At the Money: Doctor's Orders - How to Change Careers

Summary

Masters in Business: "At the Money: Doctor's Orders - How to Change Careers"

Release Date: May 7, 2025
Host: Barry Ritholtz (Bloomberg)
Guest: William Bernstein, Co-Founder of Efficient Frontier Advisors and Renowned Author

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Introduction

In this compelling episode of Masters in Business, Bloomberg host Barry Ritholtz engages in an in-depth conversation with William Bernstein, a former neurologist who successfully transitioned into the world of finance and investment. Bernstein, renowned for his insightful books such as The Intelligent Asset Allocator and Four Pillars of Investing, shares his journey, challenges, and the critical lessons learned along the way.

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From Neurology to Finance: The Unexpected Career Shift

Early Career and Motivation

Bernstein's journey began in the medical field, specifically as a neurologist. However, he never envisioned spending his entire life in medicine. Faced with the reality of a non-functioning social welfare system in his country, Bernstein recognized the necessity of self-investment for retirement.

“I went about it in the way that I thought any scientist would do, which is to read the peer-reviewed literature, basic textbooks, collect data, build models. And that led me into finance and eventually into writing about history...”
(02:29)

Inspiration and First Steps

The pivotal moment came when Bernstein acknowledged his proficiency in investing and investment research. Influenced by Frank Armstrong, an early advocate of passive indexing, Bernstein decided to share his knowledge online, much like Armstrong had done decades prior. This decision set the stage for Bernstein's foray into managing money and authoring influential financial literature.

“After I had built some of my models, he said, you know, Bill, you need to put all this stuff online. You got a basic textbook that you wrote, you need to put that online as well...”
(03:31)

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Navigating the Transition: Challenges and Triumphs

Realizing the Toughness of Medical Careers

Bernstein categorizes doctors into three groups: those who leave the profession early due to its challenges, those who persist as long as they can afford, and those who remain passionate till old age. He identifies himself with the first category, leaving medicine to pursue a more intellectually stimulating and financially viable career in finance.

“...there are two kinds of doctors. The overwhelming majority of doctors... realize by age 50 or so that it's a tough game and they're going to get out of it as soon as they can afford to do it.”
(04:27)

Financial Viability of the Career Change

Transitioning to finance was not immediate. Bernstein took approximately three to four years after publishing his first book to realize that he could sustain himself financially through managing money and writing. This period was crucial in establishing himself in the new field.

“It took about three or four years from the time the first book came out and it became apparent that I could make a decent living managing money in writing.”
(05:15)

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Overcoming Doubts: Imposter Syndrome and Learning from Mistakes

Battling Imposter Syndrome

Despite his successes, Bernstein openly discusses his ongoing struggle with imposter syndrome, a common hurdle for those making significant career shifts.

“Oh my God, I have a full, I still have a full-blown case of imposter syndrome.”
(06:27)

Learning from Early Investment Mistakes

Bernstein candidly shares his initial missteps in the financial world, such as investing in trendy funds and engaging in futures trading. These experiences, however, served as valuable lessons, reinforcing the importance of asset allocation and disciplined investing.

“I made all the mistakes that rookie investors make. I invested in hot funds, I played futures. And you know, experience is a fine teacher.”
(08:01)

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Insights into Investment Strategies: The Power of Rebalancing

The Mathematics of Rebalancing

A significant breakthrough for Bernstein was understanding the impact of maintaining a policy allocation and the discipline of rebalancing. By systematically selling overperforming assets and buying underperforming ones, Bernstein enhanced his portfolio's internal rate of return by approximately 5%.

“...by rebalancing it, the internal rate of return I got out of it was about 5% higher than the dollar-weighted, excuse me, the time-weighted return.”
(09:10)

Case Study: Precious Metals

Bernstein delves into his experiences with the Vanguard Precious Metals Fund, highlighting how rebalancing contributed to consistent returns. He emphasizes that while rebalancing is beneficial, its efficacy varies across different asset classes.

“That's it. So that's, that was, that was the insight that I had early on that enabled me to write about finance.”
(10:31)

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The Gold Conundrum: Successes and Setbacks

John Paulson's Bet on Gold

Bernstein discusses the volatile nature of precious metals investments, referencing John Paulson's infamous bet on gold. He points out the prolonged timeline required for such trades to pay off, often spanning over a decade.

