Wisdom — Aristotle believed that every virtue can become a fault if not correctly applied.
Frugality can veer into miserliness.
Self-reliance can harden into prideful stubbornness.
For Aristotle, being virtuous meant avoiding these extremes, by following the path between two vices: that of not applying a virtue enough, and that of applying it too much. He called this finding the “mean” of a virtue.
For example, courage is the mean between cowardliness and recklessness.
Loyalty is the mean between fickleness and blind obedience.
Resolution is the mean between spinelessness and obstinacy.
Practical wisdom, for Aristotle, is the ability to do the right thing, at the right time, for the right reason. Now this is easier said than done, which is precisely why we need practical wisdom. Because it is neither art nor science, its excellence in deliberation as determined by a rational principle allows a virtuous man to adapt to new challenges and different situations. For this reason, Aristotle believed that practical wisdom was the virtue that made all the other virtues possible.
Without the correct application of practical wisdom, the other virtues would be lived too much or too little and thereby become vices. What this also means for investors is that it is not enough to presuppose our prudence if we believe we know what prudence is, but we must also make sure we adhere to good judgment in our actions that are in accord with this virtue of prudence.
According to the Richard McKeon translation of Aristotle’s Nicomachean Ethics