TRUE DOLLAR JOURNAL

Brushing aside that all banking crises arise from the excessive extension of credit in the face of a future that will not yield expected profits, a future that prudent men can predict thoroughly, i.e., there is no such thing as a black swan event, Taleb seems not to understand what IQ is.

IQ is a ratio of mental age to age since birth (chronological age), Said another way, IQ is the ratio of mental age to real age.

So, for example, a five year old of four year old intelligence is 20% retarded and at age of ten, that same child will have the intelligence of someone eight.

Thus, a child, ten, who has the intelligence of a child, five, has an IQ of 50 while a child, ten, who has the intelligence of one twelve has an IQ of 120.

Looked at it one way, intelligence is cumulative. Know-how (reasoning skill) is something which increases in amount with age. So while you should not expect a two year old to read, you should expect a normal five year old to do so.

Looked at it another way, intelligence is constant. This is the way meant when someone says of another as being highly intelligent without accounting for age. The implication is this: That one has intelligence than others of his own age.

In its cumulative meaning, intelligence is a measurement of growth. In the constant meaning, intelligence is a fuzzy set relation. Height is a measurement, but tallness or shortness is a fuzzy set relation.

The intelligence quotient represents a comparison between the intelligence of someone and that of others his own age who are normal.

At any age, the reckoning of certain problems requires the exercise of intelligence. By giving tests to enough participants at every age, it is possible to ascertain what should be solved by anyone who has reached a certain age. That is mental age, in effect. Said another way, a given mental age is the degree of general mental ability which is possessed by the average of persons of that corresponding chronological age.

Mental age indicates the level of development which someone has reached at a given time. When put in ratio to real age, it tells us whether someone is bright, average or dull. That is what IQ does.

Back in 1908, Frenchmen Alfred Binet and Theodore Simon devised the Binet Simon Intelligence Scale after having hundreds of children between three and fifteen try fifty-four tests that were arranged by difficulty. The various tests challenged various mental faculties such as memory, orientation to time of day, interpretation of pictures, ability to make logical association, the use of abstraction.

It was found that as their age increased, the percent passing increased rapidly until practically all the children were successful at completing the tests. It was deemed by Binet and Simon that if a high enough percent of all those children passed the test at a certain age, that test measured the age intelligence for that age.

The BSIS was updated for use in the USA at Stanford. The so-called Stanford Revision increased the number of tests to ninety and extended the scale to measure the intelligence of superior adults. Like the BSIS, the Stanford Revision tested of memory, language comprehension, vocabulary size, orientation in time and space, eye-hand coordination, knowledge about familiar things, judgment, ability to find likenesses and differences, arithmetical reasoning, resourcefulness, ingenuity in difficult practical situations, the ability to detect absurdities, the ability to associate of ideas, the ability to combine dissected parts to form a whole, the capacity to generalize from particulars, the ability to deduce a rule from connected facts.

IQ measures the state of someone. Specifically, IQ quantifies the mental age of someone to his or her real age. IQ reveals the percentage above or below someone's mental age is to his or her chronological age. IQ measures know-how and reasoning attainment of individuals at specific test ages relative to standards of normal attainment at those ages.

At the high-level, IQ reveals the likely degree of understanding abstraction as well as the degree of ability to devise abstraction. IQ tries to answer these questions: Is the individual smart enough to follow direction? Is the individual smart enough to apply abstract ideas to real world problems? 

The importance of the Intelligence Quotient is this: 

IQ provides the basis for predicting later mental development because in almost all cases IQ remains fairly constant during the childhood years. Said another way, the probability is high that a child of four who tests with an IQ of 125 will have an IQ 25% higher than his chronological age when he ages to 16 or 30 or 45.

IQ measurement suggests this: those with higher IQs, e.g., greater than 125, likely would be  successful, that is, understand the principles of a field, if they studied that field to completion. So one can have confidence that someone with an IQ of 125 can learn to become an engineer or a surgeon, while someone with an IQ of 100 can not.

Thus, IQ should have importance in the allocation of schooling resources. There is little sense in trying to educate a dull child (i.e., IQ between 80 and 90) for post-secondary academics. Likewise, there is little sense in holding back a superior child (i.e., IQ greater than 125) at his or her real age level. Such a child should be skipped ahead to be educated among peers of his or her mental age.

For children whose IQs fall between 90 and 109, practically all make normal progress, i.e., acquire the know-how for their respective ages at every age through school. However, children between 80 and 90 rarely are capable of making the requisite grades in the requisite years, unless socially promoted. Children with IQs below 75 are not capable of doing satisfactory work in their respective real age grades and never will they become so.

Perhaps it is true that on average, various races manifest their intelligences in different ways. Enough argue that if different races show their intelligences in different ways, it becomes necessary to have different sets of tests for different races. 

Yet, proper IQ testing seeks to discover how intelligent is an individual who lives under the same jurisdiction as the standard group regardless of the race of that individual.

Race differences obviously raises important questions. 

• Can two races live side-by-side under the same jurisdiction if the majority of one race completes its growth in intelligence several years earlier than the majority of the other race?
• If these disparate races are to live together successfully, should the more intelligence race dictate the terms and conditions to the race of lesser intelligence? 
• Can the preponderance of below normal IQ individuals of the race with lesser intelligence grow up and plug into the systems, i.e., the rules of society and thus live in harmony with others?

Taleb seems to attack the concept of IQ because he seems to associate IQ with income success. Because he fails to see either causality or correlation between IQ and income attainment, Taleb dismisses IQ.

In short, Taleb has committed the fallacy of the strawman. IQ testing never was devised as a predictor of financial success. IQ is a measure of state of intelligence.

It would fail to surprise me if Nassim Taleb's IQ falls between 116 and 125, which is high enough to understand some devices of abstraction devised by others but not high enough truly to devise his own. Likely, this is why Taleb fails to understand what IQ is and how it works.

It strikes me as telling that Taleb earned his PhD from the University of Paris rather than from MIT, Harvard, Stanford or another top tier USA based university. In the artificial world of academia where individuals are socially-promoted because they can claim race membership other than a Germanic race, e.g., Anglo-Saxon, or because they are female, it would fail to surprise me that academician administrators socially-promoted Taleb because of his race (Lebanese) every step of the way for him, from undergrad admissions to conferred Ph.D.

For other takes on the debate, see:

Certainly, if guaranteed student loans were geared to IQ testing, inflated salaries of "those who can't do, teach" academicians like Taleb would come crashing to earth in the same way the Greenspan-Bernanke Great Inflation, the greatest credit bubble in the history of mankind, burst and crashed the USA economy into a near nine-year economic depression.

Can you imagine if Congress declined to guarantee student loans for students with IQs below 110, offered partial guarantees, say only 50% for those with IQs between 110 and 119, 75% for those between 120 and 129 and 100% for those at 130 or above? Bankers then could use IQ scores like credit scores and offer rates accordingly based on how much at risk they could lose.

While such a scheme would be prudent, alas, politics would prevent it from happening, especially since academics who would stand to lose the most. Under such a scheme, their salaries would approach their true market worth and be closer to what were those salaries before the advent of government-guaranteed credit and subsidy wrecked tuition pricing. In the good old days of the USA, before big government social democracy, college eggheads like Taleb earned less than factory workers.