HEXAGRAM 07: ORIGINAL, INTERPRETATION AND CASES

HEXAGRAM 07 – Shih - The Army

Above K'UN THE RECEPTIVE, EARTH

Below K'AN THE ABYSMAL, WATER

This hexagram is made up of the trigrams

· K'an, water, and

· K'un, earth, and thus,

it symbolizes the ground water stored up in the earth.

In the same way military strength is stored up in the mass of the people –

· invisible in times of peace but

· always ready for use as a source of power.

The attributes of the two trigrams are

· danger inside and

· obedience outside.

This points to the nature of an army,

which at the core is dangerous,

while discipline and obedience must prevail outside.

Of the individual lines,

the one that controls the hexagram is the strong nine in the second place

to which the other lines, all yielding, are subordinate.

This line indicates a commander,

because it stands in the middle of one of the two trigrams.

But since it is in the lower rather than the upper trigram,

it represents not the ruler

but the efficient general,

who maintains obedience in the army by his authority.

THE JUDGMENT

THE ARMY.

The army needs perseverance

And a strong man.

Good fortune without blame.

An army is a mass that needs organization in order to become a fighting force.

Without strict discipline nothing can be accomplished, but this discipline must not be achieved by force.

It requires a strong man who

· captures the hearts of the people and

· awakens their enthusiasm.

In order that he may develop his abilities

he needs the complete confidence of his ruler,

who must entrust him with full responsibility as long as the war lasts.

But war

· is always a dangerous thing and

· brings with it destruction and devastation.

Therefore it

· should not be resorted to rashly but, like a poisonous drug,

· should be used as a last recourse.

· The justifying cause of a war, and

· clear and intelligible war aims,

ought to be explained to the people by an experienced leader.

Unless there is a quite definite war aim to which the people can consciously pledge themselves,

the unity and strength of conviction that lead to victory will not be forth coming.

But the leader must also look to it that

· the passion of war and

· the delirium of victory

do not give rise to unjust acts that will not meet with general approval.

If justice and perseverance are the basis of action, all goes well.

THE IMAGE

In the middle of the earth is water: The image of THE ARMY.

Thus the superior man increases his masses

By generosity toward the people.

Ground water is invisibly present within the earth.

In the same way the military power of a people is invisibly present in the masses.

· When danger threatens, every peasant becomes a soldier;

· when the war ends, he goes back to his plow.

He who is generous toward the people wins their love, and

a people living under a mild rule becomes strong and powerful.

Only a people economically strong can be important in military power.

Such power must therefore be cultivated

· by improving the economic condition of the people and

· by humane government.

Only when there is this invisible bond between government and people,

so that the people are sheltered by their government as ground water is sheltered by the earth,

is it possible to wage a victorious war.

THE LINES

Six at the beginning means:

An army must set forth in proper order.

If the order is not good, misfortune threatens.

At the beginning of a military enterprise, order is imperative.

· A just and valid cause must exist, and

· the obedience and coordination of the troops must be well organized,

otherwise the result is inevitably failure.

0 Nine in the second place means:

In the midst of the army.

Good fortune.

No blame.

The king bestows a triple decoration.

· The leader should be

o in the midst of his army,

o in touch with it,

o sharing good and bad with the masses he leads.

This alone makes him equal to the heavy demands made upon him.

· He needs also the recognition of the ruler.

o The decorations he receives are justified, because there is no question of personal preferment here: the whole army, whose center he is, is honored in his person.

Six in the third place means:

Perchance the army carries corpses in the wagon.

Misfortune.

Here we have a choice of two explanations.

1. One points to defeat because someone other than the chosen leader interferes with the Command;

2. the other is similar in its general meaning, but the expression, "carries corpses in the wagon," is interpreted differently.

At burials and at sacrifices to the dead it was customary in China for the deceased to whom the sacrifice was made to be represented by a boy of the family, who sat in the dead man's place and was honored as his representative.

