Showing posts with label Marilyn vos Savant. Show all posts
Showing posts with label Marilyn vos Savant. Show all posts

Thursday, May 14, 2015

"Super High" IQ Scores - Why They Are Impractical & Meaningless

Parade  magazine contributor Marilyn vos Savant was once claimed by The Guinness Book of Records to have the highest IQ ever recorded. By one measure- a test first taken by her in 1956 - it was claimed to be 228 or a mental age of 22 years and 10 months at the age of 10.  A recent article ('The 21 Smartest People In The World')  at salon.com also claimed to have a list of the "world's highest IQs" with a number even higher than vos Savant's and many with IQs higher that Albert Einstein's (160). But is this really possible? Do such high IQ scores even have any credible meaning?

 In the case of vos Savant, according to Wikipedia:

" Alan S. Kaufman ,a psychology professor and author of IQ tests, writes in IQ Testing 101 that "Miss Savant was given an old version of the Stanford-Binet (Terman & Merrill 1937), which did, indeed, use the antiquated formula of MA/CA × 100. But in the test manual's norms, the Binet does not permit IQs to rise above 170 at any age, child or adult. And the authors of the old Binet stated: 'Beyond fifteen the mental ages are entirely artificial and are to be thought of as simply numerical scores.' (Terman & Merrill 1937). ...the psychologist who came up with an IQ of 228 committed an extrapolation of a misconception, thereby violating almost every rule imaginable concerning the meaning of IQs."

 The list of the "world's smartest people" featuring over a dozen with higher IQs than 160 (for Einstein) is also daft and a classic example of what author Charles Seife would call "proofiness", discussed in his excellent book, : 'Proofiness: How You're Being Fooled By the Numbers'.  In page after page Seife decries the use of numbers not merely to lie but to baffle with bullshit. No better example of such proofy twaddle can be seen than in the website below:

http://members.shaw.ca/warmbeach/INDEX3.htm


But alas, super high IQ scores are also rife with proofiness. Further understanding of what I am about can be grasped by reference to the standard (normal) Gaussian distribution or "Bell curve"  on which the distribution of IQ scores is based, e.g.



Note the percentages of the population decreasing at both the high and the low ends, corresponding to the number of standard deviations  (stds) from the zero point or mean.

We see, for example, that by a 2.2 std dispersion we are effectively at a population fraction of 2 percent - which is the cutoff threshold for qualifying in Mensa. Generally, this is taken as an IQ of 133-35. (Depending on the test used). Note also, how the corresponding population applicable is decreasing as the number of stds gets larger from the central point. At about 2.6 std we are near the threshold (or just slightly beyond it) for the top one percent or Intertel members. At 3 std (about 145 IQ) one qualifies for the Poetic Genius Society.

Using a base of 300 million as the U.S. population, the Bell curve proportions would translate into 6 million who'd qualify for Mensa entrance, and 3 million who'd qualify for Intertel.  By about 3.3 stds we reach the 0.1 percent cutoff and the threshold for the Triple Nine Society. The population qualifying is one-tenth that for Intertel or 3 million/ 10 = 300,000. Divide 300,000 by 300,000,000 and you get 1,000 - hence the Triple Nines are also known as the "One in one thousand society".  

Note how already we are near the effective upper limit of the Bell curve in terms of being able to discriminate between the IQ groups. At near 4.5 stds, however, there is the Mega Society which will have a threshold at the 0.0001 % level. Or doing the same math as I showed in the previous paragraph, only 1 in a million qualifying. This would imply 300 in the U.S. population of 300 million - and with an IQ of 171. But what does that even mean, and is it useful?

As the relevant article in Wikipedia points out:

"No professionally designed and validated IQ test claims to distinguish test-takers at a one-in-a-million level of rarity of score. The standard score range of the Stanford-Binet IQ test is 40 to 160.The standard scores on most other currently normed IQ tests fall in the same range. A score of 160 corresponds to a rarity of about 1 person in 30,000 (leaving aside the issue of error of measurement common to all IQ tests), which falls short of the Mega Society's 1 in a million requirement."