“...as soon as I saw that Journal article that referred to after the big short where Paulson, it was really one of his lieutenants... And the Journal is saying the trade is finally working out.”
(11:34)

Market Dynamics and Investor Behavior

Highlighting the unpredictability of gold markets, Bernstein explains how investor sentiment swings can create both opportunities and pitfalls. He underscores the importance of understanding market psychology and maintaining a disciplined investment approach.

“...if you understand the mathematics of rebalancing where that bonus comes from, then you understand asset allocation. And if you understand asset allocation, you understand finance. It's just that simple.”
(10:31)

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Transferable Skills and Expertise

From Neuroscience to Finance

While neurology might seem distant from finance, Bernstein identifies the transferable skills that facilitated his transition. His scientific training instilled a profound respect for data, critical thinking, and the ability to revise beliefs based on new evidence.

“Where it did help me was the basic scientific training. It caught me respect for data and for updating your priors when, when the data contradict your, your deeply held beliefs.”
(14:24)

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Addressing Stereotypes: Doctors as Investors

Challenging the Status Quo

Bernstein critiques the stereotype that doctors are poor investors, attributing many of their investment challenges to overconfidence and a lack of serious study in finance.

“...without treating finance as a serious subject worthy of academic study, they're trying to do brain surgery by reading USA Today. It just doesn't work.”
(17:34)

Gender and Confidence in Medical Professionals

He further differentiates between male and female doctors, noting that male physicians often exhibit greater overconfidence in their investment decisions compared to their female counterparts.

“Surgeons tend to be more overconfident than medically oriented physicians. Most people are happier with female doctors, probably for the very same reason.”
(16:19)

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Advice for Career Changers

Financial Security Before Transition

Bernstein emphasizes the importance of achieving financial stability before embarking on a career change. He advises against following one's passion prematurely, advocating instead for securing financial freedom first to afford true autonomy.

“...don't follow your bliss when you're too young... you have to spend 10 or 20 years doing something you don't like to become financially secure.”
(17:47)

Balancing Passion and Practicality

He underscores that money, while not a source of happiness, provides the necessary time and freedom to pursue what one truly loves later in life.

“You understand that money doesn't buy things, it buys time and autonomy. Get that time and economy and become financially secure, and then you can do whatever the hell you want to do.”
(17:47)

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Conclusion

William Bernstein's story is a testament to the power of adaptability and the importance of leveraging one's strengths and knowledge to navigate significant career changes. His insights into investment strategies, particularly asset allocation and rebalancing, coupled with his candid discussions about the psychological barriers in career transitions, offer valuable lessons for professionals contemplating a similar path.

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Notable Quotes:

• “It took about three or four years from the time the first book came out and it became apparent that I could make a decent living managing money in writing.”
  (05:36)

• “Oh my God, I have a full, I still have a full-blown case of imposter syndrome.”
  (06:32)

• “That's, that was, that was the insight that I had early on that enabled me to write about finance.”
  (10:31)

• “Without treating finance as a serious subject worthy of academic study, they're trying to do brain surgery by reading USA Today. It just doesn't work.”
  (17:34)

---

William Bernstein’s journey from neurology to finance not only highlights the feasibility of such a transition but also serves as an inspiring blueprint for those seeking to redefine their professional lives. Through disciplined investment strategies and a commitment to continuous learning, Bernstein exemplifies how expertise in one field can successfully translate into another, vastly different domain.

Transcript

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[Podcast Host]

Doctor Doctor give me the news I got a bad case loving you no pills gonna kill my head I got a bad case loving.

[Interviewer]

You how often have you thought making major change in your career you're going to give up some time, some effort, a lot of education and potentially a lot of money. But if it pays off in the end, then it's a worthwhile thing to be true to yourself. On today's at the Money, let's speak with William Bernstein. He began his career as a medical doctor, a neurologist who discovered he had a knack for investing and investment research, eventually opening Efficient Frontier Advisors. He is also the author of multiple books, the Intelligent Asset Allocator, Four Pillars of Investing, Investors Manifesto, and On and On. His most recent book is the Delusions of Crowd. Bill Bernstein, welcome to at the Money. Let's just start with a quick question. You went to medical school. Did you expect to spend your whole life as a doctor?