On the basis of this custom the text is interpreted as meaning that a "corpse boy" is sitting in the wagon, or, in other words, that authority is not being exercised by the proper leaders but has been usurped by others.

Perhaps the whole difficulty clears up if it is inferred that there has been an error in copying.

The character fan, meaning "all," may have been misread as Shih, which means "corpse."

Allowing for this error, the meaning would be that

if the multitude assumes leadership of the army (rides in the wagon), misfortune ensue.

Six in the fourth place means:

The army retreats.

No blame.

In face of a superior enemy,

with whom it would be hopeless to engage in battle,

an orderly retreat is the only correct procedure,

because it will save the army from defeat and disintegration.

It is by no means a sign of courage or strength to insist upon engaging in a hopeless struggle regardless of circumstances.

0 Six in the fifth place means:

There is game in the field.

It furthers one to catch it.

Without blame.

Let the eldest lead the army.

The younger transports corpses;

Then perseverance brings misfortune.

Game is in the field - it has left its usual haunts in the forest and is devastating the fields.

This points to an enemy invasion.

Energetic combat and punishment are here thoroughly justified,

but they must not degenerate into a wild melee in which everyone fends for himself.

Despite the greatest degree of perseverance and bravery, this would lead to misfortune.

The army must be directed by an experienced leader.

It is a matter of waging war,

not of permitting the mob to slaughter all who fall into their hands;

if they do,

· defeat will be the result, and despite all perseverance

· there is danger of misfortune.

Six at the top means:

The great prince issues commands,

Founds states, vests families with fiefs.

Inferior people should not be employed.

The war has ended successfully,

victory is won, and

the king divides estates and fiefs among his faithful vassals.

But it is important that inferior people should not come into power.

If they have helped,

let them be paid off with money,

but they should not be awarded lands or the privileges of rulers, lest power be abused.

07 - THE ARMY

MANAGERIAL ISSUE:

The CEO – managing his army of employees/customers.

Hexagram 7 describes the Army. From a managerial point of view, it is easy to compare corporations to armies. They have a chain of command, are always ready to follow the leader, and are always ready to battle its competitors.

MANAGERIAL LESSON:

The Superior CEO knows:

1) Corporations are dictatorships rather than democracies. They do not look for consensus but rather for leadership. And in a dictatorship, it is the army, which in effect rules. This Hexagram, just like an army under a dictatorship, represents the management of a corporation at all levels. Even if at times one gets the impression that at all levels the army shows obedience to its superiors, we should keep it in mind that there will always be conspiracies led by leaders bent on eliminating each other and therefore it always represents a dangerous element. In essence, a corporate army’s aim is to gather financial strength and political muscle through the abilities of its employees and allies. Such strength is a dangerous thing as it can go in the wrong direction. When Sandy Weill of Citigroup used his power and influence to change the Glass-Steagall Act, he created the conditions which almost brought about the destruction of his own corporation as well as that of the entire financial system. The same applies to Goldman Sachs – the injustices created by its unrestricted use of political influence have appropriately earned them the hatred of the public.

2) The success of a corporation is closely linked to how well organized and disciplined it is. Such organization in turn is also closely linked to how able the CEO is in earning the loyalty and the admiration of the employees. Loyalty must be earned, not forced upon the employees. To earn such loyalty, the CEO must be enthusiastic and recognize the merits and accomplishments of his executives promptly and publicly. Only then will he win their hearts and minds. And only then will he make the employees more willing to make the necessary sacrifices to earn the proper recognition. That is the key to be more productive as well as profitable.

3) The CEO must be courageous and well balanced to avoid harming others both inside and outside the firm.

4) The CEO must have the confidence and full backing of the Board of Directors at all times. Carly Fiorina of Hewlett Packard did not have such support when she launched a takeover on Compaq. She was successful in the takeover but she got fired.

5) If the CEO intends to attack another corporation or to force a takeover, he must do it only if his corporation is financially strong or bullet proof and only if there are no other alternatives. Should he pursue an aggressive policy from a weak position, his efforts will surely end in a defeat.

