Bear's quote is quite meaningful. It represents one of the lessons about life that Bear imparts to Crispin. Much of their relationship is predicated upon Bear teaching life lessons to Crispin. This particular one is rooted in the need to make decisions that underscore intelligence and increase survival.
The exchange that precedes the quote is significant. In their initial interaction, Crispin reveals that he lacked a plan for survival. Crispin tells Bear that "I don't know what I was going to do. I wanted to gain my liberty." From this, it becomes clear that Crispin is not ready to effectively navigate the reality in which he lives. It is in response to this striking lack of direction that Bear remarks “The only difference between a dead fool and a live one is the dead one has a deeper grave.” Bear's quote strikes at Crispin. It reflects how Crispin needs to have a more keen and directed means of living in a world that will take advantage of his lack of focused understanding. Bear's quote means that the "dead fool" has lived a life without direction, and for this reason, they are dead. Crispin's lack of certainty and totalizing drive makes him a live one. It is in this regard where Bear's quote possesses meaning.
At the same time, Bear's quote reflects how much Crispin has to learn. Crispin's response to Bear's quote is to realize all the "scorns and insults" that had been levied upon him in one blindingly brutal moment. From this point on, Bear recognizes that he has to help Crispin, who is literally at the bottom. From this point, Bear outlines the path to redemptive strength to Crispin. Bear points out that Crispin has much against him such as being "a boy" who is alone in the city. From this point, Crispin recognizes the importance of the lessons that Bear teaches to him. These lessons are ensured to move Crispin from a "live fool" into a functioning individual of strength and honor. Crispin is a "wolf's head," which means that Bear understands that Crispin needs to understand what to do and how it should be done before the city has its way with him. Through this urgency, Bear offers his education to Crispin, who shows himself to be a most willing and apt pupil.