HEXAGRAM 49: ORIGINAL, INTERPRETATION AND CASES

HEXAGRAM 49 – Ko – Revolution (Molting)

Above TUI THE JOYOUS, LAKE

Below LI THE CLINGING, FIRE

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

o what results is essentially only an opposition of tendencies,

here

· the younger daughter is above.

o The influences are in actual conflict, and

o 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

o gladdens the people and, by enlightening them,

o prevents excesses.

Furthermore,

· 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,

o 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.

THE LINES

Nine at the beginning means:

Wrapped in the hide of a yellow cow.

Changes ought to be undertaken only when there is nothing else to be done.

Therefore at first the utmost restraint is necessary.

One must

· become firm in one's mind, control oneself –

o yellow is the color of the mean, and

o the cow is the symbol of docility - and

· refrain from doing anything for the time being,

o because any premature offensive will bring evil results.

Six in the second place means:

When

· one's own day comes,

· one may create revolution.

Starting brings good fortune.

No blame,

When

· we have tried in every way to bring about reforms, but without success,

· revolution becomes necessary.

But such a thoroughgoing upheaval must be carefully prepared.

There must be available a man

· who has the requisite abilities and

· who possesses public confidence.

To such a man we may well turn.

This

· brings good fortune and

· is not a mistake.

The first thing to be considered is

our inner attitude toward the new condition that will inevitably come.

We have to go out to meet it, as it were.

Only in this way can it be prepared for.

Nine in the third place means:

· Starting brings misfortune.

· Perseverance brings danger.

When talk of revolution has gone the rounds three times,

· One may commit himself, And

· men will believe him.

When change is necessary, there are two mistakes to be avoided.

· One lies in excessive haste and ruthlessness,

o which bring disaster.

· The other lies in excessive hesitation and conservatism,

o which are also dangerous.

· Not every demand for change in the existing order should be heeded.

On the other hand,

· repeated and well-founded complaints should not fail of a hearing.

When talk of change

· has come to one's ears three times, and

· has been pondered well,

he may believe and acquiesce in it.

Then he

· will meet with belief and

· will accomplish something- (1)

Nine in the fourth place means:

Remorse disappears.

Men believe him.

Changing the form of government brings good fortune.

Radical changes require adequate authority.

A man must have

· inner strength as well as

· influential position.

What he does

· must correspond with a higher truth and

· must not spring from arbitrary or petty motives;

then it brings great good fortune.

If a revolution is not founded on such inner truth,

· the results are bad, and

· it has no success.

For in the end

· men will support only those undertakings which

· they feel instinctively to be just.

Nine in the fifth place means:

The great man changes like a tiger.

Even before he questions the oracle

He is believed.

A tiger skin, with its highly visible black stripes on a yellow ground,

shows its distinct pattern from afar.

It is the same with a revolution brought about by a great man:

large, clear guiding lines become visible, understandable to everyone.

Therefore

· he need not first consult the oracle, for

· he wins the spontaneous support of the people.

Six at the top means:

· The superior man changes like a panther.

· The inferior man molts in the face.

Starting brings misfortune.

To remain persevering brings good fortune.

After the large and fundamental problems are settled,

· certain minor reforms, and

· elaborations of these,

are necessary.

These detailed reforms may be likened to

the equally distinct but relatively small marks of the panther's coat.

As a consequence,

a change also takes place among the inferior people.

In conformity with the new order, they likewise "molt."

This molting, it is true, does not go very deep, but that is not to be expected.

We must be satisfied with the attainable.

If we should go too far and try to achieve too much,

it would lead to unrest and misfortune.

For the object of a great revolution is the

· attainment of clarified, secure conditions

· ensuring a general stabilization

· on the basis of what is possible at the moment.

Cf. Goethe's tale, "Das Marchen," in which the phrase, "The hour has come!" is repeated three times before the great transformation begins.

49 REVOLUTION

(Molting)

MANAGERIAL ISSUE:

The CEO – managing to bring about revolutionary corporate changes.

Hexagram 49 describes the CEO and his role in bringing about drastic changes to the corporation. The I Ching compares these drastic changes with the changing of an animal’s skin. This Hexagram is related to the Opposition (Hexagram 38) where tendencies oppose each other. Here, however, there are forces not opposing but rather fighting and trying to destroy each other and only one will come out victorious.

