There are two types of titles in the martial arts, administrative titles and teaching titles (shogo). Administrative titles are technically positions, rather than titles to be addressed by, and establish your authority of overseeing the system and your level of responsibility. Teaching titles exist as an extension of the Menkyo (license) system. The various shogo titles indicate hierarchy between the instructors of a system, as they follow a preset order of progression, and establish your authority of transmitting the system. The most common shogo titles are Renshi, Kyoshi and Hanshi. Shihan sometimes get thrown in there as a teaching title, while other organizations/styles use it administratively, so that will specifically depend on the style we're discussing.
Soke 宗家 is an administrative title. It designates the holder as the inheriting headmaster of the art they represent, much as the CEO is the head of a corporation. It is never meant to be used to address the person, just as you would never say, "Good morning CEO Smith," and it's most certainly never to be used by the holder in referring to themselves. Rather, it is most appropriately used in writing of official documents or when talking about someone. Then, like all other Japanese titles, it is to follow the person's name (i.e. John Smith, soke). So now that we've clarified the proper use of the title, what exactly does it mean to be Soke?
But what does it take to become the founder of your own martial art? True enough, every art is created on the foundation of another. Some arts even carry over a large part of the curriculum (kata, drills, etc.) from their parent art, so what makes them unique? Small modifications in kata are to be expected, so by themselves are not enough to be declared a new style. In fact, Japanese arts often make the distinction of having several branches just to accommodate those modifications, referred to as -ha. For example, Takamura-Ha Shindo Yoshin Ryu is the Takamura family's interpretation, expression and modification of Shindo Yoshin Ryu, but at the end of the day, it's still Shindo Yoshin Ryu.
What truly separates a new style from its predecessors are the principles, philosophies and training methods used in the particular expression of Budo taught by the founder. What innovation are you bringing to the martial arts community? Again, this may not be a specific set of physical techniques, as there are only a limited number of ways we can move as human beings and inflict injury on one another. Therefore, a new style must be defined outside of the physical techniques, though they should have their own unique feel (ugoki in Okinawan).
This established the tradition that it takes a Soke to recognize a new art. But remember, a Soke is not a founder. As such, a founder cannot recognize another founder! This fact is one of the most bastardized standards in the Western martial arts scene, with "Sokeship Councils" popping up all over that offer style recognition. Their existence is predicated on the tradition that a Soke must recognize a founder, but they themselves are not true Soke. They are most often founders of their own arts, and therefore are unqualified to recognize founders. Any certificates they give out are illegitimate, because they themselves do not have the credentials necessary to authorize that recognition.
Let me be clear. The only person who can certify a new style and recognize its founder is the inheriting headmaster of an existing style! It does not matter how many people sign off on your certificate, who they are, or how well-known and respected they are. If none of them possess the proper credentials, it's not valid. The same way no number of Judo masters can promote someone in Taekwondo, no number of founders or "10th Dans" can recognize a new system. They can witness and support the recognition, but they cannot be the source.
The only other way for a system to be established is through the test of time, though the founder will not be alive to see it. As stated before, once a system is passed on to a successor, it has come full circle and is considered complete.
And one more thing before I close out. The founder and all future Soke of an art are not 10th Dans. Rank itself is for the students and has no place among headmasters. They are considered outside and above the rank system. This is because rank was merely implemented to establish a hierarchy within the system and measure one's individual progression. Rank has no bearing outside of the system it was awarded in, and therefore for a founder or headmaster to hold rank is useless and redundant. They are already the headmaster of the art. There is no going higher than the headmaster, so to measure their progress serves no purpose. Unless the preceding headmaster promotes you specifically to 10th Dan upon their death or retirement, when you take over the system you have no business claiming it.
Today one could argue that the historical differences between the heirs of Tokugawa-period family lineages which operated as commercial guilds (with the natori system) and the heirs of localized teaching lineages such as those associated with martial traditions are less significant than their modern similarities. In both cases the current successors remain the only legitimate sources for traditional forms of instruction in the arts of that lineage. In both cases the current successors have assumed responsibility for preserving the historical texts, special tools, unique skills, and specific lore that have been handed down within their own particular lineage. In both cases the current successors distinguish their traditional teachings from newly founded rivals by pointing out how their teachings remain faithful to the goals and forms taught by previous generations. Based on these similarities, many modern writers use the terms iemoto or soke as designations for the legitimate heir to any established main lineage. Used in reference to present-day representatives of traditional martial art lineages, therefore, the soke label properly denotes their roles as successors to and preservers of a particular historical and cultural legacy. It should not be interpreted as implying identification with a commercial network (as criticized by Osano) nor as being equivalent to "grandmaster" or "founder" (as mistakenly assumed by casual observers), and might best be translated simply as "head" or "headmaster."
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