Average IQ in IB/PE
Just something I'm curious about. I think it's fair to say you need an above-average IQ to get in to IB or PE, but where would you place the majority of people in finance? Top 10%, 5%, 1%?
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Slightly above average vs general population but probably not higher than other generic “good jobs”. Raw intelligence is just one piece of it, and maybe not even the most important one. Hard work (to the point of extreme) and willingness to delay gratification are the bigger barriers to success long term once you’re in the door. And then ability to be creative, source deals, manage teams, and in some cases ability to win internal politics become more important as you move up. Having a high IQ can definitely help but that’s just one talent among many required.
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Most are (way) above average, but only a few (still more than in other jobs) have a really high IQ. Further, I think most of the people did not measure it at some time of their life, therefore also hard to tell, if they are quick in their head or just more experienced than others or had any other beneficially factors influencing them such as upbringing in safe & stable environment etc.
I for example was miserable in high school, had very mediocre grades in my bachelors (non-target) as well as in my master degree (target). Had a lucky shot and started my career in a LMM shop, despite having also an offer for an EB. Just switched to a MM shop and had to do an IQ test, which I crushed. Did afterwards something more official, since I was curious. Got around 140, which is pretty good. If you had spoken to me as a student, you should have taught "what a mediocre guy". Now, I am top of my associate class, outperforming all others, top European target educated guys with BB/MBB experience vs. me, kid of immigrant parent brought up in problem district. Took a while to reach full potential vs. somebody, who was supported/guided by parents in a safe environment.
What I wanted to express, there are a lot of factors which influence people and just categorising it into IQ, will not give you the right/true picture. Some work harder than others. Some have the right eye for ideas, being still maybe not the smartest guy in the room etc.
You should def aim higher then a top performing associate as ur full potential. That’s not enough lol.
Yeah, that's why I was with your girl last night while you were updating slides.
Top 5%, 1%?? The top 1% spend their lives living under the subway, conducting research that will in a couple of decades shape history; and add in the brain and heart surgeons as well. The top 5% are building space crafts, ships, subway systems, skyscrapers, tunnels, etc. that will probably outlast humanity.
In IB, people mostly do admin work at the bottom, or manage relationships at the top. In PE, they're a bit more advanced since they have skin in the game, but still do not build anything (apart from 'models'). These jobs direct the FLOW of money, which is influential, but that's it. Don't be delusional please.
There's a difference between the IQ needed to do the job, and the IQ of the people that actually end up getting these jobs at the top places.
A very decent proportion of the people at top PE funds are ~1600, ~4.0 kids, often in STEM, from schools like Harvard or MIT. If you don't think these people could have gone to a top med school, top PhD, or engineering, you are extremely mistaken.
Again, does the job require top 1% IQ? No. Do some places have a ton of extremely high IQ people because of the selectivity, and because some of the smartest people just are interested in finance/making money? Yes.
Fair point, and definitely, some people are super smart but they are nowhere on a pedestal. I agree there's a few who are truly bright and somehow end up landing in high finance, but a lot of people who end up going to Ivy leagues/ equivalents do so because of their environment (generational legacy, groomed since young, confidence which is built from a position of privilege at birth, whatever else).
lol yeah this is dumb af. Like 40% of the US is not functionally literate and the next 45% work in jobs that don't require college degrees. Based on SAT to IQ test correlations, the average college educated person is around 1 std. deviation to the right of the general population i.e. has a 115 IQ / 83% percentile. Many of these people are working jobs that don't really require a college degree. It only takes 2 std. deviations to hit 130 IQ / 98%. That's probably around the point that you get people capable of being doctors, engineers, lawyers, work in academia, etc. but a lot of these people are still severely underemployed.
Average IQ in banking is probably 120-125. These are people who are above average relative to the college educated population but not meaningfully so. PE / HF world separates the wheat from the chaff a bit so I'd guess the average IQ is closer to 130 than 125 but not all that much higher. Most of these people would not be able to get a respectable GPA in a STEM field at a good (call it USNWR top 50) undergrad. They make more money than engineers, doctors, etc. but my guess is if you adjust for taxes, COL and the value people place on their time, finance people are not really making more than other people that are around as intelligent as them.
200+
If I have to guess based on my analyst class, average is probably in the 130-140 range with SD of 6-7. As the seniority moves higher, probably similar average IQ but less variance.
130-140 is not genius
You are so smart. Now update v89 by tomorrow morning but don’t stay late
130s
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In fairness you don’t need an IQ of 130 to do this job, hence why I think the SD is fairly wide for the analyst class. But still need to account for the brilliant minds that go to HF lmao.