6) When victorious, the CEO must be magnanimous with the other corporation’s personnel. Only then will his fame spread far and wide.

7) All corporations have spiritual reserves for the employees to access when the corporation is in danger; nevertheless, those spiritual reserves should be accessed only when really needed. Meanwhile they must be kept calm. Only a CEO who has earned the admiration and respect of his troops has the right to access those spiritual reserves and put to the test the bonding between him as a leader and his army of employees as followers. Only such a CEO can make his army follow him under the worst circumstances and succeed. He must be able to explain the reasons for such a war, and such reasons must be clear and much focused in order to get the necessary commitment and unity to achieve victory. And if Heaven grants him victory, then justice for the vanquished must prevail at all times. This is a must lesson for CEO’s such as Larry Ellison of Oracle.

The I Ching advises the CEO the way to launch a takeover effort is the same to wage war. To lead a War the leader must have:

A clear cause to justify it.
A clear set of objectives.
Massive communication to explain the causes and the objectives.
Unity and commitment from the people.
Cool heads to avoid getting into the frenzy of war.
Good “citizens” who are willing to defend their “land”.
A benign, fair and generous “government” loved by the “people” for which they are willing to fight.
A strong “economy” (Balance Sheet) promoted by a humane “government” (management).
A strong bond between the “government” (management) and its “people” (employees).

INVESTMENT ADVICE:

For the investor, The Army is not, in general terms, a unfavorable Time-Space to invest. Where there is an army there is violence and where there is violence there is danger. It is not wise to invest under dangerous conditions.

By itself, (no lines), the Hexagram points to good fortune if the CEO perseveres.

THE ARMY.

The army needs perseverance

And a strong man.

Good fortune without blame.

An army is a mass that needs organization in order to become a fighting force. Without strict discipline nothing can be accomplished, but this discipline must not be achieved by force. It requires a strong man who captures the hearts of the people and awakens their enthusiasm. In order that he may develop his abilities he needs the complete confidence of his ruler, who must entrust him with full responsibility as long as the war lasts. But war is always a dangerous thing and brings with it destruction and devastation. Therefore it should not be resorted to rashly but, like a poisonous drug, should be used as a last recourse.

The justifying cause of a war, and clear and intelligible war aims, ought to be explained to the people by an experienced leader. Unless there is a quite definite war aim to which the people can consciously pledge themselves, the unity and strength of conviction that lead to victory will not be forth coming. But the leader must also look to it that the passion of war and the delirium of victory do not give rise to unjust acts that will not meet with general approval. If justice and perseverance are the basis of action, all goes well.

Only the line in the second place is favorable. The other five are negative.

The following two examples are those of corporations under the Army Time-Space

· Cisco Systems, Inc. CSCO under CEO John T. Chambers

· Tesla Motors Inc. TSLA under CEO Elon Musk

THE LINES

SIX IN THE FIRST PLACE

Managerial Issue: The CEO – managing his army of employees - moving them.

Managerial Lesson: Be committed.

Managerial Warning: At the first stage of the Army Time-Space, the CEO is about to start a campaign to increase market share by either an aggressive marketing strategy or by an aggressive takeover of another corporation. The motives behind this move are not clear.

Managerial Advice: The Superior CEO does not to move if his heart is not into it. But if he must move, he will communicate his reasons as well as his objectives, both of which must be just and fair. The Superior CEO blends the employees into a fighting team. However; in this case, there is a possibility, the employees might perceive the CEO’s heart is not totally behind this enterprise. This perception could generate doubts and a lack of obedience amongst the employees creating the conditions for the corporation’s defeat.

The I Ching says: At the beginning of a military enterprise, order is imperative. A just and valid cause must exist, and the obedience and coordination of the troops must be well organized, otherwise the result is inevitably failure.

