If you are so intelligent, why are you not wealthy?

PART 1

I managed to moderately offend one of my close friends by asking this offensive question.

If you are so intelligent, why are you not wealthy?

He works for one of the top four management consulting firms and has an IQ of about 130, which places him above 96th% of the world population.?

He replied with a gentle smile and calm voice:

I may not have the ingredients to be wealthy as per your definition. Yet, I consider myself as wealthy.

I preferred to save my long-standing relationship; hence, I didn't probe him any further! However, I pondered what he would have meant by "my" definition of Wealth. I mean, Wealth is Wealth, right? We can see it, touch it, feel it. There seems to be a global consensus on what Wealth is. Isn't it??

Let's see!?

To start with you may be surprised to know that there is no global consensus on what Wealth means! It may mean entirely different things to two different people, companies or even countries.

However, before we go any further, and since the question of defining Wealth has come up, let me borrow two popular definitions of Wealth and Intelligence, respectively as follows:

" Intelligence":?the ability to acquire and apply knowledge and skills

"Wealth": an abundance of valuable possessions.

It is pretty simple and intuitive to think that if someone is intelligent, then they must be wealthy, and why not? I would love to imagine that Wealth simply gravitates toward the Man / Woman of high Intelligence. However, this doesn't seem to be the case, barring some exceptions.

So, why is Wealth not gravitating towards Intelligence? Maybe because intelligence lacks gravitation pull, or Maybe we are missing a few steps that can lead us from Intelligence to Wealth.

By the above definition, we can simply say that "Intelligence" is like potential energy. Something akin to a coiled and compressed spring yet to come into action. Or like a rock on top of a mountain yet to roll down and convert its potential into kinetic. In short, Intelligence is simply an ability, but it doesn't exert any force like gravity unless it is brought into action.

My model of Wealth was something like a standard linear equation of the sort ( Y = m*X + C or W = q*I + E ), where Y is a dependent variable dependent on X, m is the slope of the positively sloped straight line, and C, the intercept on the Y axis. However, this linear thinking for Wealth was not holding water. (W = Wealth, q = Intelligent coefficient, I = Intelligence and E = Inherited wealth or Endowments.)

Intelligence is a great starting point in wealth creation, but it appears to be overrated.?

In this section, I will focus purely on tangible Wealth. That type of Wealth that one can see and touch, like hard cash, assets, flashy cars, bank balance, etc. However, before we connect Intelligence to Wealth; let's see how all the Wealth in the world, valued in trillions of dollars, came into being.

Surprisingly, it boils down to something straightforward;?

"The moment you create something that people want, you have created wealth."?

This principle applies uniformly to individuals, corporations, and countries. As an individual, I can choose to become an artist. If I can create art forms that people want or might want in the future, I have created Wealth. On the contrary, if I produce such mysterious art forms that no one can appreciate and desire, it won't amount to Wealth, at least in the tangible sense.?

Companies combine resources to make things that other companies and customers want. This is how they create Wealth. Similarly, in the services sector, you offer services by solving those problems of your clients that they want to get rid of hence creating wealth.

In short and fundamental terms, if you are not making something people want, then you are not creating Wealth. Having understood this fundamental concept, one can easily find the missing step between Intelligence and Wealth, which is Human capital.

Human Capital can be defined as a stock of knowledge, Know-How and skills.?

Just having Intelligence is not enough. An intelligent person still needs to invest time in learning skills and acquiring knowledge that can be used to make things that people want. So, we arrive at three simple steps in that order :

Intelligence ( ability ) > Human Capital ( Tools ) > Wealth

Human Capital is also wealth that can be used to generate material wealth in the future. You may be surprised that as countries become rich, around 70% of all their wealth may comprise purely of Human Capital. That would mean that if a country wants to be wealthy, it can simply do so by upskilling its workforce.?Narrowing down this concept to an individual level, a person can be called wealthy if he has a wealth of knowledge?despite possessing no material wealth.

With this model, we have created Wealth, but this is still only one part of the story.

PART 2

So far, you have created something precious, something people want. You have created wealth in the economy as a whole. However, you still need to deliver this to people in order to capture that wealth. Considering, you may not be the only person offering a product or service, there would be competition. Hence, you will need to convince people to buy the great stuff and services you offer.

Here we come to the ingredients of capturing wealth that my friend said he may not have :

1. Personality: You need to be a pleasant and likeable person. Consider, if two individuals are selling somewhat similar products, why would you buy that from a hot-headed nerd, no matter how intelligent they may be? Likewise, having created something valuable, you might decide not to sell it to an asshole. Either way, the transaction won't happen, and the created wealth will remain unsold.
2. Curse of knowledge: Mostly prevalent in the services sector, you need to speak in a language devoid of jargon that people can understand.?Knowledge creates a barrier between the expert and layman creating friction in a transaction.
3. Scalability: To capture maximum wealth, you will need to reach out to as many people as possible and fast as possible before your competition catches up.

