This quote is from the philosopher and poet Lao Tzu, who was also the founder of Taoism. There are many legends about him, including one where he rode a water buffalo (see picture on right), that he was born as an old man with a beard, and that he lived nine-hundred and ninety-nine years, but let's look at something that's fairly certain that he wrote:

From Lao Tzu's Tao Te Ching (~6th century BC):
"My words are very easy to understand, very easy to practice.
But no one is able to understand them,
And no one is able to practice them.
Words have authority.
Affairs have ancestry.
It is simply because of their ignorance, that they do not understand me;
Those who understand me are few,
thus, I am ennobled.
For this reason, the sage wears coarse clothing over his shoulders,
but carries jade within his bosom."

If you have read any more of the Tao Te Ching, you'll know that most of it is comprised of small verses like these. They're easy to read and are illuminating, but not always easy to understand. But although the first line of this one is debatable, it isn't too difficult to see the gist of it.
The sage (Lao Tzu, really) has no complicated philosophical advice, and he claims that his words are easy to put into practice. In the Tao Te Ching, we see a lot of Taoist ideas of living in harmony with the world around you and communing peacefully with the Tao, that ineffable principle by means of which everything in the universe exists. These principles are not about changing things externally, but molding oneself internally.
So although the sage's words are easy to understand and practice, few people can do it, because most of us do not have the right mindset. That is my reading anyway, because if people approach this looking for personal gain or some sort of higher qualities, they will not be able to reach the simpler truth of how things are. This is their "ignorance", an ignorance that makes them unable to see the world in a spiritual way (see my previous post for more on this). They are unable to see the way in which the sage's "words" will mold them and their view on life.
Now, why is the sage "ennobled" when few people understand him? Perhaps it is because few people have deeper insights about the world and their place in it, and so in order to truly understand the sage's teachings and to reach towards an understanding of the Tao (though you can never really understand the Tao because it's not something the human mind can grasp), you have to be one of these people. I think that anyone can have these deeper insights, but few take the time or effort to cultivate a more philosophical or spiritual attitude. Thus, to teach it to the few people who do is ennobling, but to teach it to people who would not understand would be wasteful, and those people could try to twist it to suit their own wishes.
My favourite part is the last sentence though: "the sage wears coarse clothing over his shoulders, but carries jade within his bosom." I think the "coarse clothing" is so that the sage does not physically stand out above others, because he too is human like everyone else. Yes, only some people can understand his teachings, but they are all humans and have a deeper connection to each other that can go unnoticed amid the vastly different clothing and worldly statuses of people in the world, in Lao Tzu's time just as much as today.
But despite this, the sage has "jade", a precious stone, inside him, which is a finer spiritual nature. This leads him to pursue a humble life on Earth while still having knowledge of things beyond it. What is important, the state of the body or the state of your soul? Of course, if you are sick and dying, you can't do much philosophy (though Epicurus is a notable exception), but what do riches matter if you are empty and unfulfilled inside? So the sage does not bother to adorn himself, and not only that, he dresses simply to demonstrate that those sorts of things don't matter. He can dress like a peasant, but that does nothing to his inner "jade", the moral and spiritual spark that he cultivates by his philosophy.
This is what truly matters, and this is what will last with the strength of a precious stone, even though coarse clothing will wither over time.


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