Investment Advice: Do not invest

NINE IN THE SECOND PLACE

Managerial Issue: The CEO – managing his army of employees - in the midst of a campaign with strong backing.

Managerial Lesson: Be united.

Managerial Warning: At the second stage of the Army Time-Space, the CEO is in charge of an aggressive campaign and this time he has the absolute backing of the Board of Directors who will honor him based on his merits rather than favoritism.

Managerial Advice: The Superior CEO stays as close to his employees as possible. He knows proximity is the way for him to feel what they feel and earn their loyalty and respect. When the CEO understands the needs of the employees, and when he makes sure all the employees are rewarded by the same standard of merit alone, then surely all the employees will follow him loyally into any battle because they will believe in his cause and in him as their leader. The CEO will receive the proper recognition for his merits.

There are some exceptions when an executive is in charge of the campaign and the CEO will not recognize his merits. This is the case of Iacocca and Ford. He was successful with the Mustang, but still Henry Ford II fired him in 1978. When this happens, both Heaven and the employees who know the executive deserved the merits and rewards will surely punish the CEO (Henry Ford II retired as CEO in 1979).

Investment Advice: Invest. (Expect good returns)

SIX IN THE THIRD PLACE

Managerial Issue: The CEO – managing his army of employees - when many meddle in the campaign.

Managerial Lesson: Be prudent.

Managerial Warning: At the third stage of the Army Time-Space, the CEO’s strategies will be meddled with by others who would like to appear as the leaders. There is a possibility this CEO might not be the adequate leader for the corporate campaign. He might lose the backing of the Board of Directors as well as that of his troops.

Managerial Advice: The Superior CEO does not get into a fight in which he is not the clear leader. He knows it is not wise to get into a fight for which he has neither the backing nor the support of his employees. In the end his efforts will end in defeat.

Investment Advice: Do not invest.

SIX IN THE FOURTH PLACE

Managerial Issue: The CEO – managing his army of employees - when facing a stronger enemy.

Managerial Lesson: Be cautious.

Managerial Warning: At the fourth stage of the Army Time-Space, the CEO’s campaign encounters an unexpectedly strong adversary who will certainly defeat him.

Managerial Advice: The Superior CEO knows when to withdraw and by so doing, avoid the destruction of his corporation. The timely withdrawal brings honor to the CEO. There is nothing wrong with a timely withdrawal when facing a superior enemy. However, to continue to fight a losing battle is a sign of weakness and even cowardice, particularly because innocent people always perish.

Investment Advice: Do not invest

SIX IN THE FIFTH PLACE

Managerial Issue: The CEO – managing his army of employees - when facing the enemy’s attack.

Managerial Lesson: Be aggressive.

Managerial Warning: At the fifth stage of the Army Time-Space, the conditions reverse and now the enemy is waging a campaign against the CEO and his corporation.

Managerial Advice: The Superior CEO recognizes when he might not be the right man to defend the firm, as he might be accustomed to being the aggressor. The corporation must fight an all-out war to win. However such counterattack must be led by the proper leader and must be carried out in an orderly fashion. If the CEO is not the right man for the defensive actions, then the company must find the adequate leader to face off this danger. The outcome is not clear, as there is no certainty they will come out victorious.

Investment Advice: Do not invest

SIX IN THE SIXTH PLACE

Managerial Issue: The CEO – managing the army of employees - after a corporate victory.

Managerial Lesson: Be just.

Managerial Warning: At the sixth stage of the Army Time-Space, the CEO and his troops win the campaign and either conquer market share or successfully complete the takeover. Now it is up to the CEO to reward merit.

Managerial Advice: The Superior CEO is careful when rewarding merit. That is, he is wise enough to reward merit but is also wise enough to differentiate between those who should receive monetary rewards only and those who should receive leadership positions within the recently conquered corporation. If he fails to exercise this rule, he will surely eventually destroy the same corporation he has just conquered. There are great executives-warriors who should never be given any managerial position within the conquered corporation because they will destroy it.

