For anyone who has read Michael Gerber’s seminal business book, The E-Myth Revisited, the idea of working “in” your business versus working “on” your business should be familiar. It is a testament to the idea’s ubiquity that you may be familiar even without having read his book. In Gerber’s most famous example, someone who is good at baking cupcakes must spend their time learning to run a successful bakery rather than baking delicious cupcakes. However, the concept only holds up as long as the proprietor already possesses some technical mastery in the field.
In our parlance, doctors already know how to doctor, so instead they should focus on learning all the other aspects of running a profitable medical business. Yet what if a medical professional wants to start a non-medical business? Real estate is a popular choice for a physician’s side hustle, but how many doctors have experience across all aspects of real estate investment? Should physicians stick with Gerber’s advice and focus on working “on” a real estate business, or should they instead spend some time working “in” real estate?
The High-Income Paradox
Doctors and other medical professionals typically earn higher incomes than the average American, which presents favorable conditions for investing in real estate. Lenders love to lend to doctors because of their steady employment and high income.
But the flip side of this coin is that medical professionals can usually earn a higher hourly rate by working at their day jobs than by materially participating in a real estate project. In other words, it doesn’t pay a doctor to work “in” real estate when they could make more money by just working a few more hours in the clinic. Many FI podcasters, bloggers, and personalities seem to believe this is true and offer it up as conventional wisdom.
In Episode 716 of the Bigger Pockets Money Podcast, “How We Built a $1M Net Worth by 32”, co-host Scott Trench said: “I want to call out some more things I just love about what you’re doing in a general sense here, right? When you are early in your career, so what are the challenges with real estate investing in a broad sense is that it is not appealing to a doctor or a very high-income earning lawyer because the work that you were doing was probably valued in the $30 to $60 an hour range, right? That’s probably what you could have hired it out for, maybe a little less for some of it, maybe a little more for other parts of it. But if you’re making $50,000 a year, right? Or 25, I don’t know, what was your salary at the time? Is it around $50,000, $60,000?”
I have heard Scott and others use the same talking point repeatedly: that high-income earners are better served by working more in the chosen professions than by working “in” their business. Here is where I believe that Gerber’s axiom and conventional FI wisdom start to fall apart
Notice That Side-Hustle Includes the Word “Hustle”
I am an emergency medicine physician who spent a lot of time doing low-dollar-per-hour manual labor in real estate projects early in my career. That effort laid the groundwork for my current multi-million dollar rental real estate portfolio, as well as a foray into a successful brick-and-mortar business.
If you don’t already have some expertise in the area of your business, you are at a disadvantage. I’m not saying that every physician-real estate investor should also be a mortgage broker, a licensed contractor, and a lawyer, but I am suggesting that you should have a general idea of financing, construction, and your state’s tenancy laws. I’m also suggesting that if you take the standard FI advice regarding high-income earners, you may never have the time to start a successful non-medical side hustle.
Working “in” a non-medical business, at least for a while, provides you with the technical experience you will need to work “on” the business later. It also provides other ancillary benefits from working outside the medical field. As I discussed in a recent guest post on The White Coat Investor, having a hobby is important for physical and mental well-being, and may actually accelerate your path to FI.
Hustling in your business will not pay off immediately, and that is the point. Conventional wisdom is right: there is a better ROI in just working more in medicine initially. However, the hours you put into your non-medical business will multiply and can eventually pay recurring dividends that surpass even your medical income. Welcome to the long game of business.
A Word of Caution
Please note that I am not suggesting that new physicians should be lazy regarding practicing medicine. I firmly believe that all new graduates should live and work like a resident for the first 3-5 years of their careers. You need to see a high volume of patients to excel at your job, and being a great doctor should always be your top priority. Additionally, this plan allows you to save a tremendous amount of money by earning more and spending less before succumbing to the inevitable physician lifestyle creep.
But notice the 3–5-year caveat mentioned above. You can’t work and live like that forever, and this article is not the basics of personal finance, but more of the first step of an advanced playbook.
