Do Not Trust, Verify

Reading Time: 4 minutes

We at Santa Economy were thinking long and hard how to kickoff this blog and we eventually came to realisation that probably the best thing to kickoff with will be with a abridged (shortened) version of the original fairytale – The Emperor’s New Clothes by Hans Christian Andersen.


Trust, but verify comes from an old Russian proverb and became widely known in English speaking world because of Ronald Reagan. I suppose we came to a point where you simply do not trust but actually have to verify.

Keep in mind that where is smoke there is fire and while stories might be bent and twisted here and there as they were passed from one person to another this story is actually based on events that supposedly happened in 11th century^ – that’s almost 1000 years ago and they indeed remain true to this day.

The Emperor’s New Clothes (Abridged Version For Busy Adults)

There was an Emperor, who was so excessively fond of new clothes, that he spent all his money in dress. One day, two rogues, calling themselves weavers, made their appearance and they manufactured clothes from which should have the wonderful property of remaining invisible to everyone who was unfit for the office he held, or who was extraordinarily simple in character.

“I will send my faithful old minister to the weavers,” said the Emperor at last, after some deliberation, “he will be best able to see how the cloth looks; for he is a man of sense, and no one can be more suitable for his office than he is.”

So the faithful old minister went into the hall, where the knaves were working with all their might, at their empty looms. “What can be the meaning of this?” thought the old man, opening his eyes very wide. “I cannot discover the least bit of thread on the looms.” However, he did not express his thoughts aloud.

The impostors requested him very courteously to be so good as to come nearer their looms; and then asked him whether the design pleased him, and whether the colors were not very beautiful; at the same time pointing to the empty frames. The poor old minister looked and looked, he could not discover anything on the looms, for a very good reason, viz: there was nothing there. “What!” thought he again. “Is it possible that I am a simpleton? I have never thought so myself; and no one must know it now if I am so. Can it be, that I am unfit for my office? No, that must not be said either. I will never confess that I could not see the stuff.”

“Well, Sir Minister!” said one of the knaves, still pretending to work. “You do not say whether the stuff pleases you.”

“Oh, it is excellent!” replied the old minister

Note In plain English: This Emperor had no clue what he was doing and he delegated the task on his trusted officer. The officer didn’t have a clue either but at the same time didn’t have the balls to give the truth to his Emperor.

The story continues and eventually another trusted officer is sent to do the same task and he comes back with same result – everything is fine.

And now the Emperor himself wished to see the costly manufacture, while it was still in the loom. Accompanied by a select number of officers of the court, among whom were the two honest men who had already admired the cloth, he went to the crafty impostors, who, as soon as they were aware of the Emperor’s approach, went on working more diligently than ever; although they still did not pass a single thread through the looms.

“Is not the work absolutely magnificent?” said the two officers of the crown, already mentioned. “If your Majesty will only be pleased to look at it! What a splendid design! What glorious colors!” and at the same time they pointed to the empty frames; for they imagined that everyone else could see this exquisite piece of workmanship.

“How is this?” said the Emperor to himself. “I can see nothing! This is indeed a terrible affair! Am I a simpleton, or am I unfit to be an Emperor? That would be the worst thing that could happen—Oh! the cloth is charming,” said he, aloud. Eventually he puts on the clothes and asks “Do my new clothes fit well?” asked he, turning himself round again before the looking glass, in order that he might appear to be examining his handsome suit.

The lords of the bedchamber, who were to carry his Majesty’s train felt about on the ground, as if they were lifting up the ends of the mantle; and pretended to be carrying something; for they would by no means betray anything like simplicity, or unfitness for their office.

Certainly, none of the Emperor’s various suits, had ever made so great an impression, as these invisible ones.

“But the Emperor has nothing at all on!” said a little child.

“Listen to the voice of innocence!” exclaimed his father; and what the child had said was whispered from one to another.

“But he has nothing at all on!” at last cried out all the people. The Emperor was vexed, for he knew that the people were right; but he thought the procession must go on now! And the lords of the bedchamber took greater pains than ever, to appear holding up a train, although, in reality, there was no train to hold.

Closing Thoughts

If you have a minute, we strongly recommend reading the story in full or listen to its audiobook version (see references below). This is definitely one of the stories you want to read to your children as bed time reading.

Do you think that nowadays large corporates operate in a different way than those two individuals did about 1000 years ago? How about Enron (2001)? WorldCom (2002)? Freddie Mac (2003)? Kmart (2005)? Madoff (2008)? Toshiba (2015)? Libor manipulation (2015)? The list goes on^.

Everybody pretends everything is fine while very often the opposite is true. Few people want to find the truth and to get to the bottom of it. Sometimes out of fear, sometimes because of laziness, stupidity or outright fraud…

The thing is – if you want to look and pay very close attention to the events around you then you can be the first to profit off it and therefore gaining for yourself the biggest rewards. Obviously this also bears the biggest risk in case you get it wrong.

If nothing else this post should remind you to not blindly trust anyone but rather always verify yourself and trust only your own judgment.

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