HEXAGRAM 12: ORIGINAL, INTERPRETATION AND CASES

HEXAGRAM 12 - P’i - Standstill (Stagnation)

Above CH'IEN THE CREATIVE, HEAVEN

Below K'UN THE RECEPTIVE, EARTH

This hexagram is the opposite of the preceding one.

· Heaven is above, drawing farther and farther away, while

· the earth below sinks farther into the depths.

The creative powers are not in relation.

It is a time of standstill and decline.

This hexagram is linked with the seventh month (August-September),

when

· the year has passed its zenith and

· autumnal decay is setting in.

THE JUDGMENT

STANDSTILL.

Evil people do not further

The perseverance of the superior man.

· The great departs

· the small approaches.

· Heaven and earth are out of communion and

· all things are benumbed.

· What is above has no relation to what is below, and

· on earth confusion and disorder prevail.

· The dark power within,

· the light power is without.

· Weakness is within,

· harshness without.

· Within are the inferior, and

· without are the superior.

· The way of inferior people is in ascent;

· the way of superior people is on the decline.

But the superior people do not allow themselves to be turned from their principles.

If the possibility of exerting influence is closed to them,

they nevertheless

· remain faithful to their principles and

· withdraw into seclusion.

THE IMAGE

Heaven and earth do not unite: The image Of STANDSTILL.

Thus

· the superior man falls back upon his inner worth In order to escape the difficulties.

· He does not permit himself to be honored with revenue.

When, owing to the influence of inferior men, mutual mistrust prevails in public life,

fruitful activity is rendered impossible,

because the fundaments are wrong.

Therefore

· the superior man knows what he must do under such circumstances;

· he does not allow himself to be tempted by dazzling offers to take part in public activities.

This would only expose him to danger, since he cannot assent to the meanness of the others.

He therefore

· hides his worth and

· withdraws into seclusion.

THE LINES

Six at the beginning means:

When ribbon grass is pulled up, the sod comes with it.

Each according to his kind.

Perseverance brings good fortune and success.

The text is almost the same as that of the first line of the preceding hexagram, but with a contrary meaning.

· In the latter a man is drawing another along with him on the road to an official career;

· here a man is drawing another with him into retirement from public life.

This is why the text says here,

· “Perseverance brings good fortune and success” and

· not "Undertakings bring good fortune."

· it becomes impossible to make our influence count,

· it is only by retirement that we spare ourselves humiliation.

Success in a higher sense can be ours,

because we know how to safeguard the value of our personalities.

Six in the second place means:

They bear and endure;

This means good fortune for inferior people.

The standstill serves to help the great man to attain success.

Inferior people are ready to flatter their superiors in a servile way.

They would also endure the superior man if he would put an end to their confusion.

This is fortunate for them.

But the great man calmly bears the consequences of the standstill.

He does not mingle with the crowd of the inferior; that is not his place.

By his willingness to suffer personally he insures the success of his fundamental principles.

Six in the third place means:

They bear shame.

Inferior people who have risen to power illegitimately

do not feel equal to the responsibility they have taken upon themselves.

In their hearts they begin to be ashamed,

although at first they do not show it outwardly.

This marks a turn for the better.

Nine in the fourth place means:

He who acts at the command of the highest

Remains without blame.

Those of like mind partake of the blessing.

The time of standstill is nearing the point of change into its opposite.

Whoever wishes to restore order must

· feel himself called to the task and

· have the necessary authority.

A man who sets himself up as capable of creating order according to his own judgment

could make mistakes and end in failure.

But the man who is truly called to the task

· is favored by the conditions of the time, and

· all those of like mind will share in his blessing.

0 Nine in the fifth place means:

Standstill is giving way.

Good fortune for the great man.

· "What if it should fail,

· what if it should fall?"

In this way he ties it to a cluster of mulberry shoots.

The time undergoes a change.

The right man, able to restore order, has arrived.

Hence "Good fortune."

But such periods of transition are the very times in which we must

· fear and

· tremble.

Success is assured only through greatest caution,

which asks always,

"What if it should fail?"

When a mulberry bush is cut down,

a number of unusually strong shoots sprout from the roots.

