Interesting topic.
Here's my standpoint. I personally study martial arts to improve QUALITY OF LIFE. I believe we always need a challenge (training as tough as we can handle) so that we can improve. I believe we need a tremendous amount of skill to ensure that we are able to use our martial arts effectively (this comes from training tough). Taking this into consideration, you also have to think about the big picture. Are you training at a level that is so physically intense, that you actually deminish the QUALITY OF your LIFE? Are you giving yourself a worse beating throughout your life than you would recieve if you didn't know how to defend yourself? So many of my martial arts friends that are much older than I tell me the same thing; take care of your body. They are all incredibly tough people, which is the result of some crazy training regimens, but what do they have to show for it? Aches and paines. The so called "dues they have paid" and "lickins they've recieved" have made them very good fighters, but they are in pain everyday because of it!!! None of them have the QUALITY OF LIFE that they wish for.

Don't get me wrong, I love to play hard. Theres nothing more fun than scrapin and grapplin without gear on nice rough asfault on a cold dark night every once in a while. It's great training, you can't get much more reallistic. But for crying out loud, WHY DO WE DO IT!!!!??!?

I try to train (and train others) in such a way that I maximize martial improvement and improvement in life at the same time. No future knee problems, no callused knuckles, no iron groin practice. I would suggest that if you do want to train hard, you don't scare students away with blood, bruises, and broken bones when they first start. You can save that for later once you've got them hooked

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PS
I always consider the smaller, weaker, or more timid students in class. They need to learn to be tough, but I would hate to make them afraid of coming to class because they don't want to get hurt.
PPS
I think when Sijo was teaching his phillosophy was
-Class isn't over 'till there's blood on the floor- or something to that effect.