Virtue

The Virtuous De

What is left when Tao is lost

Tao Te Ching, Chapter 38. Every rule in your handbook is a fossil of a trust that failed.

Strategy · Part VI · CEO-Strategy.nl

An organisation that has to publish its values has already lost them.

That is the argument of Chapter 38, and it is the most uncomfortable text in Chinese thought for anyone running a company. It doesn't ask whether your values are the right ones. It treats the act of declaring them as the symptom.

The chapter

上德不德是以有德。 High virtue is one who is virtuous and not being vainglorious, then one is virtuous.

下德不失德是以無德。 Low virtue is one who does not discredit himself of being virtuous, then one is not virtuous.

上德 [無為] 而無以為。 High virtue is one who is Wu Wei, then one has no intentional desire.

下德 [無為] 而有以為。 Low virtue is one who is Wu Wei, then one has intentional desires.

上仁為之而無以為。 High benevolent is one's action has no intentional desire.

上義為之而有以為。 High righteousness is one's action has intentional desires.

上禮為之而莫之以應， High etiquette is one's action with nothing in return,

則攘臂而扔之。 Then, raised one's arm to force others to obedient.

故失道而後德。 Therefore, one who lost Tao then become virtuous.

失德而後仁。 One who lost virtue then become benevolent.

失仁而後義。 One who lost benevolence then become righteous.

失義而後禮。 One who lost righteousness then become polite.

夫禮者忠信之薄而亂之首。 Hence, politeness is the lack of trust; it is the head of calamity.

前識者， The so called prediction,

道之華而愚之始。 It is the vanity of Tao and the beginning of one's ignorance.

是以大丈夫，處其厚，不居其薄。 Therefore, as a great man who dwells in truthfulness but not what is artificial;

處其實，不居其華。 Place oneself in a more realistic world rather then dwell in an extravagant one.

故去彼取此。 Therefore, discard the latter and keep the former.

Annotation to line 16. Artificial here means hypocritical. Fake. Not truthful. This is not an aesthetic preference for plain over decorated. Lao Tzu is not recommending minimalism. He is saying the ornamental version of a thing is the dishonest version of it, and that a leader who lives there is living in a lie.

The virtue that doesn't announce itself

Lines 1 and 2 are the whole chapter in miniature. High virtue does not perform virtue, and therefore has it. Low virtue will not let go of the appearance of virtue, and therefore has none.

Enron issued a sixty-four page Code of Ethics in July 2000, built on four values: respect, integrity, communication, excellence. Ken Lay's foreword said the company's reputation for fairness and honesty depended on every employee upholding it. Employees were given a folding cube to help them remember the four words. Fourteen months later the company was bankrupt.

Wells Fargo put its Vision and Values booklet in the hands of every employee while branch staff opened millions of accounts that customers had never asked for. John Stumpf quoted from it publicly and often.

The point is not that stating values causes fraud. The point is the direction of the relationship. The volume of declaration is inversely proportional to the presence of the thing declared. The statement is not evidence of the virtue. It is compensation for its absence.

There is a test in this, and it takes about ninety seconds. What does your company keep saying about itself? Which words appear on the wall, in the deck, in the induction pack, in the CEO letter? Whatever they are, look there first. That is the thing you do not have.

The companies that genuinely have it don't need the poster. Nobody puts up a sign saying we have chairs.

Wu wei with an agenda

Lines 3 and 4 make a distinction that most translations flatten. High virtue is wu wei with 無以為, nothing behind it. Low virtue is wu wei with 有以為, something behind it.

From the outside both look identical. Same restraint, same delegation, same refusal to force. The difference is entirely internal, and it is total.

The CEO who delegates because he trusts, and the CEO who delegates because delegation reads well, have the same calendar. They are not doing the same thing. The second one is still in the room. His absence is a message he is sending about himself, and everybody can feel it.

Line 5 and line 6 continue down: benevolence acts with nothing behind it, righteousness acts with something behind it. Righteousness is the leader who does the right thing and requires that it register as the right thing. He needs the act witnessed. He needs credit for the difficult decision, sympathy for its cost, acknowledgement that he could have chosen otherwise.

