E. T. A. Hoffman first published his fantastical short story The Sandman in 1817 in a book of stories entitled Die Nachtstücke, in English, The Night Pieces. The short story focuses on a young man named Nathaniel who, after being reminded of a childhood trauma involving the Sandman, gradually loses his mind. The narrative is remarkable for its use of fantastical elements, including vivid hallucinations as well as a mute girl, Olympia, who turns out to be an automaton. In his essay entitled The Uncanny, Freud famously analysed the protagonist's psychological stress with regard to the pervading theme of eyes as an expression of the fear of castration present in all young boys. For the more "timid" reader, it is more useful to view the events of the story as an allegory illustrating Nathaniel's inner struggle.
Clara’s postulation that “perhaps there does exist a dark power which fastens on to us and leads us off along a dangerous and ruinous path”  both foreshadows and provides and explanation for the allegorical nature of the story’s events. The dark power she refers to is the Sandman/Coppelius/Coppola character, whose presence in the narrative is always accompanied by tragedy for Nathaniel. Nathaniel believes himself to be under the Sandman’s spell; his life altered by a dark power that acts beyond his control.
Clara, however, presupposes two conditions necessary for such an evil to have a hold on a person: that the evil “have assumed within us the form of ourself, indeed have become ourself”  and that the person does not “possess a firm mind […] strengthened through living cheerfully” . The first condition constitutes the backbone of “The Sandman”; the narrative centers on the transition between the Sandman as a figure of legend in Nathaniel’s childhood to the Sandman as a figure so in control of Nathaniel’s psyche that the latter will throw himself off of a tower to his death. The importance of this transition is further highlighted when Clara elaborates that a struggle must “take place before [the evil] can achieve that form which is […] a mirror image of ourself” .
This passage of Clara’s letter explains the meaning of the story’s events as elements of the battle over Nathaniel’s soul, a struggle between the evil in him, represented by the Sandman, and the good in him, represented by Clara, Spalanzani and Siegmund. The traumatic encounter with Coppelius and Coppola and the happy times spent with Clara fall into place when viewed as allegory for this conflict. In addition, Clara’s explanation grants meaning to the elusive character of Olympia, who for all intents and purposes is the mirror image of Nathaniel himself. She too possesses a good side, i.e. her creator Spalanzani, and a bad side, i.e. her other creator Coppola; indeed she is the extension of the struggle for Nathaniel’s soul. When Coppola rips Olympia away from Spalanzani and carries her off, the dark power has all but won this struggle by finally becoming Nathaniel’s mirror image; the very situation Clara warned against in her letter.
Though the dark power of the Sandman was responsible for fulfilling Clara’s first condition by assuming Nathaniel’s form, Nathaniel himself is to blame for fulfilling the second condition by not possessing a firm mind and not living cheerfully. Nathaniel continues to believe in the evil powers of the Sandman even when given every opportunity to live cheerfully. When he goes to visit Clara “the figure of the repulsive Coppelius [grew] dim in his imagination […] it often required an effort to bestow life and colour upon him” . Nathaniel consciously makes this effort, producing a vivid poem about Coppelius and thereby actively engaging in self destruction. Unlike Clara, the embodiment of all the good in Nathaniel, Nathaniel himself does not possess a firm mind and cannot bring himself to live cheerfully. He therefore is unable “to recognise an inimical influence for what it is”  and thereby allows the Sandman to gradually win the aforementioned struggle for his soul.
In conclusion, Clara’s letter warning Nathaniel about the conditions necessary for a dark power to possess a person went unheeded, but it nonetheless serves as an explanation of “The Sandman” for the reader. An otherwise chaotic story, when viewed through the lens of allegory as Clara suggests, becomes a fierce, complex battle for Nathaniel’s soul, one which he will allow the dark power to win.