Long ago, Koda, the Ancient One, Founder of the Earth, Keeper of the Sky, formed the world, because he was bored. In the beginning, the spirits of the world were wild and untamed. In time, many took physical form: spirits of stone, spirits of water, spirits of crap, Spiteful Spirits, spirits of Restoration OMFG STAY DEAD STUPID SQUID and other creepy things. All things with form have spirits… as do many formless things. And that made 100% sense.
But one day the bear stood up and looked around him and saw that the spirits of the world were restless and chaotic. He could not understand the endless cycles of creation and destruction, so he took his Plasma Blade and caused some big trouble in little Gensokyo. And those who watched Koda rage and accepted his offer of sliced squid became the kodan. And those who were not ready and did not wish to change remained as bears. Morons.