I would guess 120 with st dev of 10. Getting an IB job requires high EQ with IQ only being a factor for getting a good GPA/answering technicals
https://www.iqcomparisonsite.com/occupations.aspx
Let’s start with some comps
Wow this is not what I expected. I expected those ranges to be way tighter and the IQ averages of the top jobs to be way higher. Essentially, this data proves that intelligence is maybe half the battle, potentially even less, with other factors (hard work, social intelligence, luck) playing way more than I had hoped (as a high IQ, medium work ethic , moderately low social intelligence person).
Anyone who cares about their IQ is a loser imho. I rely on my income and job title to provide self-validation.
I have a non-target IQ (110).
It’s clear that people don’t understand IQ very well. If you’re retarded, studying computer science and being a software engineer doesn’t magically increase your IQ.
The average IQ in IB/PE is probably same as that of students at Ivy League schools as whole (120-140). There are a couple studies on this and it passes the gut check (120 IQ is top 5% of IQ and 140 IQ is top 1% give or take). People in IB/PE are generally top 1% in income for their age group, so I don’t see why top 5% in IQ would be that surprising.
People seem to also forget that the average amount of bitches yall get is zero. Maybe stop worrying about IQ and DCFs so much and focus on getting some bitches on your dick lmao
Prospect in RE, talking about "getting bitches on your dick", in a post about IQ's. Maybe stop worrying about bitches on your dick so much and focus on sounding like you have a literacy level above an 8th grader lmao
It says Prospect in PE??? maybe focus on your eyesight problems you geezer
On average among the peer set they came from (generally highly ranked schools)? Average.
Kind of a tangent, but the smartest analysts I’ve known weren’t the “best” analysts by any means, because many did not care so much about perfecting every little fucking period in the f/n. Same applies to PE, where the “best-performing” associates simply cared more and so willingly took it in the ass through VP.
There isn’t really much room to show your “intellect” even at the highest levels of IB or PE…it’s all different stuff that matters at that stage anyway.
Painful reality for many is the lack of substitute for “high IQ” in the real world, especially in finance. You can’t just ace a test after cramming the night before - you literally HAVE to put in the hours because there is work that needs labor to complete it, and this continues through at least the mid-levels.
No, you just need to be retarded consistently and on-time.
PE you can be good at churning out work well, the top-tier bankers, or gods that are next level shit. The latter are the 1%.
Definitely higher than average, because even though the jobs themselves don't require much intelligence, most people are recruited from targets (where the smart people usually go)
I have read quite a lot on IQ so I'll try to answer OP's question.
Generalities on IQ
First of all, most of what people think they know about IQ is wrong. Sadly, this thread is no exception. Most posts here are very bad. So here are a few generalities and established facts about IQ:
1. IQ is an accurate measure of intelligence:
See Gottfredson (1997): https://doi.org/10.1016/S0160-2896(97)90011-8
Or Eysenck (1979): https://doi.org/10.1007/978-3-642-67075-6_5
2. IQ is highly heritable (c. 80% in adulthood):
See Bouchard (2004): https://doi.org/10.1111%2Fj.0963-7214.2004.00295.x
Reminder of what heritability is:
Source: https://www.britannica.com/science/heritability
3. IQ is the best predictor for educational attainment, GPA and pay:
See Zisman & Ganzach (2020): https://doi.org/10.1177/1948550620920531
4. IQ is the best predictor for job performance:
See Schmidt & Hunter (2004): https://doi.org/10.1037/0022-3514.86.1.162
To sum up, saying IQ doesn't matter or that you shouldn't care about your IQ is nonsense. IQ is probably the most important of all phenotypical traits and the one which will influence the most one's life.
Average IQ In IB/PE
Now, back to OP's question, what's the average IQ In IB/PE ?
To my knowledge, no study or survey has ever measured the average IQ of people working in high finance.
However, I think there are some ways to get an accurate estimate of the average IQ of people working in IB and PE.
Method 1 Relative estimation from other jobs' IQ
In The Scientific Study of General Intelligence (2003), we can find in chapter 15 ( https://doi.org/10.1016/B978-008043793-4/50053-2 ) a table with the median IQ score of applicants for a list of jobs. Sadly, the table doesn't include investment bankers or PE investors but it can give us an approximate idea of what their median IQ score would be.
In this table, attorneys get the highest median score with 120 (91th percentile). Engineers stand at 116, auditors at 113, nurses at 108, secretaries at 107, police officers at 101, machinists at 97, machine operators at 95 and janitors at 90.
