True goodness is like water, in that it benefits everything and harms nothing. Like water it ever seeks the lowest place, the place that all others avoid. It is closely kin to the Dao.
For a dwelling it chooses the quiet meadow; for a heart the circling eddy. In generosity it is kind; in speech it is sincere; in authority it is order; in affairs it is ability; in movement it is rhythm.
In as much as it is always peaceable it is never rebuked.
Interpretation:
While the Tao te Ching recognizes the impartial nature of the universe, it does find more effective (good) and ineffective (bad) ways for humans to lives their lives. The observation here is that acceptance of the world and co-existence are the most effective. The comparison to water may be seen as a metaphor for acceptance. if you stand like a stone in the river, the water will eventually knock you over or wear you down. If you accept the movement of the water and go with it, you will be taken with it and will see all that the river sees.
The final stanza may be seen as a caution against pride. Legg translates it this way:
"And when (one with the highest excellence) does not wrangle (about his low position), no one finds fault with him."
This may be seen as a comment that, when we accept the flow of the river, continuing to protest that we are the rock, will only bring us the troubles that come with pride.
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