Why Aren’t Doctors Rich? Goldberg’s Experiment

By Jimmy Turner, MD
The Physician Philosopher

In the 1960’s, Lew Goldberg showed that a physician’s intuition and judgment can be fatally flawed.  Interestingly, the same fatal flaw that was exposed by Goldberg is the same fatal flaw that causes some of the biggest financial mistakes that doctors make with money.  Why aren’t doctors rich?  Psychology has an interesting explanation that everyone should understand.

Tag along as we dive into the mind of physicians and investors, and where those two worlds intertwine.   After the deep dive, we will discuss how to defeat this flaw and set ourselves on a path for financial success.

Goldberg’s Experiment

In the beginning, Goldberg asked several well-trained radiologists how they set out to determine when people had stomach cancer. The doctors explained that there were 7 criteria that they use to make the diagnosis.

Goldberg created an algorithm that would strictly adhere to these 7 criteria.  Thus, he removed many of the psychological hoops that radiologists jump through (and the biases that are produced) when making a decision.

Goldberg didn’t stop here, though.

See, Goldberg was not so much interested in the accuracy of the algorithm.  Instead, he was much more interested in how the physicians came to the diagnosis of malignant or benign in the first place.

So, Goldberg set up an experiment.

In this study, he compared his algorithm, which was built on the criteria provided by expert radiologists, to the radiologists themselves.  He showed dozens of images and asked for a diagnosis.

During the study, the radiologists were also shown duplicate images multiple times during the study.  However, the duplicates were randomly presented and separated by many other images.

The Results

The results were surprising.

First, though the physicians were the ones with the experience and knowledge to provide the criteria, the algorithm outperformed the doctors by a staggering margin.

In fact, the algorithm outperformed all of the clinicians as a group, and even the single most accurate physician involved in the study.

Second, many of the physicians made a different diagnosis based on the same exact image.  In other words, they saw the same image twice and gave a different diagnosis.  Of course, during the testing, they didn’t realize it was a duplicate image.

Third, the accuracy of the judges did not correlate with experience.  The least experienced doctor was just as likely as the most experienced to make the same mistakes.

Irrational Spending in Intelligent People

This study (and many others like it) show that humans are irrational.

While we don’t diagnose stomach malignant processes in the same way today as we did in the 1960s, the point remains the same.  How many times has a bad patient outcome impacted the way that you practice medicine in the future (even if there is no evidence to support the change)?

We all do it (or at least have to actively fight against it).  We make exceptions when we shouldn’t.

Personal finance decisions are no different.  Think about the number of times that you have made a purchase that you regret.

This may be a house, a car, or some designer gadget.

If you think back to how that transpired, there was likely an inner dialogue that explained why “this time” you “needed” the item you bought.  It may have even involved saying those inner thought out loud to your significant other.

This process involves reasoning our way through a purchase.  It’s the same process that happened with the radiologists in the study.  Instead of following their own criteria strictly, they said, “Well, in this specific case I think this criteria is less important than that one.”

Unfortunately, the more intelligent you are the easier it often becomes to “reason” our way to a bad decision.

Why Aren’t Doctors Rich?

Because we are irrational.  Just like everyone else.  But we are also really good at reasoning our way to bad decisions.

The way to defeat our irrational thinking is by creating a rational financial plan that we can stick to – regardless of what is going on. If you want a good place to start, consider reading a great book on personal finance.

You can also defeat your irrational mind by sitting down when you aren’t in a moment of heated passion for a new car, house, or gadget.  Then, spend some time discussing what we want our ideal life to look like using the Three Kinder Questions.

Once the big picture is squared away, we take a look at what is preventing us from getting there.  If you are like most, it probably has something to do with your high debt burden and lack of assets.

So, we create a plan to destroy our student loans, which may involve pursuing student loan forgiveness, refinancing our student loans, or both.

It also likely involves creating a practical investing plan.  This plan should involve “automatic” payments that go into their designated accounts before you even have a chance to screw things up.

This way you can stick to the plan without a chance to rationalize a bad decision.

You can look at the plan and determine the best course of action, because you’ve already outlined it. Just like the algorithm that outlined the criteria for diagnosing cancer above.

Take Home: Simplicity Wins

The doctors in Goldberg’s experiment had the intelligence and education to diagnose cancer.  Actually, they gave him the criteria to make the algorithm in the first place.

Yet, they failed time and time again because they didn’t stick to the plan and reasoned their way to bad decisions.

While we don’t diagnose stomach cancer these days through plain films, these same biased thought processes still exist.

This bias towards reasoning our way to an irrational decision is why simplicity always wins in both clinical medicine and personal finance.  If you can create a “set it and forget it” financial plan that will get you to your goals, then all that is required is to stick to the plan.

This means that there are no “this time it’s different” thoughts or “yeah, but buying this would really help us do that!

As John Templeton so astutely pointed out:

The four most expensive words in the English language are “this time it’s different.”

Don’t fall into that trap.  Create a plan, and then stick to it.  If you do that you’ll be far ahead of your peers.  And, if you learn this skill, you just might be a better doctor, too.

What do you think?  Are there biases that you fight against?  Have you ever regretted a purchase that you rationalized at the time?  Leave a comment below.



  1. Andrew Wilner, MD

    This type of financial plan is great for a stable family.

    The problem with a “stick to it” financial plan is that a balanced budget is a moving target for many people as families grow (marriage, kids, tuition, camp, etc.) then shrink (empty nesters). It’s impossible to “set it and forget it” when there’s a newborn or a kid goes to an IVY league school, not to mention an unexpected illness, or even a job opportunity that requires pulling up roots, moving across the country, selling the old house, buying the new one, etc.

    A balanced budget has a lot more variables than most people realize!

    • ThePhysicianPhilosopher

      Yeah, I think that changes are sometimes warranted, but I think that changes should be made with great caution after careful consideration.

  2. Xrayvsn

    Very interesting experiment by Goldberg and one that I was not aware of.
    The behavior of interpreting films can easily be influenced by outside forces. You have a string of cases with the same finding and you are either more likely or less likely to call it (depending on your take) on the next one.

    Finance and behavior are going to be linked forever and people have exploited that to their advantage. Hopefully people start recognizing it but some innate stuff is tough to overcome

    • ThePhysicianPhilosopher

      For sure. The link is intrinsic, but must be understood. I find the connection fascinating and enlightening, honestly.

      It’s hard to know how to be successful without understanding all the ways we try to undermine ourselves unintentionally.

  3. VagabondMD

    “Rule 1 of Medicine. When things go wrong, blame the Radiologist.” 🙂

    I did not know of the Goldberg study, but to be fair, many of the characteristics of malignancy are quite subjective. Even though there are rules, so to speak, you are often working around grey areas.

    Fortunately, that is not the case in saving and investing. There are no grey areas in the arithmetic.

    Nice article!

  4. Tim

    “Fortunately, that is not the case in saving and investing. There are no grey areas in the arithmetic.”

    Really? Statistically speaking, probability theory would suggest otherwise. I am 100 % certain, maybe on average.

  5. Dr. Cory S. Fawcett

    Nice analysis and application of the Goldberg experiment. I think we have a hard time sticking to plans. Something always comes up and we think we need to alter the plan just this once. Then we do it again and again and soon we realize we never were following the plan.

    I plan to include this in Fawcett’s Favorites this week. Thanks.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

    • ThePhysicianPhilosopher

      Thanks, Cory. Looking forward to the feature!

      Sticking to the plan is the name of the game… But it can be tough!

    • ThePhysicianPhilosopher

      It’s like John Templeton said, “The four most expensive words in the English Language are ‘This time is different.”


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