Hence the image of tying something to a cluster of mulberry shoots

is used to symbolize the way of making success certain.

Confucius says about this line:

· Danger arises when a man feels secure in his position.

· Destruction threatens when a man seeks to preserve his worldly estate.

· Confusion develops when a man has put everything in order.

Therefore

the superior man does not forget

· danger in his security, nor

· ruin when he is well established, nor

· confusion when his affairs are in order.

In this way

· gains personal safety and

· is able to protect the empire.

Nine at the top means:

The standstill comes to an end.

First standstill,

then good fortune.

The standstill does not last forever.

However,

it does not cease of its own accord;

the right man is needed to end it.

This is the difference between

· a state of peace and

· a state of stagnation.

Continuous effort is necessary to maintain peace:

left to itself it would change into stagnation and disintegration.

The time of disintegration, however,

· does not change back automatically to a condition of peace and prosperity;

· effort must be put forth in order to end it.

This shows

the creative attitude that man must take

if the world is to be put in order.

12 - STANDSTILL (STAGNATION)

MANAGERIAL ISSUE:

The CEO – managing his corporation during periods of stagnation.

Hexagram 12 describes a period of stagnation or weakening of the corporation brought about by the return of the inferior managers and their evil managerial practices. This creates a situation where there is a wall between the Superior CEO that is still followed by a few remaining superior executives and the newly arriving evil forces. The corporation suffers because there is a lack of:

· Communication.

· Positive relations.

· Sharing of ideas.

· Trust.

· Rewards based on merit.

· Growth.

This is autumn time for the corporation. The previous CEO has brought his corporation to its highest point in productivity and the price of the stock already reflects it. Nevertheless, it is at this very moment that a fight will begin for the leadership position within the corporation. This time around, however, a new inferior CEO and his incompetent followers will win. This is unfortunate because they, in turn, will implement their own corrupt practices and drive away the competent ones from their managerial positions. This creates a situation of internal conflict in which the few superior managers left behind in the corporation are forced to obey the newly implemented bad managerial practices.

This is a matter of nature’s seasonality and the Superior CEO must accept it as such. This Hexagram is the opposite of Hexagram 11.

MANAGERIAL LESSON:

The I Ching advises those few superior managers left to:

1) Hang in there, to hold on to their principles rather than to allow themselves to be bought by salary increases or bonuses,

2) Avoid participating openly in the managerial directives of the inferior managers who presently control the corporation.

3) Obey the present evil management as much as possible without betraying their convictions.

4) Wait with aloofness until the times change and the superior managers return together with the prosperity.

INVESTMENT ADVICE:

This is the Hexagram of Steven Jobs from the time he was driven out of Apple until his inevitable return. He was always Apple’s true CEO.

1) In the first line – Jobs is driven out of Apple. He takes a few talented managers with him. Heaven tells him he has nothing to fear, thus the Oracle says:

· “Perseverance brings good fortune and success.

2) In the second line – those Apple employees who stayed behind are forced to “bear and endure” the arrogance of the false CEOs. Jobs position is that of the great man:

· The great man calmly bears the consequences of the standstill.

· He does not mingle with the crowd of the inferior; that is not his place.

· He insures the success of his fundamental principles by his willingness to suffer personally.

3) In the third line: the false CEOs and the managers who ran Apple during Jobs absence “bear shame”:

· Inferior people who have risen to power illegitimately do not feel equal to the responsibility they have taken upon themselves.

· In their hearts they begin to be ashamed, although at first they do not show it outwardly.

4) In the fourth line: the tide turns. Heaven forces Jobs’ return.

· The man who is truly called to the task is favored by the conditions of the time, and

· All those of like mind will share in his blessing.

5) In the fifth line: Jobs is asked to run Apple. He is successful because he follows Confucius advice:

· Danger arises when a man feels secure in his position.

· Destruction threatens when a man seeks to preserve his worldly estate.

· Confusion develops when a man has put everything in order.

Therefore the superior man does not forget

· Danger in his security, nor

· Ruin when he is well established, nor

· Confusion when his affairs are in order.

In this way he

· Gains personal safety and

· Is able to protect the empire.

6) In the sixth line: Jobs turns Apple around ending the period of the Standstill thanks to his obsessive and relentless creative drive.

