Knowledge vs. wisdom may be thought of as two sides of the same coin, but they are distinctly different things. Knowledge can simply be thought of as possessing “information,” while wisdom can be thought of possessing “experience.” They are not mutually exclusive nor inherently inclusive: knowledge is not required to gain wisdom, nor is a person wise just because they are knowledgeable.
Knowledge consists of being in possession of a compilation of facts, data, information about a topic, event, person – really, anything that can be learned or known. Knowledge can be acquired over a period of time by researching, studying, investigating, observing, or experiencing the information. It is best understood or recognized as being aware of and understanding concepts and facts, usually in regard to a specific subject.
An individual who is knowledgeable is generally considered to possess an above-average awareness of “truths” – data or information – especially information that pertains to a particular subject and that is considered logical, proven, and something that can be known definitively.
Knowledge of facts and information is somewhat a part of wisdom, in that a wise person gains the ability to sort through and determine what facets of their knowledge are evergreen or applicable to their life, or at least to a specific situation or set of circumstances.
Wisdom is often seen as possessing the ability to take knowledge and apply it in a way that enables you to make your life more meaningful and fulfilling. It enables individuals to discern what is of primary importance in a situation and thereby act in such a way as to reap the maximum possible benefit from the situation – in other words, to make wise choices.
Ultimately, wisdom is taking knowledge – information and facts about the world and about people – and profitably applying it to life. But wisdom also cuts much deeper than that because it involves developing an intimate understanding of life, how the world works, and how knowledge affects someone’s life on a personal level.
Wisdom is frequently associated with experience. People often interchangeably speak of people who are wise and those with lots of experience.
Bridging the Gap: Turning Knowledge into Wisdom
It’s far easier to seek and obtain knowledge than it is to attain wisdom. Hence, there are a lot more “smart people” than there are “wise men” (or women) in the world. However, with adequate knowledge, bridging the gap between adequate information and wise application of information can be pretty simple. Wisdom is the beneficial, practical application of knowledge.
There are myriad examples of translating information and knowledge into wise action, including:
Reading blogs/articles and listening to lectures about the best trading strategies to diversify a portfolio and then practicing and mastering the strategies
Reading articles or talking to a nutritionist about the best meals to help an individual lose weight and then actually preparing and eating the meals
Watching a video of the latest Zen meditation technique to help with relaxation and then putting the techniques into practice
In the world of corporate finance, for example, knowledge is comprised of all the information contained in a company’s financial statements. Wisdom encompasses the ability to evaluate that knowledge – through using skills such as financial modeling and forecasting – and arrive at a valuation that accurately reflects the ability of a company to operate as a profitable business enterprise.
Wisdom vs. knowledge are closely intertwined. Wisdom is putting into profitable practice the information learned through the pursuit of knowledge. In any arena of life – perhaps especially in business and finance – possessing both knowledge and wisdom are keys to success.
CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful: