Rethinking Failure: Why Leaders Get Risk Wrong on Both Ends of the Spectrum

Recently, on a flight back from Central America, I sat next to a seasoned Army officer who carried the kind of quiet confidence that comes from decades of experience most leaders never see. We ended up talking about decision-making under pressure — the kind where time isn’t a luxury. At one point, he offered, “Most people think the danger is in failing. The real danger is in misunderstanding the odds.”

That line hits harder the longer you lead.

Because the truth is this: leaders don’t just have a failure problem. We have a risk calibration problem. And it shows up on both ends of the spectrum — in the people who brace for failure before they even begin, and in the ones convinced that failure simply won’t apply to them.

The Fearful, the Fearless, and the Blind Spots in Between

We’ve been told for years to “embrace failure.” I've found myself saying it. Good sentiment. It turns out, it is incomplete advice.

On one side, you have individuals shaped by what psychology calls negativity bias — the brain’s ancient tendency to overweight threats, potential losses, and worst-case scenarios. Decades of research from Baumeister and others show that our minds naturally elevate risk, criticism, and potential harm. This group expects failure as a default setting: The pitch won’t land. The idea won’t scale. Someone else will get the opportunity.

They move cautiously, prepare defensively, and sometimes never take the step they need to take. For them, “embrace failure” is an invitation to move despite their wiring.

But the other end of the spectrum is just as consequential — and often common in leadership roles.

These are the leaders who operate with unwavering conviction in their own correctness. Behavioral economists describe the patterns well: optimism bias, paired with the Dunning-Kruger effect, which shows how individuals with high confidence often overestimate their accuracy or competence. Not out of arrogance, but out of a genuine inability to see the gaps.

Everything feels like a win. Every idea seems validated. Every misstep is blamed elsewhere — the market, the circumstances, or the team.

This isn’t confidence; it’s cognitive insulation.

Why Both Extremes Are Dangerous

The fearful leader underestimates their ability to succeed. The overconfident leader overestimates it.

Both distort the actual probability curve in opposite directions. But their consequences converge:

• They misread or selectively interpret data.

• They underestimate external forces.

• They avoid the tension of real risk — either by predicting failure or pretending failure is irrelevant.

• And they lose the learning that comes from seeing reality clearly.

  
  

The Missing Variable: Time

There’s another risk both groups share: they wait too long.

The cautious leader hesitates, hoping conditions will improve. The overconfident leader delays, assuming conditions don’t matter.

But decisions don’t pause just because we do. Leadership research from Harvard’s Amy Edmondson and Ron Heifetz points to a recurring trap: when we avoid confronting reality, we let time make the decision for us. And decisions made by erosion rarely favor the leader, the team, or the strategy.

Ignoring risk doesn’t neutralize it. Delaying a decision doesn’t improve it. In fast-moving environments, inaction becomes its own form of failure, because it strips leaders of agency and compresses the runway for course corrections.

The leaders who excel aren’t just better at evaluating risk — they’re better at acting before risk decides for them.

Failure Isn’t the Lesson — Interpretation Is

Leadership isn’t defined by the presence or absence of failure. It’s defined by the meaning we assign to it.

Sometimes failure comes from forces outside your control — geopolitical shifts, unexpected competitors, cultural headwinds. Sometimes it comes from something misread or ignored — the signals were there, but you saw what you wanted to see.

Cognitive neuroscience shows that the brain builds narratives to protect the ego. That’s why one person can say, “It wasn’t my mistake,” even when the evidence suggests otherwise. It’s also why another can say, “I knew this wouldn’t work,” even though they never fully tested the idea.

Both stories are self-comforting. Neither story is useful.

The productive story — the leadership story — is the one that asks:

• What was the actual risk here?

• What did I expect, and why?

• What did I miss?

• What was truly within my control?

• What would I do differently now that I know more?

  
  

Psychologists call this metacognition — thinking about your own thinking — and it correlates strongly with higher performance. Leaders who do this well outperform because they don’t just make decisions; they interrogate the assumptions beneath them.

Risk Isn’t the Enemy. Miscalibration Is.

If leaders internalize anything, let it be this: Risk is neutral. Risk is information. Risk is the price of progress.

We get in trouble not because risk exists, but because we distort it.

Some inflate it. Some minimize it. Few treat it honestly.

Great leaders learn to navigate the middle — the space where uncertainty is neither feared nor dismissed. It’s analyzed, understood, and acted upon with humility and clarity.

This Isn’t About Failing Better. It’s About Seeing Better.

The point isn’t to romanticize failure or turn it into a leadership badge. Failure is simply part of the operating environment. What matters is how clearly we see it and how honestly we face it.

When leaders recalibrate their relationship with risk — not failure — they make better decisions. They build teams that operate with awareness, resilience, and adaptability. And they create cultures where confidence is earned, not assumed.

That Army officer was right. The real danger isn’t in failing — it’s in misunderstanding the odds.

Leaders who understand risk don’t wait for perfect conditions or hide behind invincibility. They act with clarity, adjust with humility, and learn without defensiveness. That’s not embracing failure — that’s embracing leadership.

As always, these reflections are mine—drawn from a career spent learning, leading, teaching, and studying the evolving world of retail and the people who shape it. Feel free to pass along your thoughts on this topic.