The Superior CEO knows that:

1) Sometimes drastic (Revolutionary) changes are the only means for the corporation to survive. Think of Andy Grove changing Intel’s focus from a memory company to a processor company, or Microsoft making a drastic change to embrace the Internet and try and embed it in its operating system.

2) These drastic (Revolutionary) changes require a struggle between opposing camps. In the cases of Intel and Microsoft there were opposing camps that were willing to fight to the “death” in order to survive. Thus, the image of revolution where one of the opposing camps has to “die”. Bill Gates almost destroyed Microsoft because of his hesitation to support the camp that was pushing the disruptive (at that time) technology of the internet.

MANAGERIAL LESSON:

The Superior CEO knows there are various conditions for these drastic corporate changes (or Revolution) to take place and be successful. The revolution must be:

1) The only way out. Revolutions are not to be taken lightly. That is, the CEO must have tried all kinds of normal changes and must have found them ineffective in order to arrive to this desperate measure.

2) Led by a morally right CEO, especially because he will need the support of the employees. The CEO must project an image around which everyone must rally, an image of someone whose reputation is above reproach.

3) Based on constant communication. The three basic rules of normal change are communication, communication, and communication. But in the case of a drastic change, communication becomes even more imperative.

4) Focused only on the wellbeing of the employees and not of the CEO. Only then will the employees accept the CEO and help him to successfully execute his revolution.

5) Carried out with perfect timing.

6) Based on the appropriate business plan. Such plan must bring happiness to all the employees and shareholders, place a stop to the previous abuses that led to the revolution, and establish the proper checks and balances for these abuses not to happen again.

INVESTMENT ADVICE:

For the investor, the Revolution Time-Space represents in general terms a difficult condition to invest:

· 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.

o He must then proceed in the right way, so that he gladdens the people and, by enlightening them, prevents excesses.

o Furthermore, he must be quite free of selfish aims and must really relieve the need of the people.

o Only then does he have nothing to regret.

By itself (no lines), the Time-Space points to Supreme Success in persevering in the revolutionary changes.

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 lines include three possibilities of good fortune (the second, fourth and sixth lines).

The following cases are those of corporations under the Revolution Time-Space:

· Dell Inc. DELL under CEO Michael S. Dell

(Read at the end of the Hexagram)

THE LINES

NINE IN THE FIRST PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes - when there is no other way out

Managerial Lesson: Be prudent.

Managerial Warning: At the first stage of the Revolution Time-Space, the CEO finds that such changes must be carried out only if there is no other alternative.

Managerial Advice: The Superior CEO knows the main requirement for starting revolutionary changes is for him to conquer himself and his impulses before he starts to implement the changes.

In this particular case, it would appear that it is not favorable for the CEO to bring about any change but that rather it would be best to roll with the punches and let others take the initiative. The corporation is not yet ready for any revolutionary changes.

Investment Advice: Do not invest.

SIX IN THE SECOND PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes - after trying everything else.

Managerial Lesson: Be prepared.

Managerial Warning: At the second stage of the Revolution Time-Space, the CEO finds that after trying by all means to turn the corporation around in a normal way, it is time for drastic corporate changes.

Managerial Advice: The Superior CEO knows he must apply the following basic rules for making revolutionary changes:

· The CEO must prepare his own self for making any drastic change. He must make sure there are no motives for anyone to question his image as the right leader for such changes,

· If he does not fit that image, he might look for an able and honest assistant who fits such image. Whoever the CEO chooses must also be capable of conquering himself before he attempts to conquer others, and

· Whoever gets to make the changes (CEO or able assistant) must be able to create the proper atmosphere for the corporation to readily accept these changes. He must go out and deliberately seek such revolutionary changes.

Investment Advice: Invest. (Starting brings Good Fortune).

NINE IN THE THIRD PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes – waiting for the proper time, and striking the proper sense of balance

Managerial Lesson: Be balanced.

Managerial Warning: At the third stage of the Revolution Time-Space, the CEO risks falling into excessiveness while carrying out the revolution.

Managerial Advice: The Superior CEO knows that during the time of Revolution he must:

· Be balanced. He must be neither too aggressive nor too timid in bringing about revolutionary changes. He avoids:

o excessive haste and ruthlessness, which bring disaster.

o excessive hesitation and conservatism, which are also dangerous.

· Be very sure about the changes to be implemented:

o Not every demand for change in the existing order should be heeded.

o On the other hand, repeated and well-founded complaints should not fail of a hearing.