In other words, there aren't even any IQ tests that currently exist which achieve the level of discrimination to identify a would-be Mega Society member! The highest score achievable (and hence measurable) within the constellation of intelligence allows no higher than 160 - which was Einstein's IQ.

Consider the mean or 0 mark which sets the "average IQ" at 100. This means half score above this level and half below. At about 4.5 std, the threshold for the Mega Society we are already in uncharted territory. This is why it is likely impossible to design a test adequate to ferret out those 300 potential members in the U.S. The Mega Society insists it has "unsupervised IQ tests that the test author claims have been normalized using standard statistical methods" but this is very doubtful.  Most psychometricians concur that by 3 std (145) to 4 std (160 IQ) one is already at the limit of the measurable validity for testing IQ in any useful way. Beyond 4 std (again, Einstein's level) the difference between such scores blurs.

Again, in considering such stratospheric IQs one ought to look not only at the std dispersion from the mean but the area under the curve. At 4.7 std the area is essentially nil. What about claims of a 300 IQ? This is even more preposterous. We are now talking about 13.33 std from the mean. As one contributor put it on an IQ- statistics site:

"An IQ of 300 has no useful meaning because there aren't enough people in the world (or intelligent beings in the history of the cosmos) to make it useful".

Or, again, no test that could possibly discriminate that single potential member from 6 billion people. (Other estimates put the proportion in even more rarefied terms, i.e. 1 in 50 billion - or nearly 1 out of every other person who's ever walked the Earth).  In effect, it means that any article bragging on one or more people with supposed IQ scores exceeding Einstein's is preposterous. Even the Mega Society entry threshold is likely a Macguffin, given that in reality there is no living human with an IQ that high that can be satisfactorily verified at the necessary level of statistical confidence.

Even if such a "Mega" person really existed (irrespective of how many claim to be Mega Society members) would one really see a qualitative difference, say from an "Einstein-level" IQ person? I doubt it. I can't see a Mega Society member being able to do any more than Einstein did, including developing the tensor calculus to use in his General Theory of Relativity.

Thus as one of the web psychometricians put it, even a 150 IQ person (near the top of most IQ test standards) would not see a significant difference between himself and a 160 or 170 IQ person. Where the real differences would be seen is where the areas registered for standard deviations are the most.  For example, between a normal IQ person and a Mensa (upper 2 percent) IQ person. Their interests, and even vocabulary would likely be so different as to approach the analogy of an alien trying to communicate with a typical earthling.

But this is precisely why Mensa as an organization was created in the first place, to establish a communal civic space where gifted individuals could meet and converse without being put down by pejoratives (Dweebs, or "geeks") from "normals".  Intertel was launched for similar reasons, though it is interesting to note that many Intertel members also belong to Mensa - simply because it is vastly larger and there are more opportunities for social exchanges.

As an interesting side note, at Monsignor Edward Pace High in N. Miami one of the first  segregations transpired after we all took an IQ test (Stanford -Binet) in 10th grade. In the immediate aftermath I noticed a loss in the diversity of the student body with many of those perceived "slower" (but often more interesting, joking and friendly) leaving Pace for good. I was also encouraged to leave, but for a different reason:  to attend Nova High where I could advance at my own pace and not be held back by a less challenging curriculum. I decided not to take the advice because it would mean 100 extra miles a day total transporting by my dad.

The takeaway from this blog post? Don't trust any claims of people with IQs over 160!

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Sample questions from the "Sigma Test" similar to the one to qualify for the Mega Society

1) Several faucets were used to fill up six tanks. For one hour, all the faucets discharged water in a reservoir, which distributed it between four of these tanks: A, B, C and D. After that, for one hour, the faucets discharged water in a double funnel which directed half of the water to tanks E and F and the other half to the reservoir which, in turn, continued to distribute its water between tanks A, B, C and D. With this, tanks A, B, C and D were full. To fill tanks E and F up, it was necessary to use one faucet, which, for two hours, distributed its water between tanks E and F. After this all the six tanks were full. What was the number of faucets initially used? (Note: all the faucets had the same water flow rate and all the tanks had the same volume).
           
