decisions compared to people with high IQ."

Equally, people with high IQs can manipulate those with average IQs into even worse financial decisions.

.
Success is based on IQ? I don't know. I agree it's usually a neccessary component but not a sufficient one imo as other traits have an effect also. My family has a tradition of liking dangerous jobs for example. I don't know why that is but it is.

.
"What IS a smart place to put money into then? Jar under the bed?"

Since the advent of pension funds the financial system has morphed into a mechanism for robbing the surplus wealth of the middle class through stealth-robbing their pension funds. The current system isn't supportable and it's all going to come down like a bigger version of MF Global. It just needs a big shock - like an attack on Iran for example.

The best place to have money is in farmland with a good water supply in a good community not too near massive conurbations.

Anonymous said...

I'm sure there are several reasons for people with relatively lower IQ not doing well economically, but one that I constantly have noticed in my lifetime is they don't understand that wealth adds up and multiplies over time. If they have twenty-five extra bucks, they're going to spend it.

brain teasers said...

The remainder of the column after the grafs excerpted by Steve gets odd, considering the theme of "dealing with innumeracy." His non-sequitur critique of some other writer's bromide observation (i.e. a $250k+ salary going further in the lower Midwest than in NYC) is that this salary is fine for NYC anyway; perhaps for an aspie financial writer w/o kids but hasn't he heard of median, mean, or mode? Otherwise it's presenting artificial wage levels as if they were a function of marginal rates--a routine tic in the British press's way of thinking but it smells like sophistry in an argument for raising taxes. At least the old sarcastic anti-supply-side crack by Michael Kinsley a la, "If lower rates increase revenue then cut them down to 0%" was pithy, unlike Salmon's obtuse, argumentative claim about "no one" possibly paying out $125,000/yr in New York.

Anonymous said...

"Then why are there so many poor whiners "with 170 IQs" on this blog?"

I know you are exaggerating to make a point, as you should still achieve better than average financially with even a 130 IQ. I suggest that a lot of the regular commenters are net addicts, and that their net addiction is not conducive to making lots of money.

Anonymous said...

Just the whining Omega males who whine about how, with their supposed Superman IQs, they can't get all the sex, adulation of money that's supposed to fall into their laps.

I think you know nothing of Vox Day's classification system. Re-read it and get back to us.

And/or discuss the Supreme Court's Duke Power case and its effect on the job markets.

Anonymous said...

I agree with most of the concepts of HBD, but people on here treat much of these studies as hard science without any confounding factors. All this post illustrates is that people who are financial literate have more money.

In my experience, there are plenty of people from middle class backgrounds, working in fields unrelated to business and finance and little in way of inherited wealth who simply have no awareness of financial planning.
There was a book years back titled Rich Dad, Poor Dad that dealt with this in detail.



I have a hard time reading these comments regarding IQ because a disproportionate amount of people on here credit themselves with extraordinary IQs (often scores that only exist in a vanity industry, not in a statistical or educational context). R/k theory deals with things so much bigger than intelligence yet it seems it is often the only thing addressed. Perhaps as a way to immunize intelligent posters from the reality of low market value or financial prospects?

Tony said...

"3) “Let’s say you have 200 dollars in a savings account. The account
earns 10 percent interest per year. How much would you have in the account at the end of two years?”

So, 1) 100 people; 2) $400k; 3) $242."

$242? I figured $240. Am I missing something here?

Anonymous said...

No, no, no, there aren't that many people claiming to have hugely high IQs on this blog. People are interested in talking about IQ because it is a taboo subject, like sex in the 1890s. Just because someone talks about IQ doesn't mean they are claiming to have an IQ of a million.

People pissed off at the alleged claims that so-and-so has a high IQ outnumber people making such claims by at least 10 to 1.

$242? I figured $240. Am I missing something here?

Compound interest. It's not stated, but we're led to assume that the interest is compounded annually. Thus at the end of year one you have $220; you get $22 in interest the second year.

Truth said...

"I don't know if this is a function of the American black's overwhelming need to "talk trash", but all it does is render you a less serious person. At least to me, but my opinion is all that matters to me."

What trash talk?

On every thread that deals with IQ, many posters here claim to have very high IQs. Conversely, there are only two posters here, Albertosarus and me, that share information about their accomplishments, meager as they may be. Now the posters here have no compulsion about bragging upon what they scored on a high school test, yet they speak very little of what they have done as adults; therein, that leads me to the the conclusion that they haven't done much, and don't have any money.

It's really elementary my dear boy.

