What moral hazard causes — people take more risk when they don't bear the full consequences

What adverse selection is — bad risks are more likely to seek insurance than good risks

Adverse selection: High-risk individuals disproportionately purchase insurance

What Buffett means by 'Only when the tide goes out do you discover who's been swimming naked'

Exposes investors' lack of prudent risk management

What the risk-free rate represents — return on a theoretically riskless investment (Treasury bills)

The risk-free rate is the return on investments with minimal risk, like Treasury bills

What the endowment effect causes — you value what you own more than what you don't

The endowment effect leads to overvaluation of owned items compared to identical alternatives

What moral luck challenges — we praise/blame people for outcomes they couldn't fully control

Moral luck questions the fairness of praising/blaming based on outcomes beyond one's control

What deflation causes — falling prices discourage spending as consumers wait for cheaper goods

Deflation leads to decreased consumer spending due to anticipated lower prices