Doctors’ Money

While responding to a comment to another post from a couple of days ago, PG was reminded of a term, “Doctors’ Money.”

This is an example of a cognitive error often called, “transference of expertise.”

From Perceptual Edge:

People sometimes claim expertise in one field based on experience in another. This is a fallacious and deceitful claim. I have extensive experience in visual design, but I cannot claim expertise in architecture. Any building that I designed would most certainly crumble around me. I’m a skilled teacher, but this does not qualify me as a psychotherapist. That hasn’t stopped me from occasionally giving advice to friends, but without charge, which probably matches its worth. Although these fields of endeavor overlap in some ways, expertise in one does not convey expertise in another. No concert violinist would claim the transfer of that virtuosity to the saxophone, but IT professionals sometimes make claims that are every bit as audacious.

Link to the rest at Perceptual Edge

Basically, as stated at greater length above, the error is that someone who is an expert in one field of endeavor believes she/he is also an expert in another field.

As a baby lawyer working in a securities law firm a long time ago, PG learned that the term, “doctors’ money”, when applied to a stock or a company meant the equivalent of “dumb money”.

Because of a doctor’s extensive education and intellectual abilities in the medical field, many doctors felt their innate intelligence was such that they could listen to a description of a newly-public company or one that was planning a public offering of its stock in a year or so and discern which companies’ stock prices were certain to appreciate. If a startup company was backed by a lot of investments by physicians, this constituted a warning flag for more savvy investors.

There was also a herd phenomenon that sometimes occurred when one doctor found what he/she believed was an excellent investment and told professional associates and friends about it and those people bought the same stock.

2 thoughts on “Doctors’ Money”

  1. Without naming any names, about two decades ago a client came to me for advice about a sham vanity press (or is that vanity sham press?) run on the Dorothy Deering model. It was related to crime novels, which is ironic enough. The client knew little or nothing about publishing, although he knew a lot about crime: He was a judge.

    He was smart enough to recognize that something was amiss after only sinking a few thousand dollars into the scheme, and he had kept good enough records that I was able to help him get out of the contracts with the scheme. But the context was new enough to him that, even as a judge who heard some criminal matters, he didn’t recognize a scheme drawing from one that was undoubtedly criminal (including criminal conviction of its principals).

    So one need not go as far as medicine to find sophisticated, intelligent victims of financial cons (and, with all due respect to the securities bar, the difference between a “con” and a “sophisticated cutting-edge securities offering” is more often than not post-offering luck that makes the result acceptable for the latter). And finding victims of cons in an industry as devoted to secrecy as publishing is easy.

    • Agreed, CE.

      Then there is the experience of representing a doctor who is giving a deposition or testifying in court.

      “If you can answer a question accurately with a simple yes or no, that’s all you need to say.”

      “Listen to the question carefully, then provide an accurate answer to the question asked. You don’t need to elaborate once you have done that.”

      “Make sure you listen to the question carefully to make certain you understand it. It’s no problem if you take a moment to collect your thoughts before you start to speak.”

      “If you don’t understand a question, say so. It’s counsel’s job to ask questions in an understandable manner.”

      “If I object to a question by opposing counsel, please stop talking and wait until I complete my objection. Unless I tell you you can go ahead and answer the question, wait until the next question and answer that one.” (Or, in court, wait for the judge to rule on the objection. If the judge sustains my objection, don’t say anything until you get a new question.)

      I always thought that doctors made the worst witnesses (and clients) until I was retained to represent a lawyer. The judge explained that my client was a witness and that, as a witness, he couldn’t make an objection to opposing counsel’s question.

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