Aaron B. said...

"The best place to have money is in farmland with a good water supply in a good community not too near massive conurbations."

If you can afford to own it outright, maybe. Farm subsidies currently inflate the price of land well beyond what it can earn from crops. If things hit the wall to the point where the feds stop writing all those checks, land prices could drop in a hurry.

Anonymous said...

$242? I figured $240. Am I missing something here?

As someone else said, it's compound interest. IMO, that question is chosen intentionally because most/all successful investors have a very good understanding of compound interest. Understanding the magic of compound interest is the key to making a LOT of money as opposed to just being well off.

There are a few keys to understand about compound interest. The first is that after you have reached the point where the returns from your capital are the same as what you might earn as a salary, the returns from your capital soon dwarf whatever you might do as a day job, even being a doctor for example. From that point on, you must focus on making sure that your returns from capital are as good as they can be.

A second point is that your real rate of return is the only thing that matters - you have to subtract the inflation rate from the nominal rate to get this. And it's better to overestimate the inflation rate because the government has an incentive to understate this.

A third point is that a few percentage points difference in the real rate of return means the universe in terms of results.

A 5% return will match inflation. You will never get rich with this rate of return. A 10% return won't do that either, but it will give you a 5% real rate of return (ignoring taxes). A 15% rate of return is far better, because it's effectively double the 10% rate, but because of the magic of compound interest, the results are much better than that after 10 years or more. A 30% return will make you filthy rich.

Those numbers seem so close to the lay person. The math is not that hard, but there comes a difference between someone who BELIEVES the math versus someone too stupid or lacking in faith to believe it. When does math ever lie? Or maybe people who can't get the right answers have reason to doubt the math, because they can never get their answers right.

But in that last question lies the difference between those who "get it" and those who will never get it. To understand the ramifications of compound interest you must first understand compound interest, and that the correct answer is $242 not $240 after two years.

peterike said...

Truth sez: Conversely, there are only two posters here, Albertosarus and me, that share information about their accomplishments, meager as they may be. Now the posters here have no compulsion about bragging upon what they scored on a high school test, yet they speak very little of what they have done as adults; therein, that leads me to the the conclusion that they haven't done much, and don't have any money.

False assumption.

Kylie said...

"Now the posters here have no compulsion about bragging upon what they scored on a high school test, yet they speak very little of what they have done as adults; therein, that leads me to the the conclusion that they haven't done much, and don't have any money."

Oh, that's right. I forgot. The concept of privacy is a white thing.

I have had my very own internet stalker, a real nutcase with some run-ins with the law, since 2004. I used to post pretty openly about my current life, not any more. IIRC, I have said here that I'm a full-time housewife in my mid-50's and live in a small town in a flyover state. No, Truth, that doesn't mean that I'm barefoot white trash whose convict-husband makes moonshine and who has offspring by her daddy, however much I know you'd like to translate it that way.

Kylie said...

"The one that's been inspiring fantasies deep within you for 35 years; G.W.C.T.D."

Close. But it's lunch in the park, not dinner with the libs.

Truth said...

"False assumption."

Maybe once, maybe twice, but eventually My Friend, Occam's razor cuts DEEP!

Gene Berman said...

Matthew:

The word "irrational" to mean "not well though out," or "improperly
calculated" is quite common usage. But it is still a mistaken usage.

Properly used, the word implies a behavior not subject to reason and can be quite appropriately applied to many human behaviors (such as reflexes, automatisms, etc.) but not to instances of human action (considering choices, selecting one alternatives).

In other words, as commonly used, the word is simply an imprecise or "slang" term meant to imply a behavior of which the speaker does not approve. MOreover, the common usage is very frequently (maybe even usually) propagandistic in nature--intended to cut short any consideration (by the hearer (or reader) of reasons for the behavior in question.

The behavior of the "market" is entirely a product of its participants' rationality. Whether buying or selling (and whether for the near or nlong term), you wager, not on accomplishments of companies or changes in relative supplies ofcoomodities. Rather, your bet is (ALWAYS) that the net opinion of the market will change, within some appropriate time in the future, to more closely resemble the opinion you hold presently; it is that change in the opinions of others from which profits (and losses) emerge.

Gene Berman said...

Otis McWrong:

I think you've got Truth wrong on this one. He's not questoning the relationship of IQ and success. Quite the opposite--he's taking a shot at whiners in general and (according to him) their frequent claim to outsized intellect.