Let's say you have managed all of the above perfectly and captured substantial wealth. You are now all set to dive and swim into the pool of gold like Uncle Scrooge McDuck, whose estimated worth was?$44.1 billion?in 2011 as per the list of Forbes' "Fictional 15" wealthiest imaginary characters.?

What Next?

PART 3

You have now created wealth and captured a lot of that by a large number of transactions. Are you wealthy now?

Let's see some great comments on wealth :

• Being able to pay somebody to do the ironing.?Genista Mcintosh
• Wealth = choice. That's why the very rich are wealthy, but so are Hindu hermits.?Trevor Phillips
• In the future, how wealthy you are will be defined by how much time you have and how much space.?Tyler Bruce?
• Wealth is good health and peace of mind.?Carol Traynor?
• Wealth is having the choice not to do things you really don't want to do.?Sir Alan Ayckbourn?
• Wealth gives you the ability to misbehave.?John McConnel
• Wealth is good, but cannot buy happiness or health.?Paul Smith
• If we command our wealth, we shall be rich and free: if our wealth commands us, we are poor indeed.?Edmund BrBurke
• We have no more right to consume happiness without producing it then to consume wealth without creating it.?George Bernard Shaw, Candida , Act 1(1898)
• ?For thy sweet lore remember'd such wealth brings That then I scorn to change my state with kings:?William Shakespeare, Sonnet 29.

It appears wealth means different things to different people. But few coherent messages are echoed consistently, like health, choice, freedom, and time. These are intangibles.

To understand what intangible wealth is, you must ask one question: What would you do next with the material wealth that you accumulated? I would guess you would like to spend it on pleasure and leisure. Pleasure has its limits. Each unit of pleasure consumed will start going down the drain with its marginal utility of return.?

Something that most people miss is the very purpose of creating material wealth. The whole idea of wealth is simply "well-being" . This is why wealth is also defined as:

Wealth is a stock of assets that can generate future income and well-being.?

Material or Tangible wealth is just a tool to achieve that well-being. Tangible wealth is not an end in itself.

Even without realizing it, subconsciously what people want is not material wealth but intangible wealth, which is most likely one or all of the three below :?

1. The wealth of family and friendship
2. The wealth of time to spend on leisure with family and friends
3. The wealth of choice and freedom to do what they really love to do

However, as material wealth is so potent and visible, it shields and covers what subconsciously everyone is striving for. As a result, a large part of active life is spent on acquiring material wealth at the cost of intangible wealth.

In summary, the reply of my friend now makes sense.?"I may not have the ingredients to be wealthy as per your definition. Yet, I consider myself as wealthy."

He probably has the right balance of tangible and intangible wealth and is living well. Meaning he is wealthy.?

AND?

• What would tangible wealth be worth if you suffer from myriad physical and mental health issues?
• What worth would a massive amount of material wealth mean if you have no time or friends or family to spend with??
• What would material wealth mean if you could not live well?

In summary,

Intelligence is not a precondition to wealth. There is a positive correlation between the two, but there are many more variables to look at.

It appears as if tangible and intangible wealth is sometimes at a tug of war. You try to increase one, and the other decreases. The key lies in the right proportion of both, maintaining a balance and seeing things as they are.

Meaning, Wealth is not an end in itself; it has a purpose.?

The question to ask is: Is that purpose fulfilled?

OR

Are you going to become the next Midas? Turning everything into Gold!

References:?

• Journal of Business Ethics, 2009, Vol. 84, Supplement 3: Global and Contextual Values for Business in a Changing World (2009), pp. 281-295. Author(s): Georges Enderle. https://www.jstor.org/stable/27749668
• RSA Journal, 1998, Vol. 146, No. 5487 (1998), pp. 38-49.?Author(s): Dick Onians. https://www.jstor.org/stable/41378661
• Oxford Review of Economic Policy, SPRING 2014, Vol. 30, No. 1, WEALTH (SPRING 2014), pp. 1-20. Author(s): Kirk Hamilton and Cameron Hepburn. https://www.jstor.org/stable/43664591
• Industrial and Corporate Change, Volume 22, Issue 1, February 2013, Pages 313–337. Author(s) Tino Sanandaji, Peter T. Leeson. https://doi.org/10.1093/icc/dts052
• https://www.paulgraham.com/wealth.html

PS: This article is not complete because there are many answered questions like :

1. How much wealth is sufficient? When does one stop?
2. Can too much wealth create problems?
3. How do we avoid destroying current wealth in attempts to create new wealth?

However, in case you got the essence, leave a comment if you feel this article created wealth. And, if it did, is it tangible or intangible or both :)