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

What does it take to undertake a significant career change? How can you shift from a safe but unsatisfying job into one that you love? William Bernstein, founder of Efficient Frontier Advisors, is both a neurologist and a professional investor. He is also the author of numerous books on investing and economic history, including “The Four Pillars of Investing” and “The Delusions of Crowds.” Each week, “At the Money” discusses an important topic in money management. From portfolio construction to taxes and cutting down on fees, join Barry Ritholtz to learn the best ways to put your money to work. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.

• 0:31Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:13Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 1:54Speaker 02

  If you listen to financial news, you know a lot of time is spent thinking about what's next, the next opportunity, the next investment, the next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at C I N F I N dot com.

• 2:31Speaker 03

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:38Barry Ritholtz?

  How often have you thought about 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.

• 3:17Barry Ritholtz?

  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?

• 3:55Speaker 05

  Heaven's 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, the 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.

• 4:39Barry Ritholtz?

  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?

• 4:57Speaker 05

  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.

• 5:22Barry Ritholtz?

  Wow.

• 5:22Speaker 05

  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.

• 5:36Barry Ritholtz?

  So what was, 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?

• 5:53Speaker 05

  Well, there are two kinds of doctors. The overwhelming majority of doctors, probably, you know, sixty, seventy percent of them, realize by age fifty or so that it's a tough game and they're gonna get out of it.

• 6:04Barry Ritholtz?

  Very tough. And it's gotten worse, hasn't it?

• 6:06Speaker 05

  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 seventy-eight or so.

• 6:23Barry Ritholtz?

  Wow.

• 6:24Speaker 05

  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 at the chance.

• 6:41Barry Ritholtz?

  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?

• 7:02Speaker 05

  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 and writing. You know, I mean, who doesn't want to make their living, you know, writing? I mean, that's everybody's dream job. And it fell into my lap, I guess.

• 7:22Barry Ritholtz?

  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?

• 7:53Speaker 05

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

• 7:58Barry Ritholtz?

  Really?

• 7:59Speaker 05

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

• 8:25Barry Ritholtz?

  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.

• 8:39Speaker 05

  Uh, I mean, with luck, maybe that happened. I don't know that it actually did. The way I dealt with it is I picked a subject which was as remote from modern geopolitics as I can find. So I talked about the, uh, the strategy, the geo-strategy of the Athenian grain trade.

• 8:54Barry Ritholtz?

  Huh, fascinating. And these guys aren't experts in that sort of history. And there are obviously military and, and national intelligence repercussions to that. So, uh, I don't, I don't understand this, um, 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? Um, 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?

• 9:27Speaker 05

  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, and, you know, you know, experience is a fine teacher. Uh, so you learn, 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.

• 9:54Barry Ritholtz?

  I love, I think it's Howard Marks's line, "Experience is what you get when you don't get what you want." Right? Seems kind of appropriate.

• 10:03Speaker 05

  Exactly.

• 10:04Barry Ritholtz?

  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?

• 10:19Speaker 05

  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 lasted 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,

• 11:01Speaker 05

  the internal rate of return I got out of it was about 5% higher than the dollar-weighted, excuse me, the time-weighted return. So, in other words, I had a positive gap, not a negative gap. 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 it 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.

• 11:44Speaker 05

  And if you understand asset allocation, you understand finance. It's just that simple. So, that was sort of, that was sort of the insight that I had early on that enabled me to write about finance.

• 11:57Barry Ritholtz?

  So, to oversimplify that tool...

• 12:01Barry Ritholtz?

  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?

• 12:13Speaker 05

  With precious metals, it sure does. And precious metals is a, is a special case. It doesn't work quite as well for the 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. And I would read, I would read experts, you know, talking about, yeah, gold, golden precious metals really doesn't belong in your portfolio anymore. And then you have other times when, you know, 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, your precious metals, your, your, your, your precious metals equities.

• 12:56Speaker 05

  I mean, there was a, I saw a wonderful article in the journal a couple of weeks ago.

• 13:00Barry Ritholtz?

  I saw that. I, yeah. Where you going?

• 13:03Speaker 05

  Yeah. And I saw this.

• 13:05Barry Ritholtz?

  John Paulson, right?

• 13:06Speaker 05

  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.

• 13:10Barry Ritholtz?

  Yeah.

• 13:11Speaker 05

  I saw a wonderful three-word term, which is first-time investor. Anytime you see first-time investor, uh, you know, around an asset class, you know that things are getting really frothy.

• 13:23Barry Ritholtz?

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

• 14:08Speaker 05

  Yeah, it's funny that you mention that because almost exactly 15 years ago, Jason Zwagi 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 high returns.

• 14:32Barry Ritholtz?

  1900 and change or so, if memory serves?

• 14:35Speaker 05

  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 spots.

• 14:50Speaker 05

  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.

• 15:10Barry Ritholtz?

  Huh. It's, uh, it's pretty amazing that, I guess, 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've 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?

