The Doubting Thomas Principle: Why Ancient Skepticism is the Most Valuable Asset in Modern Investing
In the fast-paced world of high finance, where deals are closed in minutes and fortunes are made on fleeting data points, it’s easy to believe that the most valuable assets are speed, aggression, and a relentless focus on the future. Yet, a recent letter to the Financial Times by a reader named Joe Keaney offers a profound, two-millennia-old counterpoint. Responding to a report on the alarming decline of due diligence in private equity, Mr. Keaney drily noted: “Sir, Thomas the apostle was the first person to use due diligence.”
This simple, brilliant observation connects the frantic energy of today’s M&A market with a timeless human story. The tale of “Doubting Thomas,” the apostle who refused to believe in the resurrection until he could physically touch the wounds, is often framed as a lesson in faith. But view it through the lens of an investor, and it becomes a masterclass in risk management. Thomas wasn’t being cynical; he was demanding empirical evidence. He was mitigating the monumental risk of misplaced belief by conducting the ultimate form of personal verification.
Today, the spirit of Doubting Thomas is dangerously absent. In a market awash with capital and driven by an intense fear of missing out (FOMO), the foundational practice of due diligence—the methodical process of investigation and verification before a financial commitment—is being compressed, compromised, and, in some cases, abandoned entirely. This blog post explores why this ancient principle of skepticism is more critical than ever for the modern economy, for finance professionals, and for anyone involved in investing.
What is Due Diligence? Deconstructing the Bedrock of Smart Investing
At its core, due diligence is the corporate equivalent of “looking before you leap.” It’s the systematic research and analysis an investor performs to verify the facts and assess the risks of a potential investment. This isn’t just about checking the numbers on a balance sheet; it’s a comprehensive audit of a company’s health, from its financial standing and legal liabilities to its operational efficiency and market position.
Think of it like buying a house. You wouldn’t simply accept the seller’s asking price based on pretty photos. You would hire an inspector to check the foundation, a lawyer to verify the title, and an appraiser to confirm its value. In the world of corporate finance and the stock market, the stakes are exponentially higher, and the process is far more complex.
Due diligence can be broken down into several key areas, each a critical piece of the puzzle. Below is a summary of the most common types:
| Type of Due Diligence | Primary Focus and Key Questions |
|---|---|
| Financial Diligence |
