Having undergone psychoanalysis, Hesse was particularly interested in exploring the workings of the human mind. This comes through in many aspects of Demian. First, the entire book deals with Sinclair's intellectual development. Hesse does a particularly good job of capturing the torment that Sinclair feels, as he is pulled by very strong force in opposite directions. Not only does the author take an interest in psychology, but so also do the characters of the book. When Sinclair and Demian are taking Confirmation class together, one of the central topics of conversation concerns understanding the inner workings of other people. Their exploration often centers on Demian's prowess at getting to know people better than they know themselves and influence how they act.
This is one of the major themes of Demian and one which derives from Friedrich Nietzsche. Nietzsche's book, Beyond Good and Evil, is an exhortation to transcend humanity's accepted ideas about morality. He urges people not to be so influenced by what is considered good and what evil, but to adopt other metrics of evaluation. This idea is central to Demian . A large part of Sinclair's growing up is his coming to accept that it is all right to enjoy things from the realm of darkness, things one might refer to as evil. Ultimately, he is even brought to be fascinated by the notion of worshipping such "evil" things, in his study of Abraxas, the god who combines good and evil. Ultimately, Sinclair comes to reject the notion that he should worry about what is good and what evil in deciding how to act. This Nietzschean edict is a vital part of Sinclair's intellectual development.
Another central Neitzschean idea found in Demian is the importance of the will. People who have learned to transcend moral categories can, unhampered, express their wills. We see this very clearly as the ideal to which Sinclair aspires and grows, and the ideal that Demian and his mother represent. We see this in Sinclair's discussion with Knauer, where he tells the disturbed student, that in order to be free he must pursue his soul's innermost desires—that is to say, he must exercise his will. This point becomes particularly clear in Frau Eva's goading of Sinclair to seduce her. She tells him that he must truly want her in order to win her. She requires that his will transcend the niggling moral qualms he has retained. The he will have fully realized himself and will be deserving of her as a prize.
One of the more complex ideas that Hesse treats in Demian is the relationship between an author and his subjects. A short prologue, written by the older Sinclair, the narrator of the story, precedes the first chapter of the book. In it, Sinclair chides authors who "tend to take an almost godlike attitude toward their subject, pretending to a total comprehension of the story, a man's life." Sinclair admits that, even though the story he is about to tell is his own, he still does not have this type of godlike understanding. This recognition calls into question the entire book. Hesse wants us to be aware that the story we are reading is written by a fallible man. Writing about someone's motivations can be problematic and imperfect even if they are one's own. We are constantly reminded of this throughout the novel. While we may get engrossed in a story of a particular episode, Sinclair is constantly interrupting these episodes to present an analysis. This constant interjection reminds the reader that Sinclair, as an older man, is the one telling all of these stories, and that the information we get may or may not correspond to how the younger Sinclair actually thought at the time.