Why High $/Hr Professionals Should Still Work “In” Their Non-Medical Business
I believe the message that high-dollar-per-hour professionals should “stay in their lane” is incorrect and potentially harmful to FI-minded physicians for the following four reasons.
1. Not Every Physician Can Work Extra
Not every physician can linearly scale their income through working additional hours. Emergency physicians, anesthesiologists, hospitalists, and radiologists can pretty much work as much as they want. There are always more shifts, more on-call time, and more images to read. But primary care clinics have limited hours, and opening on nights/weekends is often not profitable. Work for specialists is also often limited by office hours, OR time, or available patients.
Physicians can choose to work outside their primary job/specialty/area, but these “extra” hours are often done through telemedicine companies, locum tenens assignments, or work at rural hospitals that may not pay as much as their base salary and/or require travel.
2. Just Say No
I didn’t have money growing up, so when I started making $70/hr moonlighting during residency, my attitude was that for that much money, I would see the patients, clean the toilets, and mow the hospital’s grass. Once I started earning $250/hr as an attending, things quickly spiraled out of control.
Despite working 22-25 shifts per month in the ER when the average was around 14, I felt guilty whenever I wasn’t working. Every day off felt like a wasted opportunity, and I began to measure every other activity in terms of how much I was “losing.”
When you grow up without money, this type of thinking can quickly take over your life. A colleague warned me to think of money as “green cocaine” – if you’ve never had any, it isn’t a problem, but once you get a taste . . .
My “addiction” lasted several years until I woke up and realized all the things I had missed.
3. There is a Limit to How Much Physicians Can/Should Work
Doctors don’t work normal hours at baseline. Twenty-three years ago, the ACGME implemented work restrictions, finding that it was harmful to everyone when resident physicians worked more than 80 hours a week. Think about that. They had to pass a law to ensure residents “only” worked twice the normal FT hours.
Limiting the number of hours worked protects both doctors and patients. Taking “call” and performing shift work are especially demanding. The more you work, the more often your sleep patterns are disrupted. Additionally, many medical jobs are mentally and emotionally taxing. In the ER, dealing with human suffering day after day, along with the never-ending pressure to work faster, be nicer, and see more patients while never making a mistake and constantly being prepared for whatever disaster is going to come in next, can make you feel like you’re going crazy. We all need a day off (or two) from time to time.
4. Focus on the Long-Term Benefits
Despite working a lot at the beginning of my career, I still spent many hours rehabbing houses between 2009 and 2016. Without any background in construction, I performed demo, installed flooring, painted walls, scraped popcorn ceilings, hung cabinets, and laid tile. Doing the work myself was beneficial for several reasons, despite my high salary: I saved money, learned new skills, and gained valuable experience for when I eventually hired contractors. Additionally, I found rehabbing homes relaxing compared to medicine, was able to work around my ER schedule, and I used the time doing manual labor to listen to hundreds of hours of business podcasts and audiobooks.
Doctors and other high $/hr earners receive the same benefits from working “in” their real estate projects as do their lower $/hr. counterparts at the beginning of their careers. Eventually, both groups will likely graduate to working “on” their business as I have. We didn’t earn a high income during our residency, yet we learned valuable skills that enabled us to earn our current income. Think of working “in” your business the same way.
Conclusion
I don’t believe I would have been better off financially just working more shifts in the ER. First, I didn’t have the bandwidth to work much more than I was. But I also wouldn’t have learned the skills, developed the relationships, and gained the confidence that enabled me to build my real estate holdings and other businesses. Success begets success.
I don’t think you should work “in” your business forever. Eventually, you must graduate from doing manual labor yourself and focus on management. But I don’t believe that medical professionals should avoid getting their hands dirty simply because they can make more money elsewhere. As long as you have a plan in place that lets you benefit from your effort, it’s a good trade-off.
These days, I only do interior painting because it’s a welcome respite from the stresses of the ER. I can turn my brain off and just roll paint while I listen to music or financial podcasts. Unlike working in the ER, there is a clear beginning and end to the project, and when I’m done, I leave behind something tangible, something that endures – at least for a time. And no one is yelling at me to work harder or be nicer . . . except maybe my wife.