[William Bernstein]

Heaven, no. At least I didn't expect that that was going to happen. But you know, I happen to live in a country that doesn't have a functioning social welfare system or safety net. And so I realized I was going to have to invest and save for my own retirement. And I went about it in the way that I thought any scientist would do, which is to read the peer reviewed literature, basic textbooks, collect data, build models. And that led me into finance and eventually led me into writing about history, because you really can't do finance unless you have a good working knowledge of the history. And I found that I enjoyed reading and writing about it.

[Interviewer]

So, so this began as you thinking I need to plan for my own finances. What was the aha moment? That, hey, I now have a new knowledge base and a new skill set. Maybe I could share this with other people.

[William Bernstein]

I'll give credit to a guy you may have heard of named Frank Armstrong, who was one of the early efficient market passive indexing gurus. He was another financial advisor. And after I had built some of my models, he said, you know, Bill, you need to put all this stuff online. You've got a basic textbook that you wrote, you need to put that online as well, which he had already done. You know, this is, we're talking more than 30 years ago.

[Interviewer]

Wow.

[William Bernstein]

And you do that and pretty soon you find that you're getting called by journalists, you're getting called by other investors, and one thing leads to another and the next thing you know, you're managing money and writing books.

[Interviewer]

So what was the, what was the moment when this went from I need to take control of my own finances to, hey, maybe I don't want to be a neurologist anymore. Maybe my career lay in managing money for other people?

[William Bernstein]

Well, there are two kinds of doctors. The overwhelming majority of doctors, probably, you know, 60, 70% of them realized by age 50 or so that it's a tough game and they're going to get very tough.

[Interviewer]

And it's gotten worse, hasn't it?

[William Bernstein]

It has not gotten any easier, that's for sure. And they're going to get out of it as soon as they can afford to do it. And, you know, and then a third of them are the kinds of, you know, doctors, God bless them, who love what they do and get carried out feet first at age 78 or so.

[Advertiser]

Wow.

[William Bernstein]

And I fell into the first category. So when the opportunity came to do something that, you know, put me into contact with very intelligent people all day long having fun conversations and dealing with fun concepts, then I left it the chance.

[Interviewer]

So at what point did you say, hey, this is going to become financially remunerative and I'm not just giving up a well paying job, although it comes with a lot of student loans and obligations and debt. How long did it take you to reach that point where, oh, I can make a go of this?

[William Bernstein]

It took about three or four years from the time the first book came out and, you know, it became apparent that I could make a decent living managing money in writing. You know, I mean, who doesn't want to make their living, you know, writing? I mean, that's, that's everybody's dream job. And I, it fell into my lap, I guess.

[Interviewer]

So A, you're preaching to the choir. But B, most people don't love writing. And what's kind of interesting is how solitary the process of writing is. And all of us who write in public do so for that back and forth, for that conversation. For you, writing became a pathway to a career change. I had the same sort of experience. Did you have any doubts or fears? How did you manage that?

[William Bernstein]

Oh my God. I have a full, I still have a full blown case of imposter syndrome.

[Interviewer]

Really?

[William Bernstein]

Oh my God, yes, of course. You know, I mean, I think I told you maybe several years ago about the experience I had of getting invited to a conference that was hosted by the dni, the Directorate of National Intelligence. And here I am, you know, with these spooks and four stripers talking about national security. I mean, if, you know, if that doesn't induce, you know, a full blown case of imposter syndrome, I don't know what, what does.

[Interviewer]

See, my assumption is that they're bringing someone in from a different field because very often knowledge, adjacency, and just seeing the world from a different perspective can provide insights to them.

[William Bernstein]

I mean, with luck, maybe that happened. I don't know that it actually did. The way I dealt with it as I picked the subject, which was as remote from modern geopolitics as I can find. So I talked about the strategy, the geostrategy of the Athenian Grain trademark.

[Interviewer]

Huh. Fascinating. And these guys aren't experts in that sort of history and they're obviously military and national intelligence repercussions to that. So I don't, I don't understand this imposter syndrome you're, you're referring to. But, but let's talk about other mistakes. You know, did you, when you made this transition, were there mistakes made? How did you recover from them? How did you get past sort of being a novice with a non traditional background in the world of investing?

