Not all rich people are geniuses – most of them are just lucky. 

Professor and author Brian Klass joins us to debunk a common misconception about wealth – that all those who have it are smarter than average. Klass uses probability to explain that though this is an easy assumption to make, it’s technically not correct. 

He points to Elon Musk as a case study, noting that while Musk’s skills have contributed to his achievements, his success also depends on his pre-existing resources and collaboration with others. In situations where Musk has worked individually (such as during his acquisition of Twitter), he has seen less success, and, ultimately, less profit. 

The key takeaway is that wealth is not directly correlated with brain power. Thinking smarter and working harder does not always make you rich; most of the time, it’s just about being positioned at the luckiest spot on the bell curve.

BRIAN KLAAS: One of the great myths that our society perpetuates is that if anyone is super rich, they must be a super genius - and this is not true. And there's a few reasons why this is not true, that when you start to peer in the dynamics of the correlation between wealth and talent, the whole idea breaks down, and luck plays a much bigger role than we are told.

So the first thing to understand is that some human traits are normally distributed, they have a bell curve to them, and some are not normally distributed. So, for example, if you think about height, height is going to be clustered around a relatively narrow band. You're not going to find a human that's 1-foot tall and you're not gonna find a human that's 200-feet tall, right?

And as a result of this, you have a sort of normal distribution around a relative average - but wealth is not like this. Wealth is distributed on what has a long tail. It has this really long distribution at the top, and then a lot of people clustered towards the bottom. So there's a large number of people who have sort of average incomes, and then a few people who might be a hundred or a thousand or even a million times richer than somebody else on the planet, and this creates a mismatch, because in order to produce that long tail, you need to have some serious, serious luck.

Now, my favorite study that shows this was a collaboration between some physicists and an economist, and they developed what is basically a sort of fake world with some crude relationships between wealth and talent. Talent is normally distributed. You have people who are clustered around a sort of normal area, the average of human society, and then you have a small number of people who are really talented and a small number of people who are really not so talented. But nobody in the world is like a billion times more talented than somebody else, and what this means is that, when luck is introduced into the equation, when you have these sort of lightning strikes that we can think of with luck, they're going to hit in the place that has the most people, because if you imagine a sort of bell curve where most people are in the talent spectrum, the idea that the lightning is gonna strike the one person who's the most talented in the world, or the one person who's the least talented in the world, it's just highly, highly improbable.

So instead what's going to happen is the lightning is going to hit someone around the middle value of talent. Now, when that happens, it's going to increase the chance that they become wealthy. If they get struck by lightning twice, the odds of them becoming extremely wealthy increase, right? So what ends up happening in these simulations they run is that, over and over and over, the richest person in their fake world is not somebody of extreme talent. It's somebody who's marginally above average on talent who happens to get lucky - and I think this is the way the world works. I think we have a lot of complex dynamics that are producing these outcomes.

Not to mention, by the way, all the things we can't control, like whether you were born rich, which is highly correlated with being rich in the future, and also whether you had a network that supported you through connections and so on, and a lot of people who are super, super rich, you know, pretend that they have earned everything, that they deserve their wealth, and that they obviously are the most talented person. And I think this is just something that is fundamentally a myth. It's not possible to become extremely, extremely wealthy if you have zero talent, but as long as you have some and you get lucky, you're more likely to end up on those long tails of the high degree of wealth, and I think this is something that our modern world infers backwards; that genius is something that always is attached to the people who are wealthy, and sometimes they were just the random byproduct of lightning hitting them rather than somebody else.

Elon Musk is one of these great examples, I think, of someone who has some level of talent, but perhaps not as much as everybody pretends. And what happens with Elon Musk is, you know, I think he got lucky. I think he got super rich, and as a result of that, he inferred that therefore he must be a genius, and therefore that his skills are transferrable into everything else that he could possibly throw himself into, which has turned out to not be the case.

So, you look at some of the areas where he has had financial success, and then you assume, "Well, the reason for the success is because you're a genius," and geniuses, of course, all believe that they can control their own future and that their talent will see them through no matter what realm they enter.

Now, Elon Musk has had some success with cars and with rocket ships and so on, and some of that is due probably to his talent, but some of it is also due to the talent of the people who work for him, the scientists who run the breakthroughs, the funding mechanisms that allow him to get government grants and so on. And when he's been on his own, which is to say when he's acquired Twitter, for example, he basically lit tens of billions of dollars on fire and made that social media site worth a fraction of what it was before because his so-called "genius" wasn't transferrable to the realm of social media.

And I think it's one of the huge problems of society is, actually, there's a lot of things about billionaires that are not due to luck or to talent; they're due to their greed. So one of the things that I think about with this as well is there is a degree of overconfidence and a degree of thirst for money that you have to have in order to become a billionaire.

So, with the thirst for money, for example, if somebody gave me $2 billion, the first thing that I would not do is say, "Oh my God, how can I get $3 billion?" I would give away most of my money. People who are billionaires, they look at the $2 billion and they say, "How can I have 3?" And then they get $3 billion and they say, "How can I have 4?" So what's happened is you have a self-selection of certain traits that make it more likely that these people will become super, super rich after they have gotten lucky because they are greedy, and so, you know, I think there is a lot of the mythology around billionaires and a lot of the mythology around people like Elon Musk infers backwards this straight line between talent and wealth, and there's so much more going on there.

And I think the immediate assumption that the genius must be embedded in the person who is financially successful in one industry is a great misunderstanding of how our world works and the sort of arbitrary nature and sometimes the unfairness with which talent and wealth are not strictly correlated.

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