We're not on the same page.
Your theory assumes that someone can accomplish ANYTHING if one just tries hard enough. What happens when someone sets an unrealistic goal? When something turns out to be beyond their physical or mental ability, despite their best efforts? It will happen to us all, sooner or later. What happens when your kid resolves to run a half-marathon at a time that turns out to be faster than their body can physically handle? Do you label them a loser or a quitter when they bust their butt for months, realize it's an unrealistic goal, and move on? Or do you congratulate them on their effort?
Now you're being silly. Part of parenting is teaching them how to set realistic, but difficult, goals. My "theory" does not assume one can reach any goal, regardless of potential. Many climbing routes in the Rockies are too difficult for me, and I know I will never have the ability to climb them. But, I can seek to keep improving. If I reach the limit of my physical ability, perhaps I can go higher/farther with knowledge or technical ability. Maybe I can train harder or better? Set the bar high, for me, and then work hard to make it.
Also, the word failure is not derogatory. It's a state, not an assessment of someone's character. Kids need to deal with failure, and if they're not reaching for a difficult goal, how will they? I see kids that are taught to blame someone else for their failure. If your kids create their goals (realistic, but difficult, with your help) and then fail to reach them, they have to understand what lead to that failure.
In teaching them about good goal setting, they will understand what success means, and they will build self esteem when they experience real success based on goals they created and were difficult to reach.
This is what I like about individual sports. No teammates to blame. It's you vs. you.
In an attempt to preserve our children's self esteem, I think we are doing the following:
1. Praising them regardless of achievement. I'm not saying you should berate your kids (hockey dad style), but if they didn't meet their goals, help them to understand why and create a plan to keep going.
2. Setting goals and working to meet them is a foreign process.
3. Not teaching them resolve and determination.