By Dr. Francis Bayes, WCI Columnist
If wealth creation is the goal, American white coat investors would be the object of envy for their international counterparts.
Many American WCIs have worried about the US dollar losing its global currency reserve status (aka “de-dollarization”), Social Security, and debt-to-GDP ratio. They also have concerns about physician compensation due to factors such as “scope creep” and private equity firms. Regardless of their validity, many American WCIs should not wish they were earning and investing somewhere else.
As this is a financial blog, today I’ll compare the US to other countries in terms of how much physicians earn and how they can turn income into wealth. This column is not a comparison of healthcare systems, nor is it an exhaustive comparison of other factors that influence spending—such as childcare, healthcare, and work-life balance.
Before I start the comparisons, I should provide some background.
I was born in the US but grew up in an East Asian country. My parents are from the latter, and my father is a physician who is nearing retirement in his country. His career had its highs and lows and skews my perspective of my home country’s specific healthcare system, retirement system, and economy. Despite my additional independent research, this column might not be as generalizable to non-East Asian countries.
With the disclosures out of the way, we will start from the most obvious to the least obvious blessings for which American WCIs should be thankful.
The “Obvious” Tier
American Physicians Have the Highest Compensation
In 2021, Medscape released an international version of its annual physician compensation report, and American physicians reported the highest average compensation.
A 2021 report from the Organisation for Economic Co-operation and Development (OECD) shows the ratio of physician remuneration to an “average wage.” It also does not include remuneration of American physicians. But by using various sources such as the BLS, Medscape, and OECD, I calculated the ratio for general practitioners and specialists in the US to be around 3.5 and 4.9 times higher than the average wage, respectively. The ratios for the US are likely lower than those of some countries because the average wage in the US is the highest in the world (as per OECD).
One might take the last point to suggest that becoming a physician in the US is not worthwhile because Americans have more alternative careers with a high income. Well, there is no guarantee that an average physician would have become skilled and smart (and lucky) enough to reach managerial positions at software companies (in reality, one’s average tenure is short) or to be a partner at financial or consulting firms. Physician compensation may not have the longest tail, but its bell curve is likely narrower than other high-income careers despite the inter- and intra-specialty differences.
One might also suggest that the compensation is higher in the US because medical schools are more expensive. But this comparison focuses on white coat investors who want to create wealth. If you are a WCI, you would have paid off loans after living like a resident for a few years as an attending. By taking advantage of the following blessings, American WCIs will likely come out ahead.
More information here:
The “If You Know, You Know” Tier
Not Worry About Currency Risk
Just look at this chart from this Wall Street Journal article on the “King US dollar”:
Or this chart from another WSJ article on the King US Dollar from 2023:
The share of US dollars in foreign exchange reserves is down to 58% from 65% in 2016, but it is still more than all other currencies combined. Even though the US share in international trade is less than half, about half of global trade involves the US dollar because even non-US companies conduct trades in the US dollar. In fact, a WSJ article from 2021 notes that the current share of US dollars (the high 50s) is back to where it was in the mid-1990s.
The same 2021 article points out that the falling value of the US dollar encourages foreign countries to buy US Treasuries to stabilize their own currencies (because of the US dollar’s aforementioned role in global trade). Such increased demand would decrease the Treasury yield, thereby increasing the value of US Treasuries and also the demand for riskier assets with higher expected returns (mainly, stocks). Contrary to popular perception, a weaker US dollar should not be a major concern for “buy-and-hold” American white coat investors.
But their international counterparts cannot ignore the value of the US dollar when they invest, even with a buy-and-hold strategy.
Not Worry About “Foreign Investors”
Most investors have a home country bias. For example, US stocks are 75% of an average American investor’s equity holdings, even though the global market weight of US stocks is around 58%. Based on the chart below from Schwab, it might be safe to assume that the average allocation to the domestic market is overweight compared to its global market weight in every country.
Whether American WCIs should have international stocks has been previously discussed and is beyond the scope of this column. The only consensus seems to be that the lack of international diversification is not a red flag. After all, many US companies are multinational, and the US stocks and bonds (given their liquidity and track record) would be included in an internationally diversified portfolio in most countries.