[William Bernstein]

Well, you know, before I took, started to take finance serious seriously, I made all the mistakes that rookie investors make. I invested in hot funds, I played futures. And you know, experience is a fine teacher. So you learn from those things. And of course I learned. You know, in the past 20 or 30 years, I absorbed certain truths that I really didn't understand when I started out.

[Interviewer]

I love, I think it's Howard Marks, his line, experience is what you get when you don't get what you want. That right? Seems, seems kind of appropriate. So, so along the line, what sort of tools did you create? Did you develop systems for managing assets and dealing with Clients or checklists, everybody has their own set of tools they use. What did you create?

[William Bernstein]

Well, I had an interesting experience which is, you know, very early on I understood the importance of maintaining a policy allocation and rebalancing towards it. So when one asset class did particularly well, you bought, you sold it to sell it down to its policy. And when it did poorly, you did the opposite. You bought and went back up to your policy. And one of the funds that I used was the old Vanguard Precious Metals fund, which back in the day was a real honest to God, low cost gold and precious metals equity fund. And what I found was that simply by rebalancing it, the internal rate of return I got out of it was about 5% higher than the, than the dollar weighted, excuse me, the time weighted return. So in other words, I had a positive gap, not a negative G. And I wanted to know where that 5% came from. It didn't matter how I did it, whether I balanced monthly or quarterly or annually or I used thresholds year after year, that 5%. Some years it was 4%, some years was 7%, but it averaged around 5%. Couldn't figure out where it came from. So I worked out the canonical math of it. Okay, and if you understand the mathematics of rebalancing where that bonus comes from, then you understand asset allocation. And if you understand asset allocation, you understand finance. It's just that simple. So that's, that was, that was sort of, that was, that was, that was sort of the, the insight that I had early on that enabled me to write about finance.

[Interviewer]

So, so to oversimplify that tool, when you're rebalancing, you're selling a little bit of what got expensive, you're buying a little bit of what got cheap. And is that where the magic percentage came from, where the bonus came from with precious metals?

[William Bernstein]

It sure does. And precious metals is a, is a special case. It doesn't work quite as well for more common, the more common asset classes. But the really nice thing about gold and precious metals is that it is subject to animal instincts. So there are some time periods when you simply can't give gold or precious metals equities away. And people are saying this really doesn't belong in your portfolio anymore. I would read experts talking about, yeah, gold, gold and precious metals really doesn't belong in your portfolio anymore. And then you have other times when the gold bugs are hopping, the dogs are quacking, and they have to be fed. And those are the times when you feed them and you sell them and you sell your, your precious metals and your, your, your, your precious metals equities. I mean, there was a. I saw a wonderful article in the Journal a couple of weeks ago.

[Interviewer]

I saw that. I know where you're going.

[William Bernstein]

Yeah. And I saw this John Paulson, right? Yeah. And. Well, it was that and it was about him and a number of other people. I think it's the same article you're talking about. And I saw a wonderful three word term which is first time investor. Anytime you see first time investor, you know, around an asset class, you know that things are getting really frothy.

[Interviewer]

So the funny thing is, as soon as I saw that Journal article that referred to after the big short where Paulson, it was really one of his lieutenants is the guy who created that bet. Paulson just was the owner of the firm. And Pagani, Paganini is the guy who had done that bet, made an ungodly amount of money and rolled it into gold. And that was 15 years ago. And the Journal is saying the trade is finally working out. I'm like, trade? It's 15 years. The S and P has outperformed performed gold over the past 15 years by like 5x. How is this anything but a disastrous trade? That's a little less disastrous.

[William Bernstein]

Yeah. It's funny that you mentioned that because almost exactly 15 years ago, Jason Zweig interviewed me about Ron Paul's portfolio, which was very heavy in gold and precious metals. Now the article came, I believe, at the end of 2011 when gold was coming off of a run of very.

[Interviewer]

High 1900 and change or so, if memory serves.

[William Bernstein]

Yeah. And, and, and you know, Jason and I just got absolutely flamed in the comments section of that article. It verged, you know, pretty much towards overt antisemitism and spots and, you know, Jews and gold and all that. And, and that was, that was a pretty good marker. And that was exactly the same time period that you're talking about. You start from 2011, it was a disaster. You start from 2015. Gold's done very well. Thank you. But gold looked very different in 2015 than it did at the end of 2011.