While the revolution is taking place, some employees will suggest many wild ideas about drastic changes. The Superior CEO’s sense of balance will serve him to differentiate between implementing wild ideas based on making changes for the sake of change and implementing legitimate changes required for the corporation to be successful. As a rule of thumb, the Superior CEO will begin the revolution by implementing the obvious changes the employees have been clamoring for.

The need to make sure the change is really needed is mentioned by the I Ching when it advises the CEO to make the changes only after they have been asked for during three consecutive times.

Investment advice: Do not invest.

NINE IN THE FOURTH PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes – searching for his moral character as the key to bringing about corporate change.

Managerial Lesson: Be honorable.

Managerial Warning: At the fourth stage of the Revolution Time-Space, the CEO finds that to bring about revolutionary changes, he must have the moral authority to do so.

Managerial Advice: The Superior CEO is a man of character, therefore he can lead the corporation’s revolutionary changes. He knows everyone, including the employees, the Board of Directors, the shareholders and indeed the world, must be convinced he is a man of character. His integrity will:

· Encourage proper planning and generate the necessary support to execute revolutionary changes.

· Enable him to make only truly needed changes rather than make it appear as if he is just doing something. To make changes for the sake of change will only bring about the corporation’s destruction. How many CEO’s make changes for the sake of change? Why do so many CEOs change the focus of their corporation only to satisfy their own egos?

Investment Advice: Invest. (Good Fortune)

NINE IN THE FIFTH PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes – clear goals and the proper communication as a first priority for making revolutionary corporate changes.

Managerial Lesson: Be communicative.

Managerial Warning: At the fifth stage of the Revolution Time-Space, the CEO finds he must set the right goals and communicate them to everyone.

Managerial Advice: The Superior CEO engages in two levels of communication: internal and external.

· In the internal communication (the most important one), he must make sure his deep belief in the need for revolutionary change:

o Is shared by everyone. Everyone must have a deep belief in the need for revolutionary changes even before he attempts to make any changes.

o Is so strong that everyone recognizes it even from afar.

o Is very clear and not open to question.

o Is a transformational experience. His belief in revolutionary change must transform him, and his vision of the completely new corporation must almost visibly change him too.

o Is strong enough so that he will be able to change others almost without any effort.

· In the external communication, he must use the regular communication channels to make the changes public.

Investment Advice: Do not invest. Look for a better alternative.

SIX IN THE SIXTH PLACE

Managerial Issue: The CEO – managing to bring about revolutionary corporate changes – bringing about minor changes after the larger ones have been completed.

Managerial Lesson: Be motivational.

Managerial Warning: At the sixth stage of the Revolution Time-Space, the CEO finds he must complete the revolutionary changes.

Managerial Advice: The Superior CEO must:

· Complete the two basic revolutionary changes: the conceptual as well as the physical. First, he completes the basic conceptual revolutionary changes and then he completes the hundreds of minor physical changes. In the case of Andy Grove and Intel, he first had to change the conceptual corporate change – from a memory (DRAMs) to a microprocessor corporation - and then he had to deal with the physical details. By doing so, Grove transformed Intel from a manufacturer of memory chips into the world's dominant producer of microprocessors. As CEO, Grove oversaw a 4,500% increase in Intel's market capitalization from $4 billion to $197 billion, making it the world's 7th largest company, with 64,000 employees.

· First change the mind of the top management and second change the mind of the lower ranks in the furthest branches of the corporation. The CEO’s conviction for revolutionary change is a must for the corporation to survive, but such conviction might not appear to the lowest ranking employees as necessary.

· Make sure all employees, even the lowest ranking ones, get the message for the need for change.

· Accept that such conviction might not be as deep amongst the employees as it might be for the CEO, but then again it is not to be expected. The idea is to make sure all employees are in the same wavelength.

Investment Advice: Do not invest. Look for better alternatives

MANAGERIAL CASES

Dell Inc. DELL under CEO Michael S. Dell

Michael Dell’s Performance: ROI= (45.00%) Annualized Return= (12.00%)

SPY’s Performance: ROI= (19.21%) Annualized Return= ( 4.41%)

Michael Dell (founder) has been CEO of Dell since its very beginning in 1984, except for a three year period (2004 to 2007). Since his return in 2007, his performance has been very poor compared to the SPYs. During the market recovery beginning in 2009, he was never able to outperform the SPY.

