I recently attended a weekend conference focusing on family, legacy, and wealth. There were a lot of rich people there, but there weren’t a lot of doctors.
There were some doctors, though. Several were there because they heard about the event through this website and associated Physicians on FIRE and fatFIRE Facebook Groups. I had let people know I’d be attending the DLP Prosperity event in Asheville, and a handful of folks decided to meet me there. We were treated very well, the speakers were amazing, and you can’t beat the price of free membership (for PoF readers) when others are paying $5,000 or more!
One of the speakers that weekend actually is a doctor, although, like me, he’s reached financial independence and hasn’t seen an O.R. in a couple of years.
His name is Tom Burns, MD, an orthopedic surgeon who authored the newly released Why Doctors Don’t Get Rich.
After his talk about living life beyond the spreadsheet, a presentation in which he came across as the most humble orthopedic surgeon ever to walk this earth, I had a chance to sit down and chat with him for a while, and I hope to do so again soon.
One would expect a guy who named his website richdoctor.com to come across like, well… a rich doctor, which, in my estimation, is not a flattering term. You know, the type with the red Lamborghini sporting vanity “RICH DOC” license plates. Instead, Tom Burns is a soft-spoken, mild-mannered soul with a self-deprecating sense of humor.
He’s also extremely well-traveled, having been a physician for the US Ski Team for years, and he has a strong sense of what’s important in life. When his colleagues put their careers and income first, he started looking for a way to leverage his career to better prioritize his young family and free time.
That search led him to the concept of passive income, a journey that was bolstered by a book purchase at a Texas car wash in 1997. Apparently, he was the first person in the world to buy a self-published book from an unknown author named Robert Kiyosaki.
He read it cover to cover, flew out to meet the author weeks later, and the two have remained friends for over 20 years. The first Rich Dad Poor Dad reader became a Rich Doctor. The moniker makes more sense in that context.
How Dr. Burns Got Rich
If you know anything about Robert Kiyosaki’s approach to wealth, then you probably know that real estate played a prominent role in Tom Burns’s path to riches.
He started small. In his talk, he showed us a picture of a run-down house with a cell tower next to the garage. It was his first rental home, and while the rent for the home wasn’t much, the money he got from AT&T made the place a great investment.
He also admits to making numerous mistakes over the years, always learning from them. Eventually, he and partners of his would build large residential housing complexes and even a hospital. Today, as a co-founder of Presario Ventures, he helps manage a 9-figure real estate portfolio.
While his passive income eventually eclipsed his physician income, he continued to practice on his own terms for a number of years, having retired from medicine only recently at about the age of 60. He wrote Why Doctors Don’t Get Rich to help others reach their goals while hopefully making fewer mistakes than he did.
So Why Don’t Doctors Get Rich?
“You see, as physicians, we were never taught to be rich. We were taught to be “poor.” – Tom Burns
Dr. Burns says that “poor” doctors live pretty well, but they spend what they earn, leaving little room to become truly wealthy. They must work indefinitely, often with long, arduous workdays, to maintain that standard of living.
Meanwhile, a rich doctor “is financially educated, enjoys freedom of choice, and lives life with purpose, passion, and service.”
He’s right. Most doctors receive no formal education in business or personal finance. Too many of us start living “the good life” with all of its trappings before we truly have the means to afford it. Delayed gratification gone wild.
Focusing on long-term goals like financial independence and its many benefits will serve physicians much better than directing income towards short-term wants (often confused with needs). Dr. Burns wrote this book for many of the same reasons I started this website in 2016. We’ve realized there’s a different way of living that will leave physicians feeling more fulfilled.
We do take different approaches, though. His focus has been largely on passive income and cash flow. I prefer to look at net worth and total return. He does state several times in his book that either approach is acceptable and that neither is necessarily better. He simply prefers the former approach, whereas I prefer the latter.
About the Book
He takes us through the process of understanding why we need rich doctors and why you should personally aspire to meeting his definition of rich.
He devotes a chapter to mindset and personal development, areas that were a focus of several talks and workshops at the conference we attended together, and topics that are rarely emphasized to physicians.
The heart of the book is devoted to teaching the reader the rules of the money game: how to think about different investments, mitigate risk, manage taxes, and protect your assets. He brings in a couple of experts to write a few pages devoted to their particular areas of expertise.
Dr. Burns closes with a chapter summarizing a wide range of investments, including real estate, business ownership, “paper assets” (I hate that term (see below)), gold, oil and gas, agriculture, insurance, and art.
I appreciate how the author touches on philanthropy numerous times throughout the text. I can imagine it’s hard to feel rich if you’re not willing and able to share some of your wealth with others.
Another approach I particularly like is his explanation of the “I” in Kiyosaki’s E/S/B/I quadrant LINK. The “I” is for Investor, but you can also think of it as becoming an Insider, or someone who knows his or her niche well and has made solid connections to others in that space.
I feel that starting this website has made me an Insider. As a result, I’ve had an incredible number of opportunities I would not have had otherwise. This includes investment opportunities, free books and courses, and the opportunity to attend DLP’s event (an opportunity you all now have — the next one’s in November) where I met Tom Burns and was among dozens to pick up complimentary copies of his and other books.
Where We Differ
I do highly recommend this book, but I want to dig a little deeper into some differences that I touched on above.
It makes perfect sense that Dr. Burns advocates for real estate investing. It’s what made him a rich doctor. To what extent survivorship bias plays a role is difficult to estimate, but there are plenty of would-be real estate investors who were wiped out in the Great Recession. An anesthesiologist friend of mine was among them; he filed for personal bankruptcy after a commercial real estate venture went south on him.