[Interviewer]

Huh. It's pretty amazing that. I guess my, I used to think people's definition of long term was too short. Like when someone says, well, I'm a long term investor, I'm going to invest for a couple of years, I'm like, no, no, you got to think in terms of decades. And now 15 years is a trade that has worked out. It's really kind of amusing. But let's Bring this back to your career change. There are very specific skills that you bring to the table as both a medical doctor and a neurologist. Any of those skills transferable? How did you leverage that?

[William Bernstein]

Well, you would think that being a neurologist would help you with behavioral finance. It really doesn't because the everyday practice of neurology has almost nothing to do with, are relatively little to do with, with behavior. I, I, the kind of neurology I did is something that's referred to disparagingly in the parade is chicken neurology. Which is, which is necks and backs. Okay.

[Interviewer]

Necks and backs. Okay.

[William Bernstein]

Yeah. And the way, you know, people talk to me about the neurosciences and about all these brilliant people, you know, Kahneman and Firsty and Spare, Sperry and Gazzaniga and what I like to say is no, those guys are, you know, da Vinci and Michelangelo. You know, I was Sherwin Williams. So it really didn't, it really didn't help me all that much. Where it did help me was the basic scientific training. It caught me respect for, for data and for updating your priors when, when the data contradict your, your deeply held beliefs. Maybe your deeply held beliefs need to be reevaluated.

[Interviewer]

Well, that's always a challenge. So, so let me throw out a touchy question at you. Doctors have a notorious reputation amongst finance people for being terrible investors. And my pet thesis is their nurses and staff all look up to them. Their patients think they're God. How on earth can those people bring any level of humility to a world that is so unknown and so challenging. Indexings is an admission. I'm not going to be a Warren Buffett or Peter Lynch. I'm not going to be a stock pick or a market timer. What's your experience dealing with doctors? Because you clearly don't fit that stereotype amongst a lot of financial advisors. No. Doctors can be difficult.

[William Bernstein]

That's a fair, that's a fair observation. Surgeons tend to be more overconfident than medically oriented physicians.

[Interviewer]

Hey, we're cutting a person open and we think it'll all work out. How can you not be overconfident?

[William Bernstein]

Exactly. And then, you know, there's the gender aspect of it as well, which is male doctors are much worse. Most people are happier, by the way, with female doctors, probably for the very same reason. As one of my neurological colleagues once, a female neurological colleague. Colleague once told me that testosterone does wonderful things for reflex time and muscle mass. But for judgment, not so much. Now that's, that's Half of it. It's the overconfidence aspect. But the. The real reason, and I think actually even the bigger reason why physicians do so poorly is they don't treat it like a serious subject. Okay. You know, you wouldn't, you know, before you're even allowed near a patient, you have to master the basic sciences. You know, your anatomy and your physiology and your pharmacology and so forth. And they never bother to take the time. And the way I expl to them is without treating finance as a serious subject worthy of academic study, they're trying to do brain surgery by reading USA Today. It just doesn't work.

[Interviewer]

Huh. That's. That's really, really insightful. So, last question. If someone were going to ask you for advice about undertaking a career change, what sort of advice would you give them?

[William Bernstein]

Well, it's. It's a complex bit of calculus, which is that you. You do have to be financially secure to change your career. Okay. One of my favorite New Yorker cartoons is the typical, you know, homeless guy in the street with the tin cup and his sign says, followed my bliss. All right, so don't. Don't follow your bliss when you're, when you're too young, you know, if you have to spend 10 or 20 years doing something you don't like to become financially secure. And you understand that money doesn't buy things, it buys time and autonomy. Get that time and economy and become financially secure, and then you can do whatever the hell you want to do.

[Interviewer]

Great stuff, Bill. Thanks. We have been speaking with William Bernstein, co founder of Efficient Frontier Advisors and author of so many great books on economic history. Birth of Plenty, splendid exchange. Masters of the word, Delusions of crowds, on and on. You're listening to Bloomberg's at the money Doctor.

[Podcast Host]

Doctor, give me the news. I've got a bad case of loving you. No pills gonna kill my bad case. Love you.

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[William Bernstein]

No.

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