Depending on where you think investment bankers and PE investors stand relatively to those occupations you can get an estimate of their median IQ. From personal experience, I would say that investment bankers and PE investors are significantly smarter than auditors (sorry Big 4 bros, but let's be honest, we ain't playing in the same league), and that investment bankers are slightly smarter than attorneys, so I would guess that investment bankers' median IQ (we can reasonably assume that the mean is pretty much the same, I don't think there is much skewness in the distribution of scores) is somewhere around 125. I also think that people in PE are slightly smarter than people in IB (people are trying to move from IB to PE, not the other way around) so I would guess that PE investors' median IQ is somewhere around 130.
Method 2 Relative estimation from SAT scores
IQ scores and SAT scores are highly correlated, see Frey & Detterman (2004): https://doi.org/10.1111/j.0956-7976.2004.00687.x
(The g-factor is synonymous with IQ: https://en.wikipedia.org/wiki/G_factor_(psychometrics) )
It's quite easy to find some tables to help you convert your SAT score into an IQ score: https://www.iqcomparisonsite.com/satiq.aspx , or find in which percentile (based on a representative sample of the total population, not just a test-takers sample) you belong: https://en.wikipedia.org/wiki/SAT#Percentiles_for_total_scores_(2019)
To my knowledge, investment banks and PE funds do not communicate data regarding the SAT scores of their employees.
However, if we look at which schools are the top IBD feeders:
Source: https://www.peakframeworks.com/post/ib-target-schools
Then look at the average SAT score of those schools: https://www.collegesimply.com/colleges/rank/colleges/highest-sat-scores/
Adjusting for the fact that economics is the most popular major among people working in IB and that economics is one of the majors with the highest average SAT score: https://archive.fo/Z9e0S
It can be reasonably assumed that the average SAT score of people working in IB ranges between 1450 and 1500 (which is in line with my experience in the industry). So from this estimated SAT score, we can imply that the average IQ score of people working in IB is around the 99th percentile (between 135 and 140), so a higher estimate than with method 1.
Method 3 Relative estimation from GMAT scores
Similarly to the SAT, the GMAT is highly correlated to IQ scores, see Thies (2019): https://doi.org/10.33423/jop.v19i1.1093
Likewise, GMAT score percentiles are easy to find: https://www.tagemajor.com/mesimages/page/percentile-gmat.png (it should be noted that the percentiles here are based on a test-takers sample, not a reprensentive sample of the general population).
If we look at which MBAs are the top PE funds feeders:
Source: https://www.peakframeworks.com/post/private-equity-placement
Then look at the average GMAT score of those schools (c.730): https://poetsandquants.com/2020/01/15/average-gmat-scores-at-the-top-50…;
We can apply the GMAT-IQ conversion formula from there: https://pumpkinperson.com/2017/07/21/converting-gmat-scores-to-iq/
And we find that the average IQ of top MBA programs ranges between 135 and 140.
Assuming that MBAs pursuing careers in PE are slightly smarter than their peers, we can imply that the average IQ of people working in PE is around 145 (at least for MF).
Summary
To conclude, here are the main takeaways from my post:
1. The average IQ of people working in IB/PE is significantly higher than the average IQ of the general population.
2. People working in IB/PE are likely in the top 2% or top 1% of the IQ distribution.
3. Depending on the estimation method, the average IQ of people working in IB ranges between 125 and 140.
4. Depending on the estimation method, the average IQ of people working in PE ranges between 130 and 145.
It should be noted that those are averages, thus it doesn't mean that all people in IB/PE have scores in those ranges, some people could have lower scores (think diversity hires), some could have higher scores.
You should also keep in mind that those are industry averages and that method 2 and 3 are based on BB/EB banks and PE MF samples (averages are likely a bit lower at MM banks and MM PE funds). It is also likely that IQ averages vary quite a lot from one firm to another (averages at GS and BX are probably much higher than at some no name shops).
Thanks to the WSO staff for recovering the post !
Do you (or anyone else) know any way I can measure my IQ from online or home? I know there are a lot if not all BS tests online and I've heard you need to go to an actual psychologist or something to take one. But there's got to be at least some test floating around online or some other test I can draw a correlation to. Was thinking Wonderlic scores maybe?
How many powerpoint color codes can you remember?
Mensa has a decent IQ test ("decent" for an online test) on its website : https://mensa.dk/iqtest/
The easiest way for most people to get a quite precise idea of their IQ is still to convert their SAT or GMAT score as I explained above.
Hahahaha I see what you did there re IQ of IB/PE.
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