2)  Several rectangles are drawn on a plane surface in such a way that their intersecting lines form 18,769 areas not further subdivided. What is the minimum number of rectangles that must be drawn to form the described pattern?
           
3)  Several straight line segments are drawn on a plane surface in such a way that their intersecting lines form 1,597 areas that are not further subdivided. What is the minimum number of line segments that must be drawn to form the described pattern?
           
4)  1 + 10^1,234,567,890 triangles are drawn on a plane surface. What is the maximum number of areas, not further subdivided, that can be formed as these triangles intersect each other? (Contributed by Rodrigo de Almeida Rodrigues)
           
5)  According to Fermat’s Last Theorem, a^n + b^n = c^n has no solutions for n > 2 (a, b, c and n must be positive integers). In 1992, I proved this in a simple, yet incorrect manner. This was my reasoning: Fermat’s Theorem is a generalization of Pythagoras’ Theorem, which asserts that the sum of areas of the squares drawn on the legs (short sides) of a right triangle equals the area of a square drawn on the hypotenuse of the same right triangle (a^2 + b^2 = c^2). If we try to generalize that theorem, going from 2 to 3 dimensions (a^3 + b^3 = c^3), we have a triangular prism formed by displacement of a right triangle along an axis perpendicular to its face, as illustrated by the figure below. 
We can construct a cube on one of the three quadrangular faces of that prism. Two of those faces correspond to the legs of the right triangle (ADFB, BFEC) while the larger face corresponds to the hypotenuse (ADEC). It is possible to construct a cube on one of the faces, implying that the 4 sides of that face have the same length. This affects the whole prism, causing the cube constructed on the other face to have the same size than that constructed on the first, for if AB=BF and BF=BC, then AB=BC. In that way, no cube can be constructed on the third face, for if AC represents the hypotenuse, then AC cannot be equal to to AB. Therefore, a^n + b^n = c^n has no solution for n=3. Following the same line of reasoning, we can show that it has no solution for any number of dimensions larger than 2. What is the error in this proof?
6) A certain gear system consists of 5 concentric, superposed discs: A, B, C, D and E, which are mounted on a solid platform, taken as a stationary reference. The discs have different sizes and spin at different speeds. All the discs spin at constant rates, some clockwise, some anticlockwise. Each disc has a red dot on its surface, and initially all these red dots are not lined up. At a given moment, all the discs start to spin simultaneously, each at its own speed, without any contact between them. It takes 7 minutes for disc A, 13 minutes for disc B, 17 minutes for disc C, 19 minutes for disc D and 23 minutes for disc E to complete a full 360-degree spin. After a certain time, all the red dots were aligned, disc A being in the same position that it was 2 minutes after the discs started to spin, disc B being in the same position that it was 3 minutes after the discs started to spin, disc C being in the same position that it was 4 minutes after the discs started to spin, disc D being in the same position that it was 7 minutes after the discs started to spin, and disc E being the same position that it was 9 minutes after the discs started to spin. How much time elapsed from the moment the discs started to spin until the discs reached that configuration for the first time?
7) In 1993, in an essay about Science and Religion, I described a project regarding the possibility to build an “invisibility machine”. On describing the details, I realized that some problems were insolvable, not only because of technological limitations but also for physical reasons imposing theoretical and possibly insurmountable limits. The project starts from the central idea that in order to make an object invisible, it is necessary for an external observer looking in its direction to visually stop noticing its presence. This can be done in the following way: A sphere is constructed, and its whole external surface is covered with minute, high-resolution TV cameras and monitors. Millions or even billions of cameras and monitors are to cover the whole sphere in such a way that each monitor transmits the image captured by a camera located in the point diametrically opposite to that monitor. The result will be as shown in the figure below. 
The image of the object (blue square) is captured by a camera located in point A, which transmits the image to a monitor in point M. As a result, an observer in point O will see the blue square as if there were nothing in front of him. In that way, everything inside the sphere will be invisible to the external observer. But this scheme presents two problems. One of them can be solved in theory while the other one is insoluble. Indicate those two problems and explain why one of them can be solved but the other one cannot..
8) The porous and gray “lead” inside a pencil consists of a mixture of graphite and clay. The ratio of graphite to clay is not known. On writing on a sheet of paper, a fine layer of “lead” remains on the surface of the sheet. Describe a method for calculating the mass of “lead” in the dot of the letter “i”. You may use only US$10 to buy the material needed for the experiment..
9)  We have a cylinder with a radius of 50 cm and a tape measure 0.01 cm thick. The height of the cylinder equals the width of the tape measure. The thickness of the tape measure is invariable and one of its wider sides is inextensible. What is the minimum length of tape necessary to wind it around the cylinder 9 times, all rounds overlapping, as in a roll of scotch tape. The top and base of the cylinder may not be covered with tape. The solution must be given with 14 significant digits and it is not allowed to cut the tape or cut or deform de cylinder.
10)  Describe a practical and fast method that can be used with good precision to determine the number of words in a person’s vocabulary..     

