At the beginning of the second chapter, Emil informs the reader that his "salvation" came from an entirely unexpected source. The key word here is "salvation." A new student, Max Demian, who is several years older than Sinclair, has enrolled at the Latin school. Demian is obviously an outsider. He is different from everyone else of Emil's acquaintance. The unexplained aura about him isolates him from the other students. Though not popular, Demian is respected by the students because of his great self-assurance, especially toward his teachers.
While walking home from school one day, Sinclair is joined by Demian, who engages the reluctant younger boy in conversation. Demian makes a reference to a weathered escutcheon above the doorway of the Sinclair residence. Emil himself is vaguely aware of its existence although he has never really looked at it. Demian identifies the carving as a sparrow hawk, thus establishing the central symbol of the story.
Demian also makes reference to a lesson which his class has shared with Sinclair's, the subject of which was the story of Cain and Abel. Demian provides his own interpretation of Cain and his mark. Sensing that the awarding of a special mark for an act of cowardice, a mark that protects Cain and puts the fear of God into others, is somewhat illogical, Demian states that Cain is a different and superior human being. Because Cain is "different," people are in awe of him and are suspicious and afraid of him. Rather than admit their own inferiority, these people invent stories about Cain and his people. Demian believes that Cain is guilty of murder, but does not pass a moral judgment against his action. In short, Demian's view of Cain emphasizes his nobility.
It is obvious in this discussion that the essence of Demian's commentary about Cain can also be applied to Demian himself. Demian's full name — Max Demian — provides insight into his character. "Max" could well be a shortened form of "maximus," meaning superlative. Demian is a name which came to Hesse in a dream and can be linked to his function in the novel as Sinclair's daemon. Among ancient peoples, a daemon was a spirit presiding over persons, places, and secret intentions. Ancient philosophers believed that each person had two daemons — one good and one evil. The term is frequently used in the writings of Carl Gustav Jung, whose influence on Hesse has already been mentioned.
The concept of the superiority of certain individuals, which Max has applied to the story of Cain, emphasizes the profound influence of the early existential philosopher Friedrich Nietzsche upon Hesse. In fact, Demian seems to be an enigmatic character because his structural aspect in the story, which is decidedly religious, and his functional aspect, which is Nietzschean, seems to clash. This, however, is not so and will be discussed later.
Demian's discussion of Cain greatly upsets Sinclair since it undercuts the pillar of his fundamental religious beliefs which he has never before questioned. Though Emil is disconcerted with the ideas stated by Demian, he is nevertheless pleased by Demian's manner and his aura of self-confidence manifested in his voice and especially through his eyes.
Reflecting back on the time when he was chastised by his father for his muddy boots and his secret feelings of superiority, Emil recognizes his feelings as identifiable with Demian's interpretation of Cain. This realization and further thoughts of Demian's conversation form the awakening of Emil's critical mind and his departure from a blind acceptance which is often said to be characteristic of childhood. For a time, at least, Emil has been so involved in thinking that he has forgotten about his predicament with Franz Kromer. Sinclair has begun to become involved in living and thinking about the total world in which he lives, encompassing both the light and the dark aspects of the dichotomized world of traditional Christianity.
Emil, however, has not been the only person to note the special qualities of Demian. Rumors are rampant. Some reports claim that the wealthy Demian is a Jew, or possibly Mohammedan. Later rumors will claim that he is an atheist, knows girls intimately, and is his mother's lover. One rumor concerning his physical prowess is confirmed when he humiliates and temporarily paralyzes the strongest boy in his class by a seemingly magical touch, probably directed at a vulnerable nerve. Thus to his less knowledgeable contemporaries, Demian seems even more than unusual. He is almost god-like — or demon-like.
Sinclair's short-lived escape from Kromer ends. But even in his dreams, he is tormented by Kromer. One dream initiates an Oedipus theme. Emil dreams that Kromer has forced him to wait in ambush, armed with a knife, for a certain person to pass by and this person always turns out to be his own father. However, Demian is also a subject of Emil's dreams and even takes Kromer's place as a torturer in two dreams.
The significance of the increased mention of dreams and dreamlike states cannot be overstressed. As the story progresses, it becomes increasingly difficult to differentiate between what is reality and what is not reality because of Sinclair's constant dreaming. Ultimately, the question of the reality of Demian himself, as well as his mother, arises. This problem will be discussed later.
Demian's next involvement in the story occurs while Kromer is once again terrorizing Sinclair, this time under Demian's analytical eyes. After Kromer's departure, it is only a matter of minutes and a few words until Demian is able to ascertain the reason for Emil's fear of Kromer. Emil is both repelled and fascinated by Demian's apparent psychic power. At this point, Sinclair notes that Demian seems to know him and understand him better than he does himself. He further adds that when Demian speaks, it is almost as though his own inner voice is conversing with him. Demian offers his assistance to Sinclair and tells him that he must free himself of Kromer's bondage if he wishes to have a meaningful life. Characteristically, Demian suggests that the most efficient method of achieving this would simply be to kill Kromer.
Approximately a week passes, during which time Sinclair has not once been bothered by Kromer's whistle. When Emil accidentally meets him on the street, Kromer turns aside to avoid facing Sinclair. Demian then admits that he has persuaded Kromer that it is in his best interest to stop plaguing Sinclair. He does not divulge his methodology, although he does say that he did not either pay Emil's debt or physically abuse Kromer. Emil remains perplexed.
His immediate problem and his necessary contact with the dark world at an end, Sinclair deserts his benefactor and returns to the womb — that is, back to his mother and the world of goodness; back to his lost paradise. The prodigal son has returned. The need now gone, Sinclair even confesses the whole episode to his parents and is subsequently forgiven and taken back into the fold. Sinclair, however, remains cognizant of the fact that things still are not and never will be as they once were. He also senses that Demian somehow, as well as Kromer, is a link to the dark world, although a different type of link.
Still dependent, still needing someone for support, Sinclair has returned to his parents. But he feels that possibly his confession, explanation, and gratitude should have been directed instead to Demian. His fear of Demian's encouragement toward independence has prevented him from seeking further contact. Demian's influence remains nevertheless. A half year later, while walking with his father, he mentions Demian's interpretation of the Cain story. His father expounds upon it as a form of heresy and warns Sinclair about the dangers of entertaining such dangerous notions.