ATM: How to Change Careers Dr. Bill Bernstein (May 7, 2025)
How often have you thought about making major change in your career?
Full transcript below.
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About this week’s guest:
Dr. William Bernstein is the author of numerous books, including mostr recently, “The Delusions Of Crowds: Why People Go Mad in Groups.” His firm, Efficient Frontier Advisors manages $400 million in client assets ($25m minimum).
For more info, see:
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TRANSCRIPT:
Intro: “Doctor, doctor give me the news, I’ve got a bad case of lovin’ you, No pill’s gonna cure my ill, I’ve got a bad case of lovin’ you…”
How often have you thought about making a major change in your career?
You’re going 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 Crowds. 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?
Bill Bernstein: Heavens, no. At least I, I didn’t expect that that was going to happen. I happened to live in a country that, uh, 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.
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. hat 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.
Barry Ritholtz: 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 skillset, maybe I could share this with other people.
Bill 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 advocates. He was another financial advisor.
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. This is more than 30 years ago. And you do that, and pretty soon you find that you’re getting called by journalists. You’re getting called by investors, and one thing leads to another. And the next thing you know, you’re managing money and writing books.
Barry Ritholtz: 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.”
Bill Bernstein: Well, there are two kinds of doctors. The overwhelming majority of the doctors probably, you know, 60, 70% of them realize by age 50 or so, that it’s a tough game and they’re gonna get out it (Very tough; and it’s gotten worse, hasn’t it?) 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. You know, doctors, God bless them, who love what they do and get carried out feet first at age 78 or so. (Wow) 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 leapt at the chance.
Barry Ritholtz: So at what point did you say, “Hey, this is gonna become financially remunerative and I’m not just giving up, well-paying job, although it comes with a lot of student loans and obligations and debt, I. How long did it take you to reach that point where, oh, I can make a go of this?”
Bill Bernstein: It took about three or four years from the time the first book, uh, came out and, you know, it became apparent that I could, uh, make a decent living, managing money and writing, uh, you know, I mean, who doesn’t wanna make their living, you know, writing, I mean, that’s, that’s everybody’s dream job. And it fell into my lap, I guess.
Barry Ritholtz: So, A, you are 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 a career change. I had the same sort of experience. Did you have any doubts or fears? How did you manage that?
Bill Bernstein: Oh my God, I have a full, I still have a full blown case of imposter syndrome. (Really?!) Oh my God, yes, of course. Uh, 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 Director of National Intelligence.
And here I am, you know, with these spooks and four stripers, talking about national security. I mean, if, if, if, you know, if that doesn’t induce, you know, a full-blown case of impostor syndrome, I don’t know what does.
Barry Ritholtz: See my assumption is that they’re bringing someone in from a different field, ’cause very often. Knowledge adjacency and just seeing the world from a different perspective can provide insights to them.
Bill 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 trade.
Barry Ritholtz: Fascinating. And these guys aren’t experts in that sort of history and they’re obviously military re and, and national intelligence repercussions to that. I don’t understand this imposter syndrome you’re referring to, 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?
Bill 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, you know, experience as a fine teacher. 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.
Barry Ritholtz: I love, I think it’s Howard Mark’s line “Experience is what you get when you don’t get what you want.”
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?
Bill Bernstein: 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, you, 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.
One of the funds that I used was the old Vanguard precious metals equity 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 about 5% higher than the time weighted, uh, 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 use thresholds. Year after year, that 5%, some years it was 4%, some years was 7%, but averaged around 5%.
I couldn’t figure out where it came from; so I worked out the canonical math. 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 was, that was sort of, that was, that was, that was sort of the insight that I had early on that enabled me to write about finance.
Barry Ritholtz: 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?
Bill Bernstein: With precious metals. It sure does. Precious metals is a special case.
Doesn’t work quite as well for the common, the more common asset classes. But the really nice thing about Gold & 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, you know, talking about gold, golden metals really doesn’t belong in your portfolio anymore.
And then you have other times when, you know the gold bugs are hopping, uh, 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 novels in your ear.
Your, your, your precious metals equities. I mean, there was a, I saw a wonderful article in the journal a couple of weeks ago. (I saw that. I saw, I know where you’re going – John Paulson, right?) Yeah. And I, 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 free 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 fun.
Barry Ritholtz: 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, Pellegrini is the guy who had found the trade, made an ungodly amount of money and rolled it into gold. And that was 15 years ago. The journal is saying the trade is finally working out. I’m like, trade, it’s 15 years. The S&P has outperformed gold over the past 15 years by like 5X. How is this anything but a disastrous trade that’s now a little less disastrous?
Bill Bernstein: It’s, it’s funny that you mention that because almost exactly 15 years ago, Jason 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 nine, 2011 when gold was coming off of a run of very high return (1900 and change or so if memory serves?).
And you know, Jason and I just got absolutely flamed in the comment section of that article. It verged, you know, pretty much towards overt antisemitism in spots, uh, and, and, you know, Jews and gold and all that. 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. Gold in 2015 looked very different than it did at the end of 2011.
Barry Ritholtz: 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 an investor for a couple of years, I’m like, no, no, you gotta 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, how did you leverage that?
Bill Bernstein: 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, 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 afraid as “chicken neurology” which is, which “necks and backs.”
And, people talk to me about the neurosciences and about all these brilliant people, you know, Kahneman and Ky and Sper, Sperry and Gga. And what I like to say is, no, those guys are, you know, DaVinci and Michelangelo. Uh, you know, I was Sherwin Williams, so it really didn’t, it really didn’t help me all that much,
Where it scientific data. Updating your prior, when, when the data contradict your, your deeply held beliefs. Maybe your deeply held beliefs need to be reevaluated.
Barry Ritholtz: 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 gonna be a Warren Buffet or Peter Lynch. I’m not gonna be a stock picker, or a market timer.
What’s your experience dealing with doctors? ’cause you clearly don’t fit that stereotype amongst a lot of financial advisors who know doctors can be difficult.
Bill Bernstein: That’s a fair, that’s a fair, uh, observation. Surgeons tend to be more overconfident than, than, than than medically oriented physicians.
Barry Ritholtz: Hey, we’re cutting a person open, and we think it’ll all work out. How can you not be overconfident?
Bill Bernstein: Exactly. And then, there’s the gender aspect of it as well, which is male doctors are much worse. Uh, 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 max 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, uh, and so forth.
Uh, and they never bothered to take the time. And the way I explain it. Treating finance is a serious subject, worthy of academic, uh, study. They’re trying to do brain surgery by reading USA today. It just doesn’t work.
Barry Ritholtz: That’s really, really insightful. So, last question. If someone we’re gonna ask you for advice about undertaking a career change.
What sort of advice would you give them?
Bill Bernstein: Well, it’s, it’s a complex, uh, uh, 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. It is sign says, “Followed My Bliss.”
So don’t, don’t follow your list 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.
Barry Ritholtz: 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 are listening to Bloomberg’s At the Money
Outro: “Doctor, doctor give me the news, I’ve got a bad case of lovin’ you, No pill’s gonna cure my ill, I’ve got a bad case of lovin’ you…”
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