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In other words, having a government of selfless people is great while it lasts, but it's a fundamentally unstable form of rule.
In my opinion, governments need balance. Without balance, there is no "true" government. At least, not what a government should be.
Each faction should have 1 government leader along with at least 2 additional members.
Having only one set of people run a government with no diversity where it matters most (in this case faction-wise) is only going to set up a disaster, as we saw well throughout the Divergent series. Jeanine Matthews had her own little scheme to take over the "world" but it may or may not have gone through so easily if some members of the government were Erudite. If that were the case she would have had quite a bit of trouble trying to invoke distrust within the other faction groups in the beginning of the first book.
In theory, the idea of having a government made up entirely of selfless people sounds like a dream come true. But if selflessness is the only virtue that they possess, then there is a problem that we could easily run into, like the problem of selflessness not equating to honesty, or competence(assuming that the only ((or primary)) qualification to become a government leader in Divergent had to have was selflessness), selflessness doesn't always mean that the peace will be kept, and it does not explicitly state that the government will have the b(guy parts) to get the job done where it needs to be done. This is what Candor, Erudite, Amity, and Dauntless would have brought to the table. Sure they wouldn't be 100% focused on everyone all the time. Thats what Abnegation is there for anyways. But Candor would be able to bring honest, cut-throat opinions where they're needed. Amity would be able to create a compromise like noones business, Erudite would be able to draw up statistics & facts concerning the needs, wants, and current issues that currently plague the people, and Dauntless would not hesitate to get sh** done when it needs to be done.
It's okay to make a fair amount of the government Abnegation, but mind you that carrots alone don't make up a vegetable soup.
As for the quote, the thing about this society is that they focus a lot on the negatives as well as the strengths of each society. It is very wise to say that someone who has focused solely on honing one trait, such as the Erudite, will have developed flaws. They are not balanced people with all the traits, but rather eccentric with too much of one.
Knowledge can be both good and bad. Knowledge may lead to a thirst for power, but if used correctly, knowledge can be a powerful asset to have.