Risk often hides in plain sight—unseen until something goes wrong. It’s only when markets crash, companies collapse, or insurers face massive claims that the true extent of risk becomes evident.
Warren Buffett famously captured this idea at the 1994 Berkshire Hathaway Annual Meeting: “You don’t find out who’s been swimming naked until the tide goes out.” He emphasized that this principle applies not only to stocks but also to bonds and reinsurance.
Investors chasing high returns through risky bonds or insurers writing questionable policies may seem smart in calm conditions. But when adversity strikes, those decisions are quickly exposed, sometimes with devastating consequences.
Buffett notes that reinsurance, in particular, can be deceptive. “You can be doing dumb things and not know it,” Buffett warned. “Then all of a sudden wake up and find out the money is gone.”
The takeaway? Risk is often invisible—until it’s too late.
Buffett’s full explanation
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© 2025 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.