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

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.

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)

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)

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)

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)

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)

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)

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)

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)

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.

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.