Taylor has related different versions of what the song is about.
On the VH1 series Story Tellers, Taylor said the song was actually about several incidents during his early recording career. The second line of the song, "Suzanne the plans they made put an end to you," refers to Suzanne Schnerr, a childhood friend of his who committed suicide while he was in London, England, recording his first album. In that same account, Taylor said he had been in a deep depression after the failure of his new band The Flying Machine to coalesce (the lyric "sweet dreams and Flying Machines in pieces on the ground"; the reference is to the name of the band rather than a fatal plane crash, as was long rumored). In 2005, during an interview on NPR, Taylor explained to host Scott Simon that the song was written in three parts:
The first part was indeed about Taylor's friend Suzanne, who died while Taylor was in London working on his first album after being signed to Apple Records. Friends at home, concerned that it might distract Taylor from his big break, kept the tragic news from him, and he only found out six months later.
The second part details Taylor's struggle to overcome drug addiction and depression.
The third part deals with coming to grips with fame and fortune, looking back at the road that got him there. It includes a reference to James Taylor and The Flying Machine, a band he briefly worked with before his big break with Paul McCartney, Peter Asher, and Apple Records.