· The time of disintegration, however, does not change back automatically to a condition of peace and prosperity;

· Effort must be put forth in order to end it.

· This shows the creative attitude that man must take if the world is to be put in order.

Merrill Lynch

In another more present-time example, this Hexagram represents Merrill Lynch’s employees when Merrill’s Board of Directors mistakenly elected Stan O’Neal as CEO. He did two things: fired the most competent executives whom he knew were better than him, and surrounded himself with yes men. He needed yes men to carry out the most wildly ambitious projects such as leveraging the corporation in a ratio of 30:1 by buying so called (by Standard & Poor’s) AAA CDOs. He fired all the honest executives who questioned his judgment. The only ones left behind were the professional flatterers, those who brown nosed him to death. The good executives who managed to survive did so because of their proper attitude - waiting for the better CEO to return (perhaps Win Smith, who according to the Oracle would have made a great CEO) and doing so with certain aloofness. They maintained their principles until better times.

For the investor, the Standstill is in general an unfavorable Time-Space to invest.

By itself (no lines), the Hexagram points to the need for perseverance while the Superior CEO returns to his proper place:

STANDSTILL.

Evil people do not further

The perseverance of the superior man.

The great departs the small approaches.

Heaven and earth are out of communion and all things are benumbed. What is above has no relation to what is below, and on earth confusion and disorder prevail. The dark power within, the light power is without. Weakness is within, harshness without. Within are the inferior, and without are the superior. The way of inferior people is in ascent; the way of superior people is on the decline. But the superior people do not allow themselves to be turned from their principles. If the possibility of exerting influence is closed to them, they nevertheless remain faithful to their principles and withdraw into seclusion.

Four out of the six lines are positive for investing but they require perseverance until the true CEO appears. Few investors can wait that long.

The following example is of a corporation under the Standstill Time-Space:

· eBay Inc. EBAY under CEO John Donahoe

THE LINES:

SIX IN THE FIRST PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation - retiring from the leadership position and taking the best managers with him.

Managerial Lesson: Be protective.

Managerial Warning: At the first stage of the Standstill Time-Space, the superior managers are leaving the corporation while the inferior ones are displacing them. However, the superior managers are taking the rest of the team of the other superior managers with them.

Managerial Advice: The Superior CEO retires gracefully from the leadership position to avoid disgrace. When the Superior CEO’s advice is no longer heard, it is time for him to retire with dignity for a better occasion. This is the opposite of the first line in Hexagram 11 where the CEO was attracting talented managers to his cause. In this case the Superior CEO is retiring from the leadership position and taking the talented executives with him.

Investment Advice: Invest.

SIX IN THE SECOND PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation - dealing with a recently appointed wrong CEO from a powerless position.

Managerial Lesson: Be longsuffering.

Managerial Warning: At the second stage of the Standstill Time-Space, the worst employees have been left behind. They gladly follow and flatter the inferior CEO and his newly appointed managers in spite of the fact they know them to be incompetent. Ironically, these same incompetent employees would rather follow the Superior CEO and his managers if they were to return to take over control of the corporation because deep within their hearts they know what is best for them.

Managerial Advice: The Superior CEO:

· Remains unperturbed during the times of the Standstill.

· Remains retired from the leadership position.

· Avoids falling into any trap of the recently appointed inferior CEO.

· Remains distant from the inferior CEO and his followers.

· Plans for the future when the more favorable times return.

· Upholds his principles to help accelerate the days of his return.

Investment Advice: Do not invest. Look for better alternatives.

SIX IN THE THIRD PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation - waiting patiently for the inferior CEO’s policies to fail.

Managerial Lesson: Be patient.

Managerial Warning: At the third stage of the Standstill Time-Space, the corporation’s Board of Directors as well as its shareholders realized that the inferior CEO and his management are harming the corporation. Even the inferior managers themselves have come to the realization that they cannot manage the corporation. They recognize they took control of the corporation without having the necessary merits to do so and their incompetence is beginning to show. This public acknowledgment from the part of the inferior managers is positive because it marks the beginning of the end of the period of stagnation.

Managerial Advice: The Superior CEO waits patiently.

Investment Advice: Do not invest. Keep an eye on the corporation.

