LEGAL: Know the difference between knowledge and wisdom

June 26, 2006

The role of knowledge in business is familiar to all of us. Wisdom, however, is more elusive and its usefulness less wellknown.

Knowledge can best be defined as "acquired facts."

Wisdom, however, is a way of seeing reality.

To "the best knowledge of seller" is a familiar term in business transactions, referring to what the seller knows-sometimes after diligent inquiry. Then there's "knowledge of the law," something lawyers specialize in. Or knowledge of numbers, which is accountants' expertise. The list goes on.

What, then, is the role of wisdom? Does it have a place in the business world?

Arguably wisdom has the predominant role, but we seldom speak of it. Perhaps because wisdom can be elusive. Maybe because it is not taught in business school or law school. You don't see business books on wisdom. I don't remember hearing the word once in law school.

Wisdom doesn't come from a book. It cannot be acquired by accumulating facts. Wisdom comes from within-which makes it difficult to comprehend.

You can gather statistics, crunch numbers and analyze industry trends all you want. But none of that tells you whether a deal is wise or unwise. Many business deals have looked great on paper and never worked in practice. Wisdom lets you see past the paper to the heart of the deal.

Vast sums of money are spent building empirical models and running statistical analyses. Don't misunderstand: You should gather facts and gain knowledge. But even though that can show you why a deal won't work, there often is much more to it.

As an example, it takes a wise person to stitch together seamlessly the cultures of two organizations that are merging-where to go, what to do, when to push and when to back away. All the knowledge in the world can't achieve this.

So what consultant do you hire to ensure you have "wisdom" on your team? It doesn't work that way. Everybody has wisdom. You just need to look away from your head and into your heart. This is very difficult for highly intelligent, analytical people who live their whole lives pursuing knowledge.

But consider this: How many analytical people are running companies? More often, you find passionate leaders at the top leading companies-those who live by their hearts.

Within these strong, passionate hearts lie the reservoir of wisdom needed to guide companies, steer deals and lead the lives of employees. Companies' mission and vision statements are written expressions of the leaders' dreams. With these leaders, wisdom is ever present.

I am fortunate to work with many business leaders who are wise men and women. These leaders often refer to my advice as "wise counsel," not "good knowledge."

A challenge with wisdom is that it can lead you to do things that knowledge contradicts. The CFOs, accountants and attor neys who trade on accumulated facts line up their defenses of decisions that this knowledge supports. While they too should look to their hearts for wisdom, many neglect to do so often enough.

Wise advisers are rare and invaluable. You must be able to identify wisdom as well as knowledge within your advisers.

Fortunately wisdom and leadership tend to go hand in hand, and the wise leader will lead gallantly down the often-unpopular path. Many times it is all you have to guide the way.

It can be a lonely path, though. Many bad deals and poor decisions are borne of a lack of faith and trust in that wisdom and leadership. In a moment of weakness, knowledge overcomes wisdom and rules the day.

Still, if knowledge were all that was required, the most highly intelligent people would be the richest and most successful. It seldom happens that way. Without wisdom, a company is poorly armed in the wars of the business world.

Knowledge alone is an inferior weapon always outperformed in the end by wisdom.

Millard is vice chairman of the Business Department for the Barnes & Thornburg LLP law firm and a past president of the Venture Club of Indiana.He can be reached at 231-7803.
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