And, while "trash-talking" is most frequently associated with blacks "in da hood," it's a style that I think they derived from southern surroundings and lapsed among its original practitioners.

For a time-worn example of the style, check out the freshman speech delivered in the U.S. House of Representatives by newly-elected Congressman, Davy Crockett.

Anonymous said...

Farm subsidies currently inflate the price of land well beyond what it can earn from crops. If things hit the wall to the point where the feds stop writing all those checks, land prices could drop in a hurry.

Hmmm, why don't we ever hear the Tea Party complain about these handouts from the govt? Is it because they are not going to blacks and hispanics?



Anonymous said...

$242? I figured $240. Am I missing something here?

You're thinking linearly; interest compounds NON-linearly.

Google "binomial expansion" or "binomial theorem":

1.10 X 1.10 =
(1 + 0.10) X (1 + 0.10) =
(1 X 1) + (1 X (0.10)) + ((0.10) X 1) + ((0.10) X (0.10)) =
1 + 2 X (0.10) + 0.01 =
1.21, NOT 1.20

Linear thinking gives you just the linear [or "affine"] part:

1 + 2 X (0.10) = 1.2

But it leaves out that final non-linear [or "quadratic"] term:

(0.10) X (0.10) = 0.01

What's interesting is that they did NOT include the linear option as a "gotcha" - they actually had only the non-linear option, which allowed you to un-extrapolate back to the correct answer.

Anonymous said...

And to think that I was sitting here trying to figure out how "G.W.C.T.D." was supposed to be an acronym for "Gone with the Wind"...

Aaron B. said...

"Hmmm, why don't we ever hear the Tea Party complain about these [farm subsidy] handouts from the govt? Is it because they are not going to blacks and hispanics?"

Some of them do go to blacks and Hispanics. There are even programs specifically for them. I'd say there are three reasons the Tea Party doesn't talk much about farm subsidies:

A) Very few people are farmers these days, so most people don't have any idea just how large and profitable the farm subsidy system has gotten. They think farmers are getting paid not to use some land, which is nice work if you can get it, but won't make you rich. But that's only one program out of many, and the bigger money is in the programs that pay you to farm land. They aren't aware of those.

B) Stupid as farm subsidies are, they're a pretty small budget item. Cut them out entirely and it won't make much a dent in a trillion-plus deficit. There are bigger fish to fry.

C) The Tea Partiers aren't budget cutters in the first place. There's very little they can agree on cutting, outside of some foreign aid.

Truth said...

Guess Who's Coming to Dinner; one of Kylie's personal favorites.

Which movie were you referring to Kylie, "The Grasshopper?"

Anonymous said...

Hopefully we find ways to outfox their redistribution schemes, and live for ourselves and not as milch cows for the grievance groups.

White people are grievance group.

Anonymous said...

Tony said..

"..am I missing something here?"

Its called compounding Tony. In year one its $20. In year 2 its $22. You get interest on your interest.

Anonymous said...

Hi. I am from Canada and like to read this blog. I couldn't believe how easy those questions were. I have only a high school education but have always been interested in financial matters. I have been investing my money for over 30 years. A few things I figured out very quickly.
1) Ownership beats loanership. this is why I have always bought quality stocks in solid companies. Canadian banks are great investments, totally different from American ones.
2) Income matters. I love dividends from good companies, some income from some REITS and selling covered calls, (never naked ones).
3) Fees matter a lot. This is why I never bought mutual funds or worked with a full service broker.

NOTA said...

Truth:

The irony here is that on the internet, under a pseudonym, there is nothing at all to judge anyone by except the quality of their arguments and writing. For all anyone knows, I'm a gay girl in Damascus impersonating a white dude in the US (turnabout's fair play, after all). Or a 600 lb black welfare recipient living in Detroit, trapped in my apartment by my inability to fit through the door. Or a space alien talking over the ansible gateway in Roswell. Or a Caltech physics professor trying to get his roommate to stop obsessing over the cute blonde chick across the hall.

This is the most wonderful thing about the internet. Not only does nobody know you're a dog, whether you're a dog or not is utterly irrelevant to any discussion.

NOTA said...

Anon 6:50:

A big part of the value of discussions here is that the commentariat and host are well outside the Overton window. These discussions are almost impossible to have in the MSM, and in fact not easy to have most places.

A lot of the ideas expressed here are surely all wrong, including mine. But those ideas at least can be expressed and disagreed over here, because they're able to see the light of day without triggering a massive flamewar or pile-on or banning.