When a capable general conquered a territory, the Emperor had to decide if the general had the ability to administer the newly acquired province. Wisely, the Emperor would look for a civilian with experience to run the province and reward the general with properties and money.

In the case of Larry Ellison’s takeover of PeopleSoft, the two corporations were easily merged because both were in the software business. There was no need to look for an executive to run the newly conquered corporation. But in the case of Citigroup, Travelers Smith Barney, and Citibank had different lines of business. One man could not run it all. Sandy Weill’s betrayal of John Reed and of Jamie Dimon was as catastrophic for the bank (Citibank) as well as for the entire corporation (Citigroup).

Investment Advice: Do not invest.

MANAGERIAL CASES

Cisco Systems, Inc. CSCO under CEO John T. Chambers

John T. Chambers’ Performance: ROI= 780.00% Annualized Return= 14.10%

SPY’s Performance: ROI= 184.71% Annualized Return= 6.55%

John Chambers has been CEO of Cisco since January 31^st 1995. Since then, his performance has been that of a superior CEO.

Because he has been CEO for almost two decades, we asked the Oracle about his future performance. It is the Army Time Space.

Points the investor should consider:

1) THE HEXAGRAM

HEXAGRAM 07 – Shih - The Army

This hexagram is made up of the trigrams K'an, water, and K'un, earth, and thus, it symbolizes the ground water stored up in the earth. In the same way military strength is stored up in the mass of the people - invisible in times of peace but always ready for use as a source of power. The attributes of the two trigrams are danger inside and obedience outside. This points to the nature of an army, which at the core is dangerous, while discipline and obedience must prevail outside.

Of the individual lines, the one that controls the hexagram is the strong nine in the second place to which the other lines, all yielding, are subordinate. This line indicates a commander, because it stands in the middle of one of the two trigrams. But since it is in the lower rather than the upper trigram, it represents not the ruler but the efficient general, who maintains obedience in the army by his authority.

THE JUDGMENT

THE ARMY.

The army needs perseverance

And a strong man.

Good fortune without blame.

2) THE ADVICE

In the middle of the earth is water: The image of THE ARMY.

Thus the superior man increases his masses

By generosity toward the people.

Ground water is invisibly present within the earth. In the same way the military power of a people is invisibly present in the masses. When danger threatens, every peasant becomes a soldier; when the war ends, he goes back to his plow. He who is generous toward the people wins their love, and a people living under a mild rule becomes strong and powerful. Only a people economically strong can be important in military power. Such power must therefore be cultivated by improving the economic condition of the people and by humane government. Only when there is this invisible bond between government and people, so that the people are sheltered by their government as ground water is sheltered by the earth, is it possible to wage a victorious war.

3) THE LINES:

Six in the fourth place means:

The army retreats.

No blame.

In face of a superior enemy, with whom it would be hopeless to engage in battle, an orderly retreat is the only correct procedure, because it will save the army from defeat and disintegration. It is by no means a sign of courage or strength to insist upon engaging in a hopeless struggle regardless of circumstances.

4) THE MOVING HEXAGRAM

HEXAGRAM 40 – Hsieh - Deliverance

Here the movement goes out of the sphere of danger. The obstacle has been removed, the difficulties are being resolved. Deliverance is not yet achieved; it is just in its beginning, and the hexagram represents its various stages.

THE JUDGMENT

DELIVERANCE.

The southwest furthers.

If there is no longer anything where one has to go,

Return brings good fortune.

If there is still something where one has to go,

Hastening brings good fortune.

This refers to a time in which tensions and complications begin to be eased. At such times we ought to make our way back to ordinary conditions as soon as possible; this is the meaning of "the southwest." These periods of sudden change have great importance. Just as rain relieves atmospheric tension, making all the buds burst open, so a time of deliverance from burdensome pressure has a liberating and stimulating effect on life. One thing is important, however: in such times we must not overdo our triumph. The point is not to push on farther than is necessary. Returning to the regular order of life as soon as deliverance is achieved brings good fortune. If there are any residual matters that ought to be attended to, it should be done as quickly as possible, so that a clean sweep is made and no retardation occur.

