You would expect that the world’s most intelligent business experts would also be the most successful investors. But that’s not the case. High IQ is not the key to success in investing and trading. Warren Buffett was rejected from Harvard Business School. George Soros repeatedly failed his financial analyst exams and eventually gave up. But both are among the two best investors the world has ever seen.
Warren Buffett agrees that high intelligence is not necessary to be a world-class investor: “Success in investing doesn’t correlate with IQ once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
Intelligent people are used to being 100% right. After all, that’s the grade they usually got on every test they took. Smart people also put a lot of thought into their decisions. As a result, the brilliant have a tough time admitting when they are wrong. Translated into the world of investing and trading, it means they rarely cut their losses. After all, they are never wrong but he market is.
Let’s look at it from another view. If academic prowess were the key to successful investing, business school professors would be the wealthiest investors on the planet. But that is not the case. Instead, the world’s top investors and traders in the Forbes 400 dropped out of academic programs as often as they completed them. Ironically, none of these “dropouts” could have gotten a job as a professor at any business school.
Sven Franssen