IQ studies give us information about how intelligence is distributed in the world and what effects it has. It's worth spending some time trying to understand and think clearly about that stuff. Some of the implications are unpleasant as hell, many are shocking (because we're not used to hearing them), some are commonplace. And some offer what seems to be some genuine insight into the world, how it works and where it's going.

Truth said...

"The irony here is that on the internet, under a pseudonym, there is nothing at all to judge anyone by except the quality of their arguments and writing."

You would think so, but it's not really the case. An FBI profiler would do a fine job of telling you who you are by reading 10 of your responses.

Certainly, one can create a fine doppelganger for himself over the internet should he choose, the issue is keeping up the ruse 2, 3, 4 years. Most of us simply aren't built like that.

What you are screams so loudly in my ears, I cannot hear what you say
-Ralph Waldo Emerson

Anonymous said...

Stupid as farm subsidies are, they're a pretty small budget item. Cut them out entirely and it won't make much a dent in a trillion-plus deficit. There are bigger fish to fry.

Farm subsidies cost the tax payer around $ 20 billion a year, food stamps cost around $ 60 billion. The difference is that over 40 million poor Americans are dividing the $ 60 billion in food stamps while less than a million farmers get to share the $ 20 billion amongst them. Huge difference in payout per capita. The farmers are making out like bandits. And let's face it, farm owners are overwhelmingly white. In fact they are overwhelmingly whites of northern European origin.


http://farm.ewg.org/farms_by_state.php

http://townhall.com/tipsheet/elisabethmeinecke/2011/10/31/how_much_are_food_stamps_costing_taxpayers





unix said...

My IQ was measured in a test situation when I was 24. Stanford-Binet 138. I lost the letter they sent to me, (pre-computer generated) and so I can't prove it. I tend to doubt I'd do that high again--in fact, I was surprised at the time.
I have for some reason, perhaps ADHD, never done well on jobs. I have excellent credit, but have never saved much and lost (so far) quite a bit in an investment.
It's not all IQ. Some of it is just personality, or maybe just a feeling that you're not worth so much money.
My siblings have all done very well, so I'm the odd one out. What this article says applies to them; but I have always been the weird one out. I do understand a lot of things better than most people, but practical affairs are not among them.

,t.

NOTA said...

Truth:

Yeah, this is a problem. Alongside the information about yourself you leak in conversation (I've said before I'm a white Catholic, for example), when you post says something about where you live and when you work. What subjects you understand narrows things down further. And your writing style probably identifies you after a few long posts, at least once you're narrowed down to a reasonable number of suspects. (Would you ever mistake Steve's writing for, say, Ta-Nahisi Coates', or Tyler Cowan's?)

I wonder how much automated tools or simple tricks could mask your style. For example, Mencius Moldberg has a really odd writing style, which you could imagine someone adopting to mask their own style.

Anonymous said...

Reply to Truth:

Yeah sure, those FBI profilers did a great job "identifying" the Washington sniper as an angry white guy, except it was ACTUALLY two black guys.

Po Huan said...

"I didn't spot them in the RAND paper. I did find them here:

1) 1) “If the chance of getting a disease is 10 percent, how many people out
of 1,000 would be expected to get the disease?”

2) “If 5 people all have the winning number in the lottery and the prize is 2 million dollars, how much will each of them get?”

Third question is asked only if respondent answered at least one of the first two correctly:

3) “Let’s say you have 200 dollars in a savings account. The account
earns 10 percent interest per year. How much would you have in the account at the end of two years?”

So, 1) 100 people; 2) $400k; 3) $242.

Or are these trick questions, because they all seem rather simple."




You're 0 for 3.

1. Depends on the people. If its Africans screwing each other at random, yes, 100. If its orthodox 'Scots-Irish' who won't even have a go at it unless its a full moon, they're double-wrapped, and have a sheet btwn them. So damn near 0 in those circumstances.

2. 5 people with the winning lottery #, means 1 person gets $2x10^6, the rest get told that that ticket was the one the winner bought with his own money, the others were the ones in the pool.

3. If you're married it'll be alot less than $242 because the wife will dip in for manicures, etc.

Komen said...


"Truth said...

On every thread that deals with IQ, many posters here claim to have very high IQs. Conversely, there are only two posters here, Albertosarus and me, that share information about their accomplishments, meager as they may be. Now the posters here have no compulsion about bragging upon what they scored on a high school test, yet they speak very little of what they have done as adults; therein, that leads me to the the conclusion that they haven't done much, and don't have any money.

It's really elementary my dear boy."