The organisation always knows which one it has. Not by analysis. By the body, in the first three seconds. That is Taking the Fifth territory, and the two chapters belong together.

The descent

Lines 9 to 12 are the spine.

Lose Tao, and what remains is virtue. Lose virtue, and what remains is benevolence. Lose benevolence, and what remains is righteousness. Lose righteousness, and what remains is etiquette.

Read it as a ladder and it looks like a moral hierarchy. Read it as a diagnostic and it becomes something more useful: each rung is what an organisation falls back on after the rung above it fails. Direction, then character, then care, then principle, then procedure.

Which means the handbook is an archaeological record.

Every policy in it is a scar. Somebody did something, trust broke, and a rule was written to hold the place where trust used to be. The expenses policy is a monument to a specific expense claim. The approval matrix is a fossil of one judgement call that went badly. The sign-off threshold has a person's name behind it, though nobody remembers whose.

None of those rules are wrong. They are just expensive, and they are evidence. A company that needs three layers of approval to spend four thousand euros is not being careful. It is telling you, in writing, exactly where along that descent it currently stands.

Count the layers. That is your position on the ladder. Adding another one is not a solution, it is the next step down.

The raised arm

Line 7 says high etiquette acts and receives nothing in return. Line 8 says it then grabs the arm and drags people into line.

That sequence is worth reading twice. Ritual is performed, nothing comes back, and the response is force.

The mandatory culture programme. The all-hands where attendance is tracked. The values training with a completion percentage on a dashboard. The engagement survey that is anonymous and also, somehow, chased. The moment a culture needs an attendance register, it is not culture. It is etiquette with a raised arm, and every person in the building understands the difference perfectly.

Then line 13, which is the hardest sentence in the chapter: politeness is the thinness of loyalty and trust, and the head of disorder. 亂之首. Not a symptom of disorder. Its head. Where it starts.

A polite boardroom is not a neutral condition. It is a measurable absence. Nobody says the true thing in the room, and everyone has the real conversation in the corridor afterwards. When a leadership team tells me it has a communication problem, the communication is never the place to look. The politeness is.

Foreknowledge is the flower

Lines 14 and 15 belong on the inside of a boardroom door. 前識, foreknowledge, prediction, is the flower of Tao and the beginning of stupidity.

This is not an argument against planning. It is an argument against mistaking prediction for perception.

Philip Tetlock ran forecasting tournaments from 1984 to 2003 with 284 experts, government officials, professors, journalists, people paid to comment on political and economic trends. They produced around 28,000 forecasts. They came out only slightly better than chance, and usually lost to simple extrapolation. The more confident and more famous the forecaster, the worse he tended to do.

The five-year plan is a flower. It is beautiful, it is admired, it justifies the quarter in which it was produced, and it has no fruit in it. It describes a world that does not exist yet and may not arrive. Meanwhile the actual situation, the one with a fruit on it, is in the building today and is being ignored because it doesn't match the model.

The Mandate of Heaven put it in plain language: the leader who needs to know before he moves will always be late. Chapter 38 puts it in six characters and adds the sting. Foreknowledge is not merely useless. It is where ignorance begins, because it replaces the thing it was supposed to serve. You stop looking, because you already have a number.

Thick and thin

大丈夫, the great man. He dwells in the thick and not in the thin. In the fruit and not in the flower.

Come back to the annotation. Artificial means hypocritical. So the flower is not just decoration, it is the lie. The polished narrative, the deck, the values page, the forecast, the performance of leadership. Each of them is a claim about a reality that isn't there, and dwelling in them is not a stylistic weakness. It is dishonesty that has become comfortable.

Then line 18, and it is not a compromise. 去彼取此. Discard that. Take this. Not balance. Not both. Discard.

For a chief executive, that is the story you tell about the company. This is what is happening in it on a Tuesday afternoon, in this market, with these people, at this cost, right now.

Chapter 38 does not tell you to become virtuous. It tells you that the effort to appear virtuous is proof that you are not, and that every layer of process you have added is a receipt for something you lost further up.

The work is not to add a layer. It is to find out which rung you are actually standing on, and to stop calling it the top.

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