NINE IN THE FOURTH PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation – The turning point - preparing for the change from stagnation to growth and prosperity.

Managerial Lesson: Be prepared.

Managerial Warning: At the fourth stage of the Standstill Time-Space, the Board of Directors and its shareholders are calling on the true CEO to return and bring back order. The I Ching warns the true CEO to look deep within his soul and honestly ask if he is up to the challenge. He will be successful only if he truly believes he has the inner strength to face the challenge.

Managerial Advice: The Superior CEO:

Prepares for his return,
Prepares for the coming change from losses to profits.
Asks the BOD for the necessary authority to carry out the task at hand.

On his return, the Superior CEO will surely restore back to their well-deserved positions those good employees who stayed behind in the corporation waiting for him. The fact that the superior managers have been called to return is what will give them a great prestige. There is also a positive note in that this turnaround is Heaven sent and as such provides an excellent environment for the new CEO.

Investment Advice: Do not invest. Keep an eye on this corporation.

NINE IN THE FIFTH PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation - taking charge of the corporation and facing the risks all changes imply.

Managerial Lesson: Be aware.

Managerial Warning: At the fifth stage of the Standstill Time-Space, the CEO must keep in mind at all times the possibility of failure. (This by the way is the question Ray Dalio asks all the time)

The CEO should repeatedly ask: "What if it should fail, what if it should fall?"

Managerial Advice: The Superior CEO:

· Realizes the risk all changes carry, including the possibility he might fail. Much of his success will depend on such realization because it will force him to keep a proper humble attitude and that is the basis for success. Every change of command contains a moment of conflict in which the inferior managers are not going to give up easily.

· Cuts the head of the leaders of the inferior managers in a single move so that the rest of the inferior managers will join the true CEO. Thus in a single move he will cut off evil.

Confucius says about this line:

· Danger arises

o when a man feels secure in his position.

· Destruction threatens

o when a man seeks to preserve his worldly estate.

· Confusion develops

o when a man has put everything in order.

Therefore

· the superior man

o does not forget

§ danger in his security, nor

§ ruin when he is well established, nor

§ confusion when his affairs are in order.

· In this way

· he

o gains personal safety and

o is able to protect the empire.

Investment Advice: Invest.

NINE IN THE SIXTH PLACE

Managerial Issue: The true CEO – managing his corporation during periods of stagnation – first turning the corporation around and second keeping it profitable.

Managerial Lesson: Be creative.

Managerial Warning: At the sixth stage of the Standstill Time-Space, the I Ching warns the CEO that just as the Peace period (Hexagram 11) does not last forever, the Stagnation period (Hexagram 12) does not last forever either. After managing a period of stagnation, comes one of the hardest periods to manage - the period of growth. The Superior CEO will turn his corporation around and succeed in making it profitable; however, this requires of a substantial managerial effort. In other words, when the corporation is at his best moment (for instance, Peace - Hexagram 11), then it is when it tends to break down by itself and without much effort. Nevertheless, when it is broken down (for instance, Standstill - Hexagram 12), it takes a tremendous effort to bring it back to its best condition. It is easy for a corporation in YANG to move to YIN, but it is very hard for corporation in YIN to move to YANG. Such move requires effort and the involvement of a Superior CEO.

Managerial Advice: The Superior CEO prepares for a challenge greater than just turning the corporation around. He must prepare for the challenge of keeping it profitable. Only the right CEO can accomplish this.

Investment Advice: Invest. Realize this is a long-term investment. Prepare for volatility.

MANAGERIAL CASES

eBay Inc. EBAY under CEO John Donahoe

John Donahoe’s Performance: ROI= 29.36% Annualized Return= 7.86%

SPY’s Performance: ROI= 0.39% Annualized Return= 0.12%

John Donahoe has been CEO since March 2008. His performance has been better than the SPY’s as indicated by the first line of the hexagram. According to the I Ching, he will run into difficulties as per the third line, but eventually, according to the nine at the top he will do well. The question is if eBay is in the hands of the true CEO or if Meg Whitman should return to eBay as the true CEO.