- Your elementary calculations seem to miss the obvious. People don't post information on themselves here because it gives the thoughtpolice types an easier time with trying to wreck people's lives for discussing facts and reality contrary to the Narrative.

Truth said...

"Yeah sure, those FBI profilers did a great job "identifying" the Washington sniper as an angry white guy, except it was ACTUALLY two black guys."


The FBI profilers were the accurate ones, it was the police an academians that were off...

"The most esteemed profilers weren't always so off-base. Fox redeemed himself by correctly positing that a duo was behind the murders, rather than a lone gunman. Ex-FBI profiler Clinton Van Zandt said that the shooter had honed his techniques through practice; indeed, Muhammad had become an expert marksman while serving in the Army and reportedly practiced in a Tacoma backyard before hitting the road."

http://www.slate.com/articles/news_and_politics/explainer/2002/10/did_criminal_profilers_blow_it_in_the_sniper_case.html

Anonymous said...

"If you can afford to own it outright, maybe."

Yes, meant that.

"Hmmm, why don't we ever hear the Tea Party complain about these [farm subsidy] handouts from the govt? Is it because they are not going to blacks and hispanics?"

Probably. That could mean either

1) white people are uniquely evil and racist

or

2) most human groups (on average) dislike paying taxes that go to people from their own ethnic group much less than they dislike paying tax that goes to people from other ethnic groups

The latter would be yet another reason why multi-racialism and diversity on the scale currently taking place is a gigantic disaster waiting to happen.

Truth said...

"People don't post information on themselves here because it gives the thoughtpolice types an easier time with trying to wreck people's lives for discussing facts and reality contrary to the Narrative."

Without personal stories, there is no narrative.

Anonymous said...

That could mean either

1) white people are uniquely evil and racist

or

2) most human groups (on average) dislike paying taxes that go to people from their own ethnic group much less than they dislike paying tax that goes to people from other ethnic groups

The latter would be yet another reason why multi-racialism and diversity on the scale currently taking place is a gigantic disaster waiting to happen.



Since diversity is a reality this ethnic/racial/tribal jealousy has has to be dealt with if the disaster is to be avoided.

Its not like things were hunky dory in Europe without any blacks, hispanics or asians around.

Anonymous said...

"Its not like things were hunky dory in Europe without any blacks, hispanics or asians around."

Or Chicago or New York but that's just the point, even if all the different ethnic groups are from the same race diversity can't work on this scale.

Humans aren't designed for it.

Anonymous said...

"Since diversity is a reality"

It's not though, not really.

"Diversity" is just a transitional state between when a neighborhood/town/county/state/country goes from being mono-ethnic white to mono-ethnic something else.

The Frankfurt School said...

Or Chicago or New York but that's just the point, even if all the different ethnic groups are from the same race diversity can't work on this scale. Humans aren't designed for it.

Au contraire, "diversity" is proving to be even more successful than we ever imagined in our wildest dreams.

MOO HA HA HA HA HA HA!!!!!

ben tillman said...

On every thread that deals with IQ, many posters here claim to have very high IQs. Conversely, there are only two posters here, Albertosarus and me, that share information about their accomplishments, meager as they may be.

Here's an accomplishment of a rather infrequent commenter (with a 170+ IQ) who used to comment under his real name but now comments anonymously:

http://tvtropes.org/pmwiki/pmwiki.php/VideoGame/Spasim

Silver said...

Since diversity is a reality this ethnic/racial/tribal jealousy has has to be dealt with if the disaster is to be avoided.

Its not like things were hunky dory in Europe without any blacks, hispanics or asians around.


If we want to care about people we have to find a way to deal with the diversity around us. Hard to argue against that. Where I differ from the liberal approach is to prefer racial reality over racial fantasy. Contrary to what certain sorts of liberals will insist, racial reality doesn't call for or require racial hatred. If I had to name one benefit of racial diversity I would say that it's opened up eyes to the fact that while we may not like other groups enough to wish to spend any serious sort of time around them, other groups are hardly so horrible that the only "realistic" attitude towards them is to hate them and desire to war on them. That mightn't sound like much, but if you compare to it the state of affairs that prevailed throughout millennia of human history up until only a relatively short time ago it's actually hugely significant.

NOTA,

IQ studies give us information about how intelligence is distributed in the world and what effects it has. It's worth spending some time trying to understand and think clearly about that stuff. Some of the implications are unpleasant as hell

I disagree completely that any of the implications are as "unpleasant as hell." Name one implication that you believe to be so.