People with higher IQs make more accurate predictions about uncertain future events, thus making their lives better.
A BATE University study found that people with low IQs can lead to more than twice the prediction errors than those with high IQs, thus providing new insights that intelligence is associated with better health, wealth, and life outcomes.
The study was published in Journal of Personality and Social Psychologyanalyzed data from more than 50 people from England, who were asked to predict their life expectancy. These predictions are then compared with official mortality statistics to measure prediction accuracy.
Probability Assessment Gap
Researchers use genetic markers related to intelligence and find that smarter people have consistently made more realistic probability assessments. The lowest 2.5% of people with IQ distribution showed that prediction errors were much larger than the top 2.5%.
“Accurately assessing the likelihood of good and bad things happening is at the heart of good decisions,” explains Professor Chris Dawson of the University of Bath School of Management. “Almost all decisions we make, whether it’s doing business, investing, crossing the road, choosing who has so far, requires a probability assessment.”
Why smart people make better choices
The study reveals several key modes of how intelligence affects decision-making:
- Compared with lower IQ groups, higher IQ individuals have 16% higher prediction accuracy
- Smart people make fewer positive and negative mistakes and show more consistent judgment
- People with low IQ show greater “noise” in their predictions – more random changes when asked repeatedly about the same event
- This relationship exists even after controlling for education, wealth and family background
The researchers used an innovative approach called Mendelian randomization, which uses genetic variation to establish causality rather than just correlation. The technology shows that the link between IQ and precision stems from real cognitive differences, not just educational or social advantages.
The meaning of the real world
These findings help explain why IQ predicts success in multiple life areas. Poor probability assessment can lead to suboptimal financial decisions, inadequate retirement plans and healthy choices for risk.
“IQ is already well known to predict health, wealth, income, career status and education, and this study highlights a possible channel through which people with lower IQs will do worse in all these results,” Dawson noted.
The study found that people with low IQ (two standard deviations below average) predicted a prediction error of 26.37 percentage points, while individuals with high IQ (two standard deviations above average) showed an error of only 12.13 percentage points.
Beyond Noise
Importantly, studies show that individuals with lower IQ make not only systematic mistakes—they also show more random inconsistencies in their judgments. When asked to make the same type of predictions multiple times, they are far less accurate than those with higher IQ individuals.
This “noise” in decision making can be as expensive as a system bias because it can lead to unpredictable and confusing biases from good choices. This finding is consistent with recent psychology research, suggesting that random errors should be as attention as systematic bias.
Practical application
The study proposes practical solutions to help people easily predict errors. “Clearly stating the probability estimates of information related to health and finance, rather than relying on individuals to do their own calculations, can help people make smarter, accurate decisions,” Dawson advises.
The study used genetic analysis and traditional IQ tests to examine participants’ cognitive test performance and their genetic predisposition to intellectual and educational success. This dual approach enhances confidence that the relationship between intelligence and prediction accuracy reflects the true causal influence.
“Expectations for the future, how families make key decisions, such as how much to save, when to retire or invest,” Dawson explained. “Poor calibration expectations can lead to poor financial decision-making and reduce economic benefits, which can adversely affect the country’s growth.”
These findings open new avenues to understand how cognitive abilities shape life trajectories and suggest that improving people’s probabilistic assessment skills may bring broad benefits to individual and social well-being.
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