The sovereign of the Tao Te Ching can be thought of as a metaphor for many sets of phenomena in the world. Those agencies are best which merely tweak and fix small things here and there. The law works best as a means to keep people accountable to their word, not as a way to see to it that everything fits within a perfectly rigid formula. Stipulations and repeatable procedure can certainly keep society functioning, but society flourishes best if there are people who are able to fix things and smooth situations over before they can go wrong. You don't get this by taxing the rich (at least not eternally, as kitten-soft establishment socialists would want). You get this with people (or one person) who's in tune with the natural order of the community; a Mediator in the highest possible sense.
One can think of it almost like a guardian angel. You won't see him until he decides to grace you with his presence or, as the protagonist of Apocalypse Now was instructed to do, execute with extreme prejudice. The important thing to remember is that this mediator has set it up to where someone will have a good idea of what is expected in a community just by entering; that or one will not have the agency to destroy things by simply entering. The man cannot break the law when a community does not resist him.
One can attain kingship through blood, force and cunning, but you will not get the better of one who is clever enough to escape. One can delegate and appoint others even, all independently of the people using their services in an ongoing feedback of reciprocation.
Anarchist writer, Bob Black, developed the idea of non-legal, non-authoritarian mediation in his work. While it wasn't suggested there that this mediator would have any kind of monopoly on public property, that is precisely what I'm suggesting here. The panarchists and the early days of Formalist/Neoreaction would vulgarize the members of the community by calling them 'customers' to a government's 'service,' when in fact, Lao Tzu had them beat thousands of years ago, and what's more, he understood sovereignty which was defined beyond the mere realm of the material world. One must keep in mind that the owner is not simply the owner only because of one, single fair legal action he'd performed at a particular point in history as libertarians and propertarians would want to focus on, but the owner is the owner because of who he is and who he continues to be with respect to his property. To grant him the 'right' to pollute or degrade his own land is a dangerous superstition; that words written down on paper are like magical curses which bind people to their objectives.
Real sovereignty is dynamic. Its home is in the very act of interface between reciprocating parties. The coercive view of sovereignty is that one who exercises a higher degree of agency commands and the one with lower agency obeys. A true, honorable sovereignty is when one with higher agency honors the lower agency in another in such a way that they can have communion. The ultimate sovereignty would be like a guide, a teacher, a person of wisdom and inspiration, as well as a guardian who would protect his people from violence. He is like a father, in a sense. But in some instances, it is best if he is a distant father, neither loved nor hated as Machiavelli's prince, but himself ever aware, ever scrutinizing, ever watchful.