If you're so smart, why aren't you rich?

Photo: John Vachon

You don't hear it much any more, but for a long time, "If you're so smart, why aren't you rich" was a pretty effective line for the average Joe when dealing with somebody who was smarter than him.  The expression has kind of fallen out of fashion lately.  Nowadays, there are too many rich smart people.

The line worked because, for most of history, being smart wasn't really a big advantage in becoming rich.  Aside from things like inheriting/marrying wealth, or winning the lottery, there are basically two paths to wealth:

Option #1 is the "millionaire next door" way to wealth:  live below your means, save and invest, and let compound interest and the natural growth in the markets work its magic.  If you do this--and  you live long enough--you'll eventually be wealthy.

Option #2 is to be an entrepreneur:  find some need, and then create a product or service that can satisfy it at a profit.  Unlike living frugally and saving, this is not a sure way to wealth.  Many new businesses go broke.  Many of the rest muddle along making less money than the owner could have made working a regular job.  But lots of entrepreneurs make good profits and a few become wealthy.

The downside to option #1 has always been that it took too long.  Unless you lived very frugally indeed, it could take 30 or 40 years to turn an ordinary salary into real wealth.  (Even then, success depends on living long enough--and if bad luck or bad choices pushed your income down, your expenses up, or weighed on your investment returns, "long enough" could turn out to be longer than you've got.)

So, for most of history, option #2 has always been the way to go if you wanted to be wealthy.  But being an entrepreneur took a certain set of personality traits--a set that notably doesn't include being smart, but includes things like a tolerance for risk, a burning desire for wealth, a thick skin, and a willingness to put running the business ahead of other interests (like hobbies, friends, and family).

Over the past generation, the "knowledge economy" has made intelligence a bigger advantage than it used to be.  Besides the dotcom boom (which made it possible for people with only a modest entrepreneurial bent to get rich following option #2), it's been possible over the past couple of decades to accelerate option #1 as well:  an ordinary smart person, working at an ordinary good-paying job, has been able to support a family at an ordinary middle-class standard of living, and have enough of a surplus for saving and investing to become modestly wealthy in a decade or two.  (Of course, lots of smart people failed to do so, but that's just because smart people are as prone as dumb people to suffer from the natural human inclination to let the cost of living rise to whatever one's income will support.)

Smart people of the world:  This is your shining hour.  There's no telling how long just being smart will translate into the kind of income advantage smart people have enjoyed these past couple of decades.  This is very much a "get while the getting is good" kind of situation.  Don't miss it.

Average: 4.3 (4 votes)
Your rating: None

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

Guest's picture

Tremendous pic of a Castro-esque gent up to no good in his garage laboratory.

Guest's picture

I think you have to do a little bit of both to stay ahead. However, I would lean more towards the second option.

Become wealthy the slow and fast way:)

Philip Brewer's picture

The photo was a lucky find.  I searched for "scientist" and "expert" in the Library of Congress archives without finding what I wanted.  Then I searched for "laboratory" and there it was.

Guest's picture

**** off, I'll make more money than you as the millionaire next door.

Guest's picture

... so they take fewer risks.

More education translates to more income ... more current income means more that you have to be prepared to sacrifice to hang out your own shingle. Hanging out your own shingle (i.e. going into business for yourself) is probably the best way to get rich (if you pump your profits into outside investments and/or sell your business for a lot of money).

In other words: smarter people take less risks ... therefore, they can limit the upside, by being less prepared to risk the downside.

It's not always true (I have a degree, was a professional, but took a 50% - 70% 'paycut' to go into my own business/es).

Guest's picture

Philip, I love your name.

The millionaire next door is a great book, however many of the people those authors worked with over the years were self made entrepreneurs. That doesn't kill the argument, just being an entrepreneur forces you to learn the frugal lifestyle "next door" talks about

The truth is, just find something you love to do. If you love your work, you'll likely never retire because you don't want to. Money will no longer be the reason you work. Look at Warren Buffet, or just my own dad. He's a professor and could retire now. He won't because its his life's work and he'll never be "finished" with it.

Guest's picture

Different things work for different people. Rich Dad, Poor Dad author Robert Kiyosaki would probably say that weakeconomist's Dad reminds him of his "Poor Dad" but what does he know?

Most probably need a combo of good income and frugality to get rich but some have such good income, they'll never need to become frugal and some are so frugal they may never need to make much money in order to live happily.

Guest's picture

As the economy changes, industries come and go. Therefore you cannot always do what you love for a living. My brother loves to build houses... but he don't be doing that anymore ... because he needs to support his family.

Different things work for different people. But, the best thing to do is stay on top of that is going on. Rich Dad, Poor Dad author Robert Kiyosaki, has a new book called Financial IQ. The idea is that the economy is in constant change, and you have to read constantly to realize is 1) or 2) or both the best way for you to get ahead - with your current economic situation.

Reading is perhaps the foundation to building wealth. Donold Trump reads constantly (2 books a week), just to keep up with his financial planning.

Guest's picture

Currently in my situation I'm trying to do a little of both until my entrepreneurial endeavors take off. I'm currently working a decent paying day job and working my business in my spare time. By combining the two options, I hopefully mitigate some of the risk of entrepreneurship while possibly decreasing my wealth timeline.

The problem is that it takes up the majority of my days, every day.

Guest's picture

Good points.

I still think it's possible for people who aren't all that smart to be successful.

I barely graduated high school, don't have a college degree, and yet by simply taking action on what I have learned I have done very well.

There are plenty of not so smart (to put it nicely!) people who have achieved great success (and there will continue to be more) simply by gaining enough knowledge about something such as real estate or business - and then acting on it.

Too many smart people are broke because they spend the majority of their time learning, but not enough time doing.

Philip Brewer's picture

It's always been possible for people who aren't especially smart to be successful.  Being smart was an advantage for lots of other things, but for being successful (in the sense of being able to provide for a family), it was much less important than many other characteristics.  It's just been in the last few decades that being smart became such a leg up in general.

Of course, the expression really begs the question:  Is becoming rich really your goal?  Everybody wants to support their family in comfort, but once you accomplish that, going on to become wealthy may not be the most important thing you could be doing.

Guest's picture

I think it's important to think a bit about what it means to be "smart". Most experts these days will agree that we're discovering new types of "intelligence" all the time. Emotional/interpersonal intelligence, kinesthetic intelligence, logical/mathematical intelligence are all exhibited to varying degrees in all of us.

I agree the most important thing is to find something you truly love to do. If that is also something you're very good at, have an innate intelligence for, you're probably well on your way to being "rich" by at least one definition of the word.

Guest's picture

A bunch of 'smart' people - at least those who think themselves smart - are on the edge of going from wealthy to poor. Think of all the recent nouveau rich made so through real estate. Poor slobs.

Put this in your pipe and smoke it:

25 top percentile of smartest people in China outnumber entire population of North America. Hmm.

Guest's picture

A certain amount of confusion is apparent in your thinking, and a certain amount of presumption has lead you to an assumption. Alas, all wrong. Still 5/10 for trying, and work on your spelling.

Guest's picture

I live in Bolivia for, to me, obvios reasons