Tao Te Ching, Chapter 17

The highest type of ruler is one of whose existence the people are barely aware.
Next comes one whom they love and praise.
Next comes one whom they fear.
Next comes one whom they despise and defy.

When you are lacking in faith,
Others will be unfaithful to you.

The Sage is self-effacing and scanty of words.
When his task is accomplished and things have been completed,
All the people say, "We ourselves have achieved it!"

Tao Teh Ching, ch 17, translated by John C. H. Wu

Like I've said before, I consider the Dao De Jing to be a guide for "leading one's life" - Laozi uses the sage and ruler as models for us. In this chapter, leadership types are ranks from highest to lowest - each type is distinguished by the people's response to them.

Through wu wei(uncontrived action), the highest type of ruler leads with non-interference. Non-interference means the ruler does very little imposing on their people. They are humble and cautious with their actions and words, realizing the non-linear dynamics of cause and effect. Wu wei is a method for achieving ziran(naturalness), which accords with the Dao. This produces de(virtue/inner power), which allows the ruler to have an influence over people without the use of authority. The highest ruler provides and guides the conditions for the positive development of people's autonomy - this allows people's successes to be their own.

When the ruler doesn't have "de", they have to govern with directness, which includes a balance between just rewards and punishment - the ruler is loved and praised for their righteousness when this is succesful in keeping order. The rulers who are feared, use harsh punishments. Last is the despised who the people defy - these rulers don't have "de" and do not know how to apply any type of authority.

Now, in lines 6 and 7, Laozi touches on the issue of faith. When someone lacks faith in another person, this effects their approach towards them and the person's receptiveness. For example, when a leader doesn't have faith in a person's abilities or integrity, they tend to micro-manage and enforce many restrictions. This creates division and inhibits positive growth. Due to the lack of power people feel, they blame their leaders for any failures. Another example of the faith issue is one of "projection" - when you don't trust a person, they tend to not trust you out of suspicion. Also, consider the following quotes:

use deception to fight a war

Tao Te Ching, ch 57, translated by Red Pine

Warfare is the Way [Tao] of deception.

Art of War, Sun Tzu, ch 1, translated by Ralph D. Sawyer

With the above in mind, consider what message you are sending to the person you don't trust. You are inadvertly saying they will deceive you - that they fall into a catagory of opposition. Food for thought.

So what we can learn from this chapter is that Leadership should be about empowering people - allowing others to shine. Non-interference should be the foundation for leadership - other methods emerge and return to this foundation with necessity. This returning to the foundation will help a leader maintain "de".