Only when the tide goes out do you discover who's swimming naked.
Source: Berkshire Hathaway Letters · Risk
Core Idea
Buffett means that during difficult times, weak businesses and risky strategies are exposed, revealing who relied on luck, excess, or leverage rather than true strength and sound fundamentals.
Practical Application
Use strong fundamentals, avoid excessive leverage, and stress-test your portfolio, because when markets fall, only genuinely resilient investments and disciplined strategies keep you from being exposed.
Why It Matters
This quote reveals that adversity is the ultimate audit, exposing hidden fragility and revealing which people, businesses, and strategies are genuinely robust versus merely buoyed by favorable conditions.