“The relationship between SAT scores and that measure of earnings is pretty steep. The relationship between SAT scores and starting a star business is essentially flat. And that tells me that you don't have to be a genius to be a successful business owner.”
The Pie: An Economics Podcast · October 2026
Economist Eric Zwick, discussing his research on America's private-business millionaires, compares test scores with salaried earnings at 35 and with founding a highly successful business. He argues that relentlessness and early work experience matter far more than raw brains.
Transcript
…pass on, they haven't set up the business to be handed over. And so that's really sort of, it's not physical capital. It's not a monopoly card that has hotel on it that you can just pass on from generation to generation. It's kind of human capital that's kind of much, much harder to transfer.
…from Kevin Murphy, of course. Of course. Nobody's disputing Kevin. Kids who score in the top 10% on the SAT only become founders about 1.3 times as often as kids who score at the median, barely more at all. So if it's not brains, what actually predicts who ends up building one of these businesses?
…Because I think one idea that's very much in the conventional wisdom about how to get ahead, we do as well as you can in the SAT, go to a really prestigious school, and then you get that job at McKinsey or JPMorgan, you get a really high salary, and that's like the path to prosperity. And yeah, you can do quite well comfortably that way, but there's going to be a ceiling there. And it turns out the relationship between SAT scores and that measure of earnings is pretty steep. The relationship between SAT scores and starting a star business is essentially flat. And that tells me that you don't have to be a genius to be a successful business owner. Like you said, IQ is not kind of the necessary factor entering in. So what does matter, as we've discussed before, like early labor market experience and being able to put that to work to solve a real problem that has sufficient size such that you can find a lot of customers that are willing to pay for the solution you've devised. Being able to run that business requires, especially in the early…
Let's pick up on that inheriting because not everyone in the book earns their way in. You call inheritance the shortcut. How big a share of mainstream millionaires actually got there that way versus bootstrapping, starting from nothing? Yeah,
so it's a non-trivial share. We estimate it's about a third, maybe 25% to a third of top 1% owned businesses, different ways of defining who the top 1% are, inherited their business. And that's a lot. So, a lot of family businesses, multi-generational family businesses, including the Brockway car…
doing it for us. Yeah. Yeah. I'm
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