How Warren Buffett's optimism has helped him succeed

Warren Buffett

Columbia psychologist Heidi Grant Halvorson says there is a dangerous side to optimism that can prevent you from reaching your goals.

"Optimism is a huge asset," Melinda Gates writes in this year's Bill & Melinda Gates Foundation annual letter addressed to Berkshire Hathaway CEO Warren Buffett.

"We see this in you, Warren. Your success didn't create your optimism," she writes. "Your optimism led to your success."

In her book "Nine Things Successful People Do Differently," Heidi Grant Halvorson, a social psychologist and associate director of the Motivation Science Center at Columbia University notes the difference between realistic optimists, like Buffett, and unrealistic optimists.

"To be successful, you need to understand that vital difference between believing you will succeed and believing you will succeed easily," Grant Halvorson writes.

She describes this as the difference between being a realistic optimist and an unrealistic optimist.

Realistic optimists, the author writes, believe they will succeed but also understand they have to strategize, put in effort, plan and be persistent in order to overcome any obstacles and get things done.

Meanwhile, Grant Halvorson underscores how unrealistic optimists believe that success will happen to them as a reward from the universe for all their positive thinking.

When data scientist Michael Toth performed a sentiment analysis on Buffett's annual Berkshire Hathaway shareholder letters from 1977 to 2016, he found that Buffett has an impeccable ability to balance both optimism and realism.

While the vast majority of shareholder letters spanning the past 40 years were positive, the only five negative letters aligned with negative, recession times in the U.S.

"To me this communicates that even in negativity, Buffett is thinking about solutions and charting a path forward," Toth tells CNBC Make It. "When things are going poorly, he's comfortable admitting that and he's comfortable telling others both when Berkshire's performance is bad and when the broader market is bad."

Buffet managed to remain transparent through his realistic optimism with company stakeholders.

But "visualizing effortless success," Grant Halvorson notes, "can be disastrous."

"People who are confident that they will succeed and equally confident that success won't come easily put in more effort, plan how to deal with problems before they arise and persist longer in the face of difficulty," the author writes.

To become a realistic optimist, the author suggests you not only maintain a positive outlook, but also run an honest assessment of the challenges you might face.

"Don't visualize success," the author writes. "Visualize the steps you will take in order to make success happen."

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