But international WCIs do not have such luxury to only own domestic holdings. If they want to buy foreign stocks and bonds, they have to worry about the currency exchange rate. Based on Vanguard’s research (see Figure 3 of its report), an appropriate allocation to non-domestic markets is not an inconsequential matter (vs. simply a tool for risk minimization). Finally, their domestic markets are often at the mercy of foreign investors and sometimes influenced by seemingly arbitrary decisions.
For instance, South Korea has the 10th-largest nominal GDP in the world. Its GDP per capita is 2.8 and 15.8 times greater than that of China and India, respectively, and comparable to that of Italy. But the Morgan Stanley Capital International (MSCI) still considers South Korea as an emerging market, and thus, South Korea is included in popular emerging market ETFs such as IEMG. This is costly for South Korean WCIs! The difference in assets under management (AUM) of developed market and emerging market index funds shows how developed markets attract more investments. As the Financial Times Stock Exchange (FTSE) considers South Korea as a developed market—even while the South Korean government and corporations could carry out reforms to meet the MSCI’s criteria—the designation seems arbitrary and outdated.
Direct Access to the Safest Liquid Asset
Even though this column is publishing today, I wrote it in May 2023 . . . did we default? Whether we did or not, foreign investors will continue to buy US Treasuries. Since the S&P downgraded the credit rating of the US government in 2011 in light of brinkmanship over the debt ceiling, they have continued to buy US Treasuries for safety. Until they stop buying, American WCIs who want to match their liabilities with assets can buy US Treasuries and receive interest in the currency with which they earn and spend.
But just as we overweight domestic stocks, we overestimate the risk of domestic problems. Consider why international white coat investors would need to diversify their safe assets with US Treasuries just as they need to diversify their risky assets: (1) Military invasion against European countries (from Russia), South Korea (from North Korea), and Taiwan (from China); (2) Aging population for European and East Asian countries; (3) Dependency on the US economy for Canada, Mexico, and other major trading partners. I predict that such issues would be more difficult to resolve than any issue that could make US Treasuries less appealing as a safe asset.
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The “You Have No Idea” Tier
More Money, Less Problems
Physician shortage and burnout are huge issues in the US, but they are not as severe as they are in Asia-Pacific countries due to a combination of: attitudes toward vocations and apprenticeship, financial incentives within the single-payer system, and lack of protection for physicians.
American physicians have to manage patients with complex comorbidities, but once they are attending physicians, they do not have to work as much as their Japanese counterparts who treat one of the longest-living and healthiest populations.
Neurosurgery and cardiothoracic surgery are two of the highest-paying specialties in the US and fill their residency slots with the most competitive applicants. Not so in South Korea where they are two of the least popular specialties because of inadequate compensation and the high likelihood of medical dispute.
American physicians may feel they are expendable and viewed as service workers, but various surveys still show that physicians are one of the most respected and trusted professions. Chinese and Indian physicians have to worry about physical and verbal violence that might lead to death. Unsurprisingly, given a lower language barrier, India supplies the largest number of international medical graduates in the US.
The “Your Mileage May Vary” Tier
Access to Premium Travel Products
If you want to maximize benefits with credit cards, then the credit card issuers in the US have something for everyone. If you want premium travel benefits, such as free lounge access and business class flights, no other country can match the range of credit card options in the US. Even specific cards have vast differences in signup bonuses, earning rates, and other statement credits between the US and UK versions.
Access to Diverse Financial Products
The US may not yet have a Bitcoin ETF (which exists in Canada and Europe), but the US has no shortage of financial products that can meet various investor’s needs and preferences. If an American WCI wants to buy private real estate, farmland, art, or other alternative assets, they can use a domestic firm or platform. Granted, such financial products may not be better than plain vanilla Fidelity brokerage accounts and Vanguard index funds.
Winning the “Ovarian Lottery”
American WCIs won the “ovarian lottery” (a thought experiment that Warren Buffett popularized). In fact, I won the Mega Millions and not just a scratch-off ticket because many of us were luckier than the average American. Despite the drawbacks of the US healthcare system and economy, I hope that this column broadens our perspective so that we can be (1) more sympathetic toward our domestic colleagues who immigrated from other countries and (2) more generous in supporting public health issues that our international colleagues have to face day-to-day.
If you’re an American white coat investor, do you feel like you won the “ovarian lottery?” If you’re from another country, what are your thoughts? Comment below!