His new Time-Space (Revolution) calls for a revolutionary change for Dell such as switching its main emphasis from a producer of PCs to a services provider. There is a lot of evidence that it is already doing so:

o The purchases of Perot Systems for $3.9 billion in 2009.

o The purchase of over a dozen smaller companies in the area of services (storage and networking).

o The building of its cloud computing infrastructure (10 data centers for $ 1 billion).

o Almost 40% of its 120 thousand employees work in the services area.

o Dell’s commitment to acquire companies at a very rapid pace (8 per year) using its $16 billion in cash reserves to execute such revolutionary changes.

Points the investor should consider:

1) THE 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.

2) THE ADVICE

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.

3) THE LINES:

Six in the second place means:

When one's own day comes, one may create revolution.

Starting brings good fortune.

No blame,

When we have tried in every way to bring about reforms, but without success, revolution becomes necessary. But such a thoroughgoing upheaval must be carefully prepared. There must be available a man who has the requisite abilities and who possesses public confidence. To such a man we may well turn. This brings good fortune and is not a mistake. The first thing to be considered is our inner attitude toward the new condition that will inevitably come. We have to go out to meet it, as it were. Only in this way can it be prepared for.

Nine in the third place means:

Starting brings misfortune.

Perseverance brings danger.

When talk of revolution has gone the rounds three times,

One may commit himself,

And men will believe him.

When change is necessary, there are two mistakes to be avoided. One lies in excessive haste and ruthlessness, which bring disaster. The other lies in excessive hesitation and conservatism, which are also dangerous. Not every demand for change in the existing order should be heeded. On the other hand, repeated and well-founded complaints should not fail of a hearing. When talk of change has come to one's ears three times, and has been pondered well, he may believe and acquiesce in it. Then he will meet with belief and will accomplish something- (1)

Six at the top means:

The superior man changes like a panther.

The inferior man molts in the face.

Starting brings misfortune.

To remain persevering brings good fortune.

After the large and fundamental problems are settled, certain minor reforms, and elaborations of these, are necessary. These detailed reforms may be likened to the equally distinct but relatively small marks of the panther's coat. As a consequence, a change also takes place among the inferior people. In conformity with the new order, they likewise "molt." This molting, it is true, does not go very deep, but that is not to be expected. We must be satisfied with the attainable. If we should go too far and try to achieve too much, it would lead to unrest and misfortune. For the object of a great revolution is the attainment of clarified, secure conditions ensuring a general stabilization on the basis of what is possible at the moment.

4) THE MOVING HEXAGRAM

HEXAGRAM 10 – Lu - Treading (Conduct)

The name of the hexagram means on the one hand the right way of conducting oneself. Heaven, the father, is above, and the lake, the youngest daughter, is below. This shows the difference between high and low, upon which composure, correct social conduct, depends. On the other hand, the word for the name of the hexagram, TREADING, 1 means literally treading upon something. The small and cheerful [Tui] treads upon the large and strong [Ch'ien]. The direction of movement of the two primary trigrams is upward. The fact that the strong treads on the weak is not mentioned in the Book of Changes, because it is taken for granted. For the weak to take a stand against the strong is not dangerous here, because it happens in good humor [Tui] and without presumption, so that the strong man is not irritated but takes it all in good part.

THE JUDGMENT

TREADING.

Treading upon the tail of the tiger.

It does not bite the man.

Success.

The situation is really difficult. That which is strongest and that which is weakest are close together. The weak follows behind the strong and worries it. The strong, however, acquiesces and does not hurt the weak, because the contact is in good humor and harmless.

In terms of a human situation, one is handling wild, intractable people. In such a case one's purpose will be achieved if one behaves with decorum. Pleasant manners succeed even with irritable people.

THE IMAGE

Heaven above, the lake below: The image Of TREADING.

Thus the superior man discriminates between high and low,

And thereby fortifies the thinking of the people.

Heaven and the lake show a difference of elevation that inheres in the natures of the two, hence no envy arises. Among mankind also there are necessarily differences of elevation; it is impossible to bring about universal equality. But it is important that differences in social rank should not be arbitrary and unjust, for if this occurs, envy and class struggle are the inevitable consequences. If, on the other hand, external differences in rank correspond with differences in inner worth, and if inner worth forms the criterion of external rank, people acquiesce and order reigns in society.