知不知上;不知知病。
夫唯病病,是以不病。
聖人不病,以其病病,是以不病。

To know that you do not know is highest
To not know but think you know is flawed

Only when one recognizes the fault as a fault
Can one be without fault

The sages are without fault
Because they recognize the fault as a fault
That is why they are without fault
(Translation by Derick Lin)

Why the sage is the sage is that they know the things they don’t know and recognize how they’re flawed.

What makes the sages without fault is that they recognize the fault.
So the recognition is the key to being a sage. Being humble like sage makes it easy for anyone to find fault with oneself. Once we recognize our fault and take the step to correct it then we are no longer be bound by it and free from it.

Notes:

The Chinese character bing (病) occurs eight times in this chapter. Many translators translate it as “disease” or “illness.” It does not fit in the context here. It makes this chapter seem strange. I believe bing ( 病) instead derives from mao bing (毛病) which means a fault, flaw, problem, etc. I included Derick Lin’s translation here because he uses flaw or fault instead of disease or illness. I think that it is perfect for the context and makes Lao Tzu’s idea crystal clear to the readers.