Tuesday, November 18, 2014

Kids in COLO. Play a Simulated Stock Market Game: Do They Have A Clue?

    Kids get into the 'stock market challenge' in Colorado
The "Stock Market Challenge" is a recent invention of Christina Frantz, manager of social responsibility for Great West Financial - a Greenwood Village-based financial services company. The purpose,  as stated in a recent Denver Post piece (Nov. 16, p. 1C),  is to teach kids how the stock market works since "whether they realize it or not most Americans have a stake in the stock market through their retirement programs". Thus, more Americans need "basic financial literacy".

Actually, the 'stake in the stock market' meme needs to be corrected: Americans DO have the choice, for example in their 401ks (most of them anyway),  to select money market or low risk funds as opposed to equities. This is something more might have benefited from if they'd known before the 2008 stock crash. 

The piece goes on to cite a 2013 survey wherein "43 percent said their number one financial worry is not having enough money saved for retirement.".  Another 38 percent fretted about not having enough money to get by according to a Harris Interactive 2013 survey.

But nowhere in the article do readers learn that stock market investment is only one way to attain financial security. A better way  for most average people, perhaps, is to save much more (on average 20-30% more than the average) and instead of plowing it into a volatile market - use it to purchase immediate fixed annuities to ensure a stream of later income. The problem is most Americans would rather risk their stash on the stock market, then have it tied up with an insurance company to provide steady income later. This, to me, is nuts.

Some of the students in the challenge also learned "both the agony and ecstasy the market can offer".  The students initially saw their simulated portfolio growing 26 percent in 30 days- but then "thirty minutes later all the confidence and energy was gone".  They saw $200, 000 "evaporate" in minutes and they ended up near the bottom of the pack. 

The students in this team later said: "It was fun, it was just dream shattering!"

Really, kids? Imagine if that money you lost in minutes was real money and not the synthetic kind!

But most of these students can be forgiven their irrational exuberance given they may not be familiar with certain things going on in the market now. I refer to the recent column by WSJ author Jonathan Clements, who writes that "I find it hard to get enthused  about the prospects for U.S. stocks over the next ten years."

Why?

Clements cites three components of the market's current returns which reflect inflated growth beyond realistic expectations leading to a ridiculously high price to earnings ratio. (He names dividend yield and corporate earnings growth and the value put on those earnings reflected in the P/E ratio.)

He notes,for example, that over the 10 years up to mid-2014, the per share earning of the S&P 500 companies grew 6.3 % a year compared to 3.6% growth in GDP per year. In other words, something is out of kilter -and this anomaly was also warned about by the authors of  'The Great 401k Hoax'. 

The other anomaly is that recent gains have been driven by corporate profit margins. After tax corporate profits rose from 7.9 % of GDP in mid-2004 to 10.6% in early 2014. Without this boost the S&P 500 earnings would have lagged behind GDP. 

The main contributors to this profit anomaly are productivity gains (mainly via automating production or laying off workers and having fewer do the work of those fired) and buying back "as much stock as they've issued". Of course, using these tricks can't go on forever, nor can the Fed's cheap money (quantitative easing) policy.  Besides, that - the more workers laid off or automated the less disposable income they have to purchase the goods and services available- so the path is set for a permanent decline unless: a) more people are hired, and b) at significantly higher wages.

