One day, a man hears of a strange race at the track where only one horse will run. No competitors, no rivals—just one horse on an empty track. The man, astonished, reaches an obvious conclusion: If there is only one horse, it must win.

So, he does exactly what you’d expect: he goes all in. He sells everything he owns, takes a mortgage on his house, and borrows from friends and family. He cuts back on food and daily expenses, hoarding every bit of cash he can find. On race day, he puts every cent on that one horse. He doesn’t even buy a hot dog; he’d rather bet the money instead.

As he daydreams about the watches and cars he’s about to buy, the starting gun fires. The gates open. The horse bolts, charges down the track, turns left, jumps over the fence, and disappears into the horizon. It is never seen again. There is no winner in the one-horse race, and the man loses everything.

I heard this story from the acclaimed investor Howard Marks, and it provides an excellent lesson on the nature of risk and uncertainty. No matter how certain you feel, risk can appear in ways you can never predict. This is especially true in markets and businesses, which are influenced by countless variables—many of which remain invisible until it’s too late.

Political decisions are a prime example. In 2025, Donald Trump’s tariff announcements shocked global markets and disrupted decades-old supply chains. Companies that looked stable one week suddenly faced soaring costs and fleeing customers, forced to choose between raising prices or shutting down.

Operational risks provide another source of surprise. There are business owners who focused on perfecting their products and marketing, only to see millions of pesos in inventory wiped out by unprecedented flooding in their warehouses during typhoon season.

Then there are the external shocks that defy all expectations. Before the COVID-19 pandemic, restaurants, malls, and hotels were viewed as steady, predictable businesses with long track records of profit. Within weeks, revenues collapsed to zero. It wasn’t bad management that caused the damage; it was an event few had anticipated.

Similarly, most local luxury companies are well-managed and possess great brand recognition. Yet, the 2025 flood control scandal was a completely unexpected turn of events that drastically reduced their revenues. Even when everything looks great, the horse can always jump the fence.

The real danger in these cases is the same: the belief that nothing can go wrong. When you believe success is certain, you become comfortable taking on leverage, concentrating bets, and ignoring small probabilities. This only increases the damage when disaster strikes. Always be open to the possibility of failure. Even small probabilities matter when the downside is total; a one percent chance of failure is not “small” if failure means losing everything.

To protect yourself, you must spread your risks deliberately across companies, industries, and asset types. Invest under the assumption that any single asset can go to zero for reasons you haven’t even thought of yet. Assume that things you can't even imagine right now will happen, and that they will be a complete surprise when they hit. Diversification is your primary insurance against being wrong in ways you couldn’t have imagined.

The man in the one-horse race did not lose because he was unlucky; he lost because he believed certainty existed. When you invest knowing things can go wrong, you behave differently. You position smaller, you think deeper, and you focus on surviving rather than just maximizing returns.

The goal is not to eliminate risk—that’s impossible. The goal is to survive long enough to benefit from compounding. Stay safe, and no matter how sure you feel, always invest as if the horse might just jump the fence.