Why Smart People Do Not Become Very Rich (and often lose their wealth when they do)!

“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.” Ecclesiastes 9:11 (KJV)

[Though most of what I will share with you today is from Robert Kiyosaki, you can also read Malcolm Gladwell’s classic, “Outliers; The story of success,” for his unique take on why some people succeed, while others, seemingly better than them, fail.]

I was talking to my uncle, Mr Kunle Awoluyi the other day and he asked me what I did with the money I made in the last two years. I told him that apart from being a medical doctor, I am a recording artiste (amateur); I compose songs, I have poems and books I have written to be published, I speak, I want to get married, I have business ideas, and I tried to put all the money I made in the last two years into everyone of those things at the same time but then failed woefully to achieve anything worthwhile.

He immediately told me that the reason why very smart people (A students) end up poorer in life than the dullards (F students) is because the A students believe they are good at many things but unfortunately do not decide on one very quickly- they do not focus to become successful at one thing, and end up poor or not very rich. Whereas the dullard of their class, who already knows he is not gifted academically, quickly chooses ONE thing, masters it very well and begins to make money from it enough to even employ the brainiacs”

To achieve financial success, one needs three types of intelligence;

1. Mental intelligence: normal IQ- intelligence measured in school.
2. Emotional intelligence: the intelligence that experts say is 25 times more powerful than mental intelligence. For example; emotional intelligence makes you keep your cool rather than arguing back, high emotional IQ will not make you get married to someone who you know in the long run will not be a good life partner, and delayed gratification is also a mark of high emotional IQ.
3. Financial intelligence: Your financial intelligence is measured on your personal financial statement, in how much money you make, how much money you keep, how hard that money works for you, and how many generations you can pass on the money to.

One major reason high IQ students sometimes end up poor, or poorer than less intelligent colleagues or people, is because they lack the emotional intelligence required for financial success and wealth accumulation.

The four common signs of low emotional IQ are:

1. They get rich too slowly because they play the money game too cautiously. Because they remain employees or are too afraid to take the risk to starting their own businesses, they end up paying so much in taxes (PAYE) as well as giving all their productive years to building another’s business. They also fail to invest wisely, either keeping their money in the bank, or putting it in investments they know little about e.g. buying shares of companies they have not researched thoroughly, or land/real estate without knowing the rudiments of the business eventually losing their investments.

I will give you two examples. My poor dad once ‘lost’ his land to a church here in Lagos because he did not fence it, and did not get a lawyer to warn the encroachers when they trespassed. He is also always too scared of court cases.

A close friend too lost his land in Ikorodu too in similar fashion- this time to ‘omo onile’ (village touts/miscreants) who claimed that since he didn't develop it within 6 months, he did not deserve the land.

2. Trying to get rich too quickly. They lack the emotional intelligence known as patience. This person often goes from job to job, or hot new idea to hot new idea. They start something, get bored and quit. I have being very guilty of this though I didn't intentionally start out to get-rich-quick. And that impatience to Follow Once Course Until Successful, was what my uncle was talking about.

3. Spends on impulse. Women particularly are guilty of this, no matter how intelligent they are (-and many of them are more intelligent than men, albeit not emotionally). Their favorite form of exercise is ‘going shopping.’ These kind of people, if they have money, they spend it on a whim. These people say, “Money seems to run through my fingers.”

4. Cannot stand owning anything of value. These are people who only own things or work at things that make them poor. For example, a person who over time invests in gold or real estate or the shares of a blue chip company, but then sells it off to pay off credit card debt or some other debt, or to organize a party, or they divorce their wife and marry a new one, or buy a new yacht or do something that reduces their worth. In other words, they hang on to things that have very little value and sell anything that has real value.

Many of these same people, rather than build a business, feel better working for someone else and working hard at something they will never own. The emotion of fear is so high that they would rather work for security rather than work for freedom.

Warren Buffet quite succinctly put it, “A person who cannot manage their emotions cannot manage their money.”

If you want to be rich and smart, learn to master your emotions. Read more books on developing your emotional IQ, and hopefully, not only will you become very rich, you will also remain very wealthy too. 

Cheers!