Get a Financial Checkup with Dr. Bernstein

Physician's Money DigestSeptember15 2004
Volume 11
Issue 17

And you think you're busy? WilliamBernstein, MD, of North Bend, Ore, certainlywears a lot of hats these days. He'sa practicing neurologist, a coprincipal inEfficient Frontier Advisors (a money managementfirm based in Eastford, Conn), and also an accomplishedfinancial author.

The Intelligent

Asset Allocator

The Four

Pillars of Investing

The Birth of Plenty—

How the Prosperity of the

Modern World Was Created

The Birth of Plenty

With two previous booksunder his belt, (McGraw-Hill; 2000) and (McGraw-Hill; 2002), his most recenttome, (McGraw-Hill; 2004) waspublished in May 2004 to rave reviews. John C.Bogle, founder and former CEO of the VanguardGroup, says, "Bill Bernsteinhas given us a compact andimmensely readable economic,political, military, andinstitutional history of ourcivilization that is a tour deforce. Put everything elsedown. Take a deep breath.Open .And prepare to be amazed."

Physician's Money Digest

Once a self-taught investor, Dr. Bernstein is considereda financial guru today. Recently, he sparedsome time out of his busy schedule to talk to.

Tell us about your new book. What do youwant fellow physicians to take away from it?

The book documents the sudden explosion inworld economic growth that occurred after1800 and describes its causes and its consequences.From the physician's perspective, the most importantthing to fall out of increased societal wealth is that itresults in citizen empowerment. The effects of thisempowerment are, for the most part, positive. Mostimportantly, a well-fed and housed populace demandsthat the government respect its civil libertiesand maintains the rule of law. But an ever wealthierand empowered citizenry also demands ever moreextensive government services, particularly in therealm of health care. As medical care becomes a governmentmandate and as patients become moredemanding, physicians lose autonomy and the practiceof medicine becomes less rewarding.

The book touches on the interaction of wealthand happiness. Interestingly, most doctors areconsidered "wealthy,"yet we hear a lot about themfeeling increasingly frustrated and dissatisfied.

In general, physicians are pretty well off. Thathides quite a bit of inequity, of course—ingeneral, gastroenterologists, neurosurgeons, andophthalmologists are paid far, far more than pediatricians,neurologists, and family practitioners, forexample. But it's important to remember that wealthis a relative phenomenon; in the words of H. L.Mencken, "A wealthy man is one who earns morethan his wife's brother-in-law."

With so many responsibilities, how much of arole does medicine still play in your life?

It provides my life with meaning, human contact,and a chance to employ a hard-earnedcraft. It's difficult to think of anything more importantthan that.

Within the medical community you encounter,how would you typify today'saverage physician-investor?

The average physician is completely unpreparedto deal with their investments. This isbecause, for some strange reason, they do notapproach investing with the same rigor and effortwith which they approach medical science. A goodphysician is not only well-trained, butalso does not undertake diagnosis and treatment withoutevidence-based guidelines. Investing your hardearnedmoney without learning the basics of financialtheory and history is like practicing medicine withoutstudying anatomy, physiology, and pharmacology.

You must be constantly asked for financialadvice by physicians you work with. What'sthe number-one thing you tell them?

A Random Walk down

Wall Street


Sense on Mutual Funds



I tell my colleagues to consult the classics ofinvesting and to learn as much about themodern science of investing as possible.It's not that hard—BurtonMalkiel's (W. W. Norton & Co;2004), John Bogle's (Wiley;2000), and Roger Gibson's (McGraw-Hill; 2000)are great places to start.

Devil Take

the Hindmost

They should also learn somethingabout financial history sothey don't get snookered in thenext bubble or sell out at the bottom.Ed Chancellor's is a painless way togain exposure to this valuable area.

The Birth of Plenty

To read excerpts from Dr. Bernstein's, visit The book isavailable at

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