The anomalous S&P increase, combined with the corporate earnings gimmicks, have enabled to P/E ratio to increase to 25.3 since 1990, which might sound great until you compare it to historical averages, i.e. 19.6 over the past 50 years and 16.6 over the past 100 years. This begs the question of what would happen if the current P/E average reverted to its 100 year average, say indicating a drop of 25.3 - 16.6 = 8.7. Well, you might not want to lose sleep thinking about it because it implies a large part of your share value is "phantom money". (Another little item the students in the Stock Market Challenge might have wished to learn about)

This is why Clements ends up pining for a 25 percent correction. In his own words:

"My hope: We get a 25 percent decline in share prices. That would make the market more reasonably valued and provide a buffer against disappointment."

He is right to be concerned as the students would be if their little simulation also included some realistic facts concerning stocks, valuations, capitalization and loss. Say, for example, an original, over-valued stock share plummets after ten years from $50 to 50 cents a share. The market capitalization has now decreased a factor of 100 ($50/ $0.5 = 100) to $5 million. If there are now 10 million investors, the share price can be no more than 50 cents a share and that is the maximal cashout (redemption) amount. Thus if all ten million stock holders cash out at once they will (theoretically) get 50 cents a share. However, since stock managers do demand to take profits, commissions, and don't intend to part with all the money, they use a formula pegged to the volume of selling such that the share value is inversely proportional to the volume.

Thus, what theoretically might look like 50 cents per share on paper, for a mass redemption, will really end up as probably only ten cents per share.

If all the buyers (say of company XYZ stock) initially bought stock at $50 per share, then watched it collapse to $1 a share, where did the money go?  The (Duh!) answer (see also 'Ask Marilyn' column in PARADE, April 5, 2010) is that the sellers (redeemers) got it. Well, who else would? The other aspect is that this scenario only accounts for a tiny fraction of the total money "lost".

Remember that when all the 2 million purchasers of XYZ stock bought it (at $50 per share) they actually artificially inflated the worth of all the shareholders. Obviously, they also inflated the worth-value for all those who bought it at $48, $24, $15 and $1! The reason? Everyone's stock is valued at the last share price times the number of shares owned. Thus, at any time in that transition interim, IF one of those lower purchase owners had the prescience or good fortune to cash out in time, they would have reaped a relative reward. This, despite not having bought the stock at a lower value.

In like manner, Janus World Wide Fund sold shares at one time for as high as $75 each. When I bought in (in 1997) they were still high but not as high as the initial offering rate. As they began a down swing I cashed out (in 1998) at least 100 shares for $70 a share- enough to finance a holiday to Yellowstone National park. Eventually,  the shares crashed to below $30 a share, by which time almost all share holders were selling (which was why the share price was being driven lower).

Consider now that Jack Sprat similarly may be elated at beholding a $174,000 balance after his 10th year of holding XYZ stock,  following an initial investment of $35,000. But he needs to understand that the bulk of this:

$174,000 - $35,000 = $139, 000

is phantom money. (I.e. generated by an excessive P/E ratio)

By the same token, if the following month the share prices collapses back to $5, Jack has not lost $174, 000 but only the money he actually put in up to THAT point, say  $35,250.

It is this larger value, based on a "misleading multiple" of inflated share value times shares, that leads many to believe they have lost money they never owned in the first place. It only appears they did. Such is the stuff of stock hocus pocus which has nearly every modern day "investor" bamboozled and starry -eyed.

What if all sellers sold at once, does that make their losses real? Never in a million years! As I noted earlier, if all sold at once they'd all be victimized since as sellers outnumber buyers the share price drops according to inbuilt formulas used by the companies to correct for diminishing share volume. Diminishing (held) share volume = diminishing returns. Zero sum game anyone? The true and hard fact, again, is that only the prescient or early sellers, are able to obtain the top share price. This is possible because there are many times more "buy and hold" investors to support those sales.

I am pretty certain that none of the kids in the "Stock Market Challenge" were taught any of this!