Does Wearing a Black Hat Make Your Money Disappear?

Does Wearing a Black Hat Make Your Money Disappear?

black hat thinking The human brain can think in a number of ways about any particular piece of information. Edward de Bono identified six distinct ways of thinking that he calls “6 Thinking Hats.” In my previous post, I talked about how Yellow Hat thinking focuses on discerning investment values and benefits. Today, I want to continue this discussion on thinking styles.

We will now look at Black Hat thinking. This thinking style is all about discernment. It looks for reasons to be conservative and cautious. If Yellow Hat thinking tends to be optimistic, then Black Hat thinking leans towards pessimism.

As a chess player, Black Hat thinking makes you sit on your hands when you see an opportune move. However tempting it may be to make the move, Black Hat thinking forces you to think why your opponent has given you the opening, and causes you to realize that what looks like a gift is really a trap. By thinking pessimistically you end up saving yourself.

Similarly, an investor wearing a Black Hat may be able to avoid common investment traps. If an investment looks too good to be true, it most probably is. Using Black Hat thinking, you should look for reasons why the idea may not work.

Examples of Black Hat Thinking

Tigran Petrosian, a Soviet Armenian Grandmaster and a World Chess Champion from 1963 to 1969, was famous for his Black Hat style of play. He was called “Iron Tigran,” because he played with such a cautious style that his defense was considered almost impenetrable.

In his book, How to Get Rich, Donald Trump offers some classical Black Hat type of philosophy: he advises investors to be optimistic and bold… but to also prepare ahead by contemplating worst case scenarios.


Using Black Hat thinking, you can avoid making blunders by scanning for possible problems, seeking flaws in possible plans, and exploring reasons strategies might fall apart. While Black Hat thinking may not be an exciting way to play chess or to invest, it can save you from a world of hurt. There are three more hats to go in this series. Keep on reading here to find out how using the Six Thinking Hats can make you a better investor.

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