Points the investor should consider:

1) THE HEXAGRAM

HEXAGRAM 12 - P’i - Standstill (Stagnation)

This hexagram is the opposite of the preceding one. Heaven is above, drawing farther and farther away, while the earth below sinks farther into the depths. The creative powers are not in relation. It is a time of standstill and decline. This hexagram is linked with the seventh month (August-September), when the year has passed its zenith and autumnal decay is setting in.

THE JUDGMENT

STANDSTILL.

Evil people do not further

The perseverance of the superior man.

The great departs the small approaches.

2) THE ADVICE

Heaven and earth do not unite: The image Of STANDSTILL.

Thus the superior man falls back upon his inner worth In order to escape the difficulties.

He does not permit himself to be honored with revenue.

When, owing to the influence of inferior men, mutual mistrust prevails in public life, fruitful activity is rendered impossible, because the fundaments are wrong. Therefore the superior man knows what he must do under such circumstances; he does not allow himself to be tempted by dazzling offers to take part in public activities. This would only expose him to danger, since he cannot assent to the meanness of the others. He therefore hides his worth and withdraws into seclusion.

3) THE LINES:

Six at the beginning means:

When ribbon grass is pulled up, the sod comes with it.

Each according to his kind.

Perseverance brings good fortune and success.

The text is almost the same as that of the first line of the preceding hexagram, but with a contrary meaning. In the latter a man is drawing another along with him on the road to an official career; here a man is drawing another with him into retirement from public life. This is why the text says here, “Perseverance brings good fortune and success” and not "Undertakings bring good fortune." If it becomes impossible to make our influence count, it is only by retirement that we spare ourselves humiliation. Success in a higher sense can be ours, because we know how to safeguard the value of our personalities.

Six in the third place means:

They bear shame.

Inferior people who have risen to power illegitimately do not feel equal to the responsibility they have taken upon themselves. In their hearts they begin to be ashamed, although at first they do not show it outwardly. This marks a turn for the better.

Nine at the top means:

The standstill comes to an end.

First standstill, then good fortune.

The standstill does not last forever. However, it does not cease of its own accord; the right man is needed to end it. This is the difference between a state of peace and a state of stagnation. Continuous effort is necessary to maintain peace: left to itself it would change into stagnation and disintegration. The time of disintegration, however, does not change back automatically to a condition of peace and prosperity; effort must be put forth in order to end it. This shows the creative attitude that man must take if the world is to be put in order.

4) THE MOVING HEXAGRAM

HEXAGRAM 49 – Ko – Revolution (Molting)

The Chinese character for this hexagram means in its original sense an animal's pelt, which is changed in the course of the year by molting. From this the word is carried over to apply to the "molting" in political life, the great revolutions connected with changes of governments. The two trigram making up the hexagram are the same two that appear in K'uei, OPPOSITION (38), that is, the two younger daughters, Li and Tui. But while there the elder of the two daughters is above, and what results is essentially only an opposition of tendencies, here the younger daughter is above. The influences are in actual conflict, and the forces combat each other like fire and water (lake), each trying to destroy the other. Hence the idea of revolution.

THE JUDGMENT

REVOLUTION

On your own day

You are believed.

Supreme success,

Furthering through perseverance.

Remorse disappears.

Political revolutions are extremely grave matters. They should be undertaken only under stress of direst necessity, when there is no way out. Not everyone is called to this task, but only the man who has the confidence of the people, and even he only when the time is ripe. He must then proceed in the right way, so that he gladdens the people and, by enlightening them, prevents excesses. Furthermore, he must be quite free of selfish aims and must really relieve the need of the people. Only then does he have nothing to regret.

Times change, and with them their demands. Thus the seasons change in the course of the year. In the world cycle also there are spring and autumn in the life of peoples and nations, and these call for social transformations.

THE IMAGE

Fire in the lake: the image of REVOLUTION.

Thus the superior man

Sets the calendar in order

And makes the seasons clear.

Fire below and the lake above combat and destroy each other. So too in the course of the year a combat takes place between the forces of light and the forces of darkness, eventuating in the revolution of the seasons. Man masters these changes in nature by noting their regularity and marking off the passage of time accordingly. In this way order and clarity appear in the apparently chaotic changes of the seasons, and man is able to adjust himself in advance to the demands of the different times.