Remember that a 50% drop in the stock market cuts the value of your stocks in half, but a 30% drop in the value of real estate when you’re 70% leveraged oon it leaves you with nothing.
To the author’s credit, he does write extensively on how to mitigate known risks by talking to the right people, asking the right questions, using leverage appropriately, and generally performing adequate due diligence. Of course, the biggest risks are the unknown and unforeseeable risks, like credit default swaps toppling a house of cards or a year-long moratorium on rent collection or evictions.
The stock market burns people too, and Dr. Burns has been a victim of the “paper asset” markets, having bought into the hype by loading up on individual tech stocks in the late 1990s. The risk of massive losses in the stock market can also be mitigated by avoiding individual stocks, investing in broad-based index funds, and staying the course through bear markets, but there’s not a lot of talk of that in this book.
His bias against the stock market is clear when he puts quotes around the word “investing” when discussing making investments in the stock market. I think that’s a disservice to the reader to cheapen a mode of investing that takes little effort and has enriched millions of people.
I feel the same about anyone using the dismissive term “paper assets” to describe stocks, bonds, and the funds that hold them. Behind those shares and notes, which were once printed on paper but are now issued electronically, are factories, products, offices, and employees who create the items and services that we all rely on day in and day out.
Meanwhile, real estate remains represented by actual paper, the deed of which is used as proof of ownership. But the brick, mortar, wood, and steel that’s used to build the factories and office buildings of thousands of publicly traded companies is every bit as real as the materials used to build other (often the same) types of investable real estate.
Perhaps it’s just semantics, but I view “paper assets” as misguided and tired terminology that’s used primarily by those who profit from the promotion of real estate.
Evidence of an anti-stock-market bias is also evident in the brief and misinformed section on average stock market returns. He correctly states that the stock market has returned about 10% annually over the last century. The compound annual growth rate (CAGR), also known as the geometric mean or actual return, of the S&P 500 over a 100-year period ending June of 2021 has been 10.8%.
He then explains, correctly, how your actual return on investment (i.e. CAGR) can be lower than the average return when calculated by taking the arithmetic mean of the annual returns. A 50% loss followed by a 50% gain gives you 25% less than you started with. The arithmetic mean of a 50% loss one year and a 50% gain the next may be 0%, but the calculated CAGR would correctly show a loss of 25%.
What he fails to explain is that the long-term stock market returns reported by any credible source will be the accurate CAGR, not the arithmetic mean calculated by adding the annual returns and dividing by the number of years as he does in his example. The returns of about 10% over a century that he mentions are true returns of a dollar invested over that timeframe.
To be precise, $1,000 invested in June of 1921 would now be worth $48,839,145 at the 10.845% CAGR the stock market has returned (assuming no tax drag in a tax-advantaged account). Adjusting for inflation, that $1,000 in 1921 had the buying power of about $15,200 in 2021, so in real (inflation-adjusted) terms, the equivalent of a thousand 2021 dollars in 1921 (about $66 then) would now be worth about $3.2 Million today. Past returns don’t predict future results, but the stock market has done amazing things for those of us who have invested through thick and thin.
He also talks about egregious fees of up to 11.85% that can be encountered by investing in the stock market when adding up front-end loads, expense ratios, management costs, and other miscellaneous fees. He forgot to mention that all of these can be avoided by investing in low-cost index funds with fees of under 0.1%.
Why leave out that very important detail? It’s not exactly a secret that a DIY investor can put together an extremely diversified portfolio with thousands of stocks and bonds for a few basis points. I also didn’t see a comparison to the fees of real estate investments, which are often a few percentage points (that is, a few hundred basis points), although I will say that it’s not an apples-to-apples comparison.
Finally, the tax advantages of real estate investing are championed, and admittedly, there are many. However, any mention of tax loss harvesting, tax gain harvesting, the backdoor Roth, or the 0% capital gains bracket were conveniently left out of the stock market section.
Where We Agree
To be honest, there were only a few pages on the stock market in the entire book, and they were about as fair and balanced as the television channel that claims to be, but I thought the other 98% of the book was fantastic. Tom Burns is an excellent writer who gives the reader much to ponder and improve upon.
The chapter on developing a rich mindset is full of sage advice. Just look at the headings. Reign in Your Ego. Cultivate Humility. Have a Positive Attitude. Develop Discipline and Good Habits. Always Be Growing. If you skip these steps, you may find that your actions later on don’t get you the results you’re looking for.
When defining wealth, he talks about capital. I used to think of capital as another word for money, but Dr. Burns talks about 8 types of capital: financial, living, material, knowledge, emotional, social, cultural, and time. Having an abundance of multiple types of capital leads to a richer life than having lots of money but little else.
Similarly, I typically think of leverage in terms of borrowed money, but we are reminded that we can also leverage time, knowledge, experience, relationships, and technology to reach our goals more effectively. This is sage advice.
As physicians, we have targets on our back — not only for lawsuits, but also for investment scams and lousy investment products. The author reminds doctors of the bullseye they all carry and advises them to become educated in financial matters. I couldn’t agree more.
The Real Reason Doctors Don’t Get Rich
The reason many doctors will never be rich is that they don’t take the time to read a book like this. They don’t think enough about what matters most in life and how to prioritize those things. They don’t have a roadmap to wealth or a mentor to guide them.
Write down your goals and dreams. Figure out what steps you need to take to achieve them and start taking them without delay.
Remember that it takes more than just money to live richly. Figure out what your rich life looks like and take action. This book will help you take that much-needed first step.