The Shocking Truth About Investing and Optimism

The Shocking Truth About Investing and Optimism

optimisimAs an investor, optimism achieved through sharper thinking may help you increase your profits. Edward de Bono invented thinking protocols called Lateral Thinking, and one particular protocol, Six Thinking Hats, is especially useful for improving critical thinking.

In my previous post, I discussed the first of these thinking hats, White Hat thinking. White Hat thinking is all about focusing on facts and figures, understanding what information is missing and needed, and separating facts from opinions. It hones in on relevant information and evaluates the accuracy of information.

Edward de Bono’s second hat, the Yellow Hat, also has important parallels between chess and investing.

What is Yellow Hat Thinking?

Yellow Hat thinking focuses on values and benefits. It discerns how information contributes and why it may be rewarding. As a result, Yellow Hat thinking is optimistic. It essentially asks, “What is good about this information?” and “How will it benefit me and others?” Yellow Hat Thinking asks the basic question of why something might be valuable and why something might work out.

In chess, focusing on values and benefits can make you a champion because when you have a solid understanding of them, you can gain incredible self-confidence. A Russo-German chess grandmaster, Efim Bogoljubow (1889- 1952) won many events and even played against Alexander Alekhine for the world championship. His incorrigible optimism and unquestioning belief in his own ability may have contributed to his becoming the fourth strongest player in the world during the 1920s. This was no mean feat considering that the top three players in the world at that time were Emmanuel Lasker, Jose Raul Capablanca, and Alekhine!

Similarly, in investing, using Yellow Hat thinking can make you outstanding. Investors who focus on values, benefits, and why something might just work are less likely to stick with a sinking ship. By constantly examining the value of your investments, and adjusting your strategy accordingly, you can always stay ahead. Yellow Hat investors also don’t focus on the memory of bad investments. What’s more, they are also more likely to listen to good recommendations. Finally, they realize that although not all investments are winners, wealth and success is possible in the long run if you have enough patience and self-discipline to ask the right questions.


Yellow Hats focus on understanding why something is valuable is fundamentally optimistic. A chess player using Yellow Hat thinking may be able to discern the value of a few good moves and win. In investing, a Yellow Hat thinker who understands the value and benefits of a successful company may prosper. Think for a moment of Warren Buffett. He has made a fortune from noticing value and discerning benefits.

Does this mean that pessimism is unwarranted in chess or investing? No, but that’s another type of hat, and we have 4 more hats to go. Keep following this blog to understand how the 6 Thinking Hats work in a synergistic way.