Credit Suisse - IQ versus RQ: Differentiating Smarts from Decision-Making Skills > 15min

Intelligence quotient (IQ) and rationality quotient (RQ) are distinct. Think of IQ as the horsepower of an engine and RQ as the output. ... We share the results of a classic test of calibration, which is an important facet of rationality. Well calibrated people know what they know and know what they don’t know. ... Consistent with past research, we find that participants overestimate their accuracy as their subjective probability estimates tend to be higher than the actual percent correct. ... Investors and executives can improve their rationality by keeping score, asking about others, using base rates, and updating probabilities. ... A large-scale forecasting project has shown that the best forecasters use inductive and numerical reasoning, have cognitive control and a growth mindset, and are open-minded and effective working as part of a team.