The Trillion Dollar IQ Business and The Future of the Smarts - Rich Karlgaard:Forbes

At an August 6, 2010 conference in Lake Tahoe, the richest and smartest guy in the room, Bill Gates, offered his opinion on the next big thing.

Ready?

Toilets. All kinds of toilets. Broadband biffies that email PSA counts to your doctor. Do-gooder dumpers that save water in the third world. “[Toilets are] one of the greatest under investments,” Gates effused. “Not much money goes into that. You end up with the low IQ guys on the toilets.”

If you know Gates — I once spent 5 days on the road with him — you’ll know he uses the term, IQ, a lot. Gates has always loved IQ. He loves it like a football coach loves 40-yard-dash speed. It never seems to occur to Gates that IQ has become a politically incorrect subject for many. Some 30% of American colleges have made the SAT test — a rough proxy for IQ — optional in the admissions process. Where the SAT is still considered, Asian and east Indian enrollment has soared.

It is foolish not to talk openly about IQ. How else can we address this vital subject? Gates is right: the modern knowledge economy requires boatloads of IQ. On the flipside, a great deal of the fear and panic in today’s economy is about a trend that no one dares mention: The world’s smart people are crushing the dull and average.

The seeds of the IQ Economy were sown in the 1950s with two developments: James D. Watson and Francis Crick’s description of the double helix; and Jack Kilby and Bob Noyce’s invention of the integrated circuit. The resulting biotech and computer/software/Internet industries became playground sandboxes for the freaky bright — and a mystery for the rest of us.

A new class — the Scary Smart — have inherited the world. The surest way to become a billionaire today is to be born with a 150-plus IQ and 800 math SAT skills. This would describe Gates, Google founders Sergey Brin and Lary Page, Facebook’s Mark Zuckerberg and most of the whizbangs in Internet, biotechnology and algorithmic finance.

I am convinced the next trillion-dollar industry will be built around all the stuff that makes us smarter. This would include both stuff that goes into our body — performance enhancing supplements and drugs, chip implants and the like – and traditional tools like smart phones and databases.

This is not a new trend, but it is gathering speed. The Great Recession has given it urgency. The salesman today who says “Don’t know the answer, but I’ll get back to you on that” looks slow. He is at a huge disadvantage to a competitor with the answer at his fingertips. The job seeker who flubs an interview because her synapses weren’t firing right that day is a sad story. Worse if a can of Red Bull could have saved the day.

By the way, Red Bull is part of an estimated $6 billion energy drink industry that is growing more than 20% a year, even in tough times. Cruise a big grocery store and count the drinks that promise to make you smarter or give you more energy.

Today Red Bull. Tomorrow a designer drug that elevates your IQ and quickens your memory even as it opens pathways to your creative side. The Viagra of the brain is coming.

It is dawning on people, in this age of the Scary Smart, that the best — really, only — way to play the economic game successfully today is with high IQ, creativity and energy. We therefore will pay for more IQ, creativity and energy. This is why energy drinks and smart phones have been two hot categories in a cold economy.

But we’ve only seen the beginning. The Scary Smart business will start to command larger portions of GDP.

The proof that people will pay for performance is sports. Modern performance doping began in the 1930s in Germany, where steroids were developed for Nazi soldiers. Eastern bloc weightlifters used steroids to great success in the 1952 Olympics. We tend to think that steroids hit American sports in baseball during the 1980s. It actually started with Olympic weight throwers and sprinters in the 1964 games. Mike Larabee, a 30-year-old schoolteacher, won the Olympic 400m dash while (legally) juiced. Steroids have changed every sport demanding explosive strength.

Endurance athletes discovered their own doping miracles in the 1970s. Finnish runners such as Lasse Viren transfused their own red blood cells and won gold medals in the 1972 and 1976 distances races. Blood doping was legal then, as it was in 1984 when American cyclists, including Alexi Grewal, blood doped and took home gold medals. The artificial red cell booster, EPO, hit endurance sports in the 1990s. EPO improves one’s speed up long bicycle climbs by 5% or more, according to physiologists at the Science of Sports.

Sports proves the irresistible lure of performance doping when money and prestige are on the line.

Today, everyone’s job and career is on the line. In a global economy that:

1. Increasingly favors the Scary Smart

2. Ruthlessly culls winners and losers

… Workplace intelligence becomes the next trillion dollar industry.

Smart phones. Smart data. Smart content. Smart drugs.