Lao Tzu is an aging patron of Jupiter Café observed by Eiji Miyake in the novel number9dream. Eiji does not know the customer’s name, and calls him Lao Tzu because he is identical to Lao Tzu in Eiji’s school textbook: “bald, nutty, bearded.”
Lao Tzu spends a considerable amount of time at Jupiter Café playing on his “vidboy,” a handheld electronic device, complaining about “blasted bioborgs.” It is at this point that Miyake begins fantasizing about his encounter with attorney Akiko Katō. Towards the end of his fantasy, Miyake integrates both bioborgs and Lao Tzu in the fantasy. After he shoots Akiko Katō, the real Akiko Katō tells him to drop it and aims a gun at him. The Akiko Katō he shot turns out to be a bioborg: "A bioborg, dummy! A replicant!"
Lao Tzu, in his fantasy, is an undercover spy: "We saw you coming! Our spy picked you up in Jupiter Café - the old man you bought cigarettes for? His vidboy is an eye-cam linked to PanOpticon central computer."
Note: At his point in the novel Miyake has not yet bought cigarettes for Lao Tzu; that happens a few pages later in the story after Miyake has stopped fantasizing.