THE IMAGE

Thunder and rain set in: The image of DELIVERANCE.

Thus the superior man pardons mistakes

And forgives misdeeds.

A thunderstorm has the effect of clearing the air; the superior man produces a similar effect when dealing with mistakes and sins of men that induce a condition of tension. Through clarity he brings deliverance. However, when failings come to light, he does not dwell on them; he simply passes over mistakes, the unintentional transgressions, just as thunder dies away. He forgives misdeeds, the intentional transgressions, just as water washes everything clean.

Tesla Motors Inc. TSLA under CEO Elon Musk

Elon Musk’s Performance: ROI= 30.83% Annualized Return= 28.68%

SPY’s Performance: ROI= 30.49% Annualized Return= 28.36%

Elon Musk has been CEO since October 2008. Tesla Motors went public on June 29^th 2010. Since then, his performance has been the same as the SPY’s. It is too early to evaluate his performance, but the I Ching points to his leadership in a war that will end successfully.

Points the investor should consider:

1) THE HEXAGRAM

(Same as Above).

2) THE ADVICE

(Same as Above).

3) THE LINES:

Six at the top means:

The great prince issues commands,

Founds states, vests families with fiefs.

Inferior people should not be employed.

The war has ended successfully, victory is won, and the king divides estates and fiefs among his faithful vassals. But it is important that inferior people should not come into power. If they have helped, let them be paid off with money, but they should not be awarded lands or the privileges of rulers, lest power be abused.

4) THE MOVING HEXAGRAM

HEXAGRAM 04 - Meng - Youthful Folly

In this hexagram we are reminded of youth and folly, in two different ways. The image of the upper trigram, Ken, is the mountain, that of the lower, K’an is water; the spring rising at the foot of the mountain is the image of inexperienced youth. Keeping still is the attribute of the upper trigram; that of the lower is the abyss, danger. Stopping in perplexity on the brink of a dangerous abyss is a symbol of the folly of youth. However, the two trigrams also show the way of overcoming the follies of youth. Water is something that of necessity flows on. When the spring gushes forth, it does not know at first where it will go. But its steady flow fills up the deep place blocking its progress, and success is attained.

THE JUDGMENT

YOUTHFUL FOLLY has success.

It is not I who seek the young fool;

The young fool seeks me.

At the first Oracle I inform him.

If he asks two or three times, it is importunity.

If he importunes, I give him no information.

Perseverance furthers.

In the time of youth, folly is not an evil. One may succeed in spite of it, provided one finds an experienced teacher and has the right attitude toward him. This means, first of all, that the youth himself must be conscious of his lack of experience and must seek out the teacher. Without this modesty and this interest there is no guarantee that he has the necessary receptivity, which should express itself in respectful acceptance of the teacher. This is the reason why the teacher must wait to be sought out instead of offering himself. Only thus can the instruction take place at the right time and in the right way.

A teacher's answer to the question of a pupil ought to be clear and definite like that expected from an Oracle; thereupon it ought to be accepted as a key for resolution of doubts and a basis for decision. If mistrustful or unintelligent questioning is kept up, it serves only to annoy the teacher. He does well to ignore it in silence, just as the Oracle gives one answer only and refuses to be tempted by questions implying doubt.

Given in addition a perseverance that never slackens until the points are mastered one by one, real success is sure to follow. Thus the hexagram counsels the teacher as well as the pupil.

THE IMAGE

A spring wells up at the foot of the mountain: The image of YOUTH.

Thus the superior man fosters his character

By thoroughness in all that he does.

A spring succeeds in flowing on and escapes stagnation by filling up all the hollow places in its path. In the same way character is developed by thoroughness that skips nothing but, like water, gradually and steadily fills up all gaps and so flows onward.