• 15:50Speaker 05

  Well, you would think that being a neurologist would help you with behavioral finance. Uh, it really doesn't because the everyday practice of neurology has almost nothing to do, uh, or relatively little to do with with behavior. Um, I, I, the, the kind of neurology I did is something that's referred to disparagingly in the phrase is chicken neurology, which is Dex and Backs. Okay.

• 16:13Barry Ritholtz?

  Dex and Backs, okay.

• 16:14Speaker 05

  Yeah. And, and, and the way, uh, you know, people talk to me about the neurosciences and about all these brilliant people, you know, Kahneman and Fersky and Sperry and Gazaniga. And what I like to say is, no, those guys are, you know, Da Vinci and Michelangelo. Uh, you know, I was Sherwin-Williams. So it really didn't, it really didn't help me all that much. Uh, where it did help me was the basic scientific training. Uh, it taught 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.

• 16:50Barry Ritholtz?

  Well, that's always a challenge. So, so let me throw out a, a touchy question at you. Um, 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, um, indexing 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?

• 17:35Barry Ritholtz?

  Cause you clearly don't fit that, uh, stereotype amongst a lot of financial advisors. No, doctors can be difficult.

• 17:46Speaker 05

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

• 17:55Barry Ritholtz?

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

• 18:00Speaker 05

  Exactly. And then, you know, there's the, 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 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, 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.

• 18:45Speaker 05

  And they never bother to take the time. And the way I explain it 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.

• 19:00Barry Ritholtz?

  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?

• 19:13Speaker 05

  Well, it's, it's a complex bit of calculus, which is that you, you do have to be financially secure and 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.

• 19:32Speaker 05

  So, don't, don't follow your bliss when you're, when you're too young. You know, if you, 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 autonomy and become financially secure, and then you can do whatever the hell you want to do.

• 19:50Barry Ritholtz?

  Great stuff, Bill. Thanks. We have been speaking with William Bernstein, co-founder of Fish and Frontier Advisors, and author of so many great books on economic history, Birth of Plenty, Splendid Exchange, Masters of the Word, Delusions of the Crowds, on and on. You're listening to Bloomberg's At the Money.

• 20:30Speaker 00

  At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance, and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.

• 21:02Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Millions of Americans are taking peptides, short strings of amino acids that can act as biological signals for cells. Peptides like insulin can occur naturally in the body, or they can be synthetically introduced to induce a biological process, as happens with semaglutide, the active ingredient in Ozempic. Now Bloomberg's Anika Inampudi reports peptides may be exploring their next frontier, the brain. People are taking peptides for mental clarity and cognitive benefits as alternatives to psychiatric medications and to gain a competitive edge or stave off the effects of aging. Both insulin and semaglutide are approved by the U.S. Food and Drug Administration.

• 21:46Speaker 01

  Because importing or selling unapproved peptides for human use is not legal in the U.S., many people turn to online forums for guidance and overseas vendors with questionable credentials to obtain them. Unapproved peptides, which are marketed as research chemicals, have been Circulating in what's become a billion-dollar gray market amid the rise of do-it-yourself medicine as people increasingly turn to social media or artificial intelligence for medical help. Doctors warn against self-experimentation and advise talking to providers before trying any new therapies. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 22:24Speaker 06

  Empower is all about helping you invest well, so you can go out and live a little. And their Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com, not an Empower client paid or sponsored.

• 22:56Speaker 07

  She's been thinking about this sleepover all week, but I think about her food allergies all the time. Fortunately, her doctor prescribed Zolair, omalizumab. It's proven to significantly reduce allergic reactions if a food allergy accident happens.

• 23:09Speaker 08

  Zolair 150mg is a prescription medication used to treat food allergy in people one year of age and older to reduce allergic reactions due to accidental exposure to one or more foods. While taking Zolair, you should continue to avoid all foods to which you are allergic. Don't use if you are allergic to Zolair. Zolair may cause a severe, life-threatening allergic reaction called anaphylaxis. Tell your doctor if you ever had anaphylaxis. Get help right away if you have trouble breathing or if you have swelling of your throat or tongue. Zolair should not be used for the emergency treatment of allergic reactions, including anaphylaxis. Zolair is for maintenance use to reduce allergic reactions, including anaphylaxis, while avoiding food allergens. Serious side effects such as cancer, fever, muscle aches and rash, parasitic infection, or hardened circulation problems have been reported. Please see zolair.com for full prescribing information. Ask an allergist

• 23:51Speaker 08

  about Zolair. This is an advertisement for Zolair, paid for by Genentech and Novartis.

• 23:56Speaker 09

  With ChatGPT, you can do more than get answers. You can get things done. Whether you're leading a big project, planning an elaborate trip, or trying to balance work and life, ChatGPT can help. Give it a goal, plus things like files, notes, or project plans, develop a trip itinerary with daily updates, or create a prioritized schedule, so you can spend less energy sorting out the details and more on bringing your biggest ideas to life. Get started at ChatGPT.com.