The hexagram of stripping: Understanding systematic collapse

Systemic collapse almost never happens in one dramatic moment. It always begins with small, almost invisible deterioration in small corners, then quietly spreads until the damage is beyond repair.

This is exactly what hexagram 剥 teaches: how to spot the very first signs of rot and, if we still can, how to stop it.

Let’s use this ancient hexagram to look again at the 2008 financial crisis—one of the clearest modern examples of stripping in action.

The image is composed of five yin lines (--) and one yang line (—), showing the yin force rising from below, gradually eating away at the single yang force at the top.

The strong is being stripped, bit by bit.

“Strip the bed by its feet. Ignore this small loss. Bode ill.”

This is the first line, at the very bottom of this hexagram. Something that seems trivial: the feet of the bed.

This is where every large collapse quietly begins. A tiny lowering of production standards that are still acceptable. A small accounting trick that is still within the rules. A quarter-end window-dressing that does not break the law.

How accounting firm Ernst & Young (EY) signed off Lehman Brothers was exactly this. It allowed Lehman to use a controversial accounting practice called “Repo 105” to temporarily hide over $50 billion bad assets as sales, making the firm’s finances look better than they were. 

EY did not violate any professional standards, as the court eventually concluded. But anyone who understood what was happening knew: the feet of the bed were already being sawn away.

“Strip the bed until skin touches bare ground. Ominous.” 

This is the fourth line. Now the erosion reaches the surface we all lie on. It says volumes about the failures of the rating agencies.

Rating agencies, such as Moody’s, S&P and Fitch, gave “AAA” ratings to risky complex securities which were filled with subprime mortgages. These high ratings misled investors into believing the securities were safe, which fuelled demand and kept the flow of easy credit going to risky borrowers. When the housing bubble burst and borrowers defaulted, the value of these mis-rated securities plummeted, causing massive losses across the global financial system.

What these rating agencies threw away was the very thing their entire reputation rested on. When you voluntarily strip away your own bed and lie on the cold floor, serious illness—or collapse—is only a matter of time.

“The great fruit is not eaten. A virtuous person loads it onto a wagon for the people; a petty person strips away everyone’s shelter.”

This top line in the hexagram gives two opposite results depending on who is in charge. At the moment of systemic crisis, a capable and virtuous leader can correct course and deliver benefits to the masses, but a selfish and corrupt leader will cause great harm.

Stan O’Neal and John Thain at Merrill Lynch lived the second half of the line perfectly. 

O’Neal was forced out in October 2007 after Merrill Lynch disclosed billions in losses related to the subprime mortgage crisis. Despite these failures, he left the company with a severance package valued at over $160 million.

Thain was appointed to replace O’Neal as CEO in November 2007, and was out in January 2009. During his approximately 14 months in office, he authorised and completed a $1.22 million redecoration of his office, including around $1,400 for a waste-paper basket. 

O’Neal and Thain were only two noticeable figures among many top bank executives who enriched themselves but left millions of people poorer.

Around 10 million Americans lost their homes due to foreclosures between 2008 and 2010. In 2008 alone, 3.1 million Americans filed for foreclosure. The widespread foreclosures contributed significantly to rising poverty, with the US poverty rate increasing from 12.5% in 2007 to over 15% in 2010. 

The fruit was eaten, just not by those who grew it.

Hexagram 剥 does not describe an explosion. It describes slow, polite erosion—small compromises that feel harmless at the time.

It asks us to stay painfully sensitive to the very first missing piece, the very first time someone says “it’s legal” instead of “is it right?”

If the auditors had refused, if the rating agencies had protected their only real asset (credibility), if even a few leaders had chosen stewardship over personal gain, the stripping could have been stopped long before the mountain fell.

Through this hexagram, I Ching teaches us that the greatest danger is never the crisis itself. The greatest danger is our growing tolerance for the small wrongs that start everything.

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