Reality is the fully integrated recognition that there is a world around you that is in essence different from you, does not care about you, but is a world that you desperately need. (Dr. Peter Koestenbaum, Philosopher, author and Mentor)
The first principle is that you must not fool yourself. And, you are the easiest person to fool. (Richard P. Feynman, Physicist, 1918-1988)
We tell ourselves that we know what is real, that we live a life well grounded in reality. We assume that our reality is what matters. And, therein lies the problem.
Unfortunately, a connection to reality is not as simple as forming our opinions and living our lives within our self-created perception. Nor is reality based on accepting a dogma that is espoused by our political party, religious leaders, or teachers. Reality demands an examination of perceptions and teachings, and a drilling down until we reach the facts that underlie all that exists around us.
Reality can be a hard master. Money, laws, physics, culture, and time do not change to accommodate assumptions. However, a great leader will understand the realities that apply to a particular situation, and will use this knowledge to select the path that leads to success.
Don't confuse reality with current conditions. For example, existing laws may prevent you or your business from entering a certain market, or your city from providing a certain service. But laws can be changed. So the reality that may be most important is not the present law, but the process for changing the law and the likelihood of success.
External realities are sometimes easier to deal with than the inner realities of the soul. We all have an inner vision of who we are, how we interact with others, and how our coworkers, bosses, classmates, teachers, families and friends perceive us. We find ways to make our inner selves comfortable with the fact that we did not complete our work on time, did not attend a class, or did not deliver on a promise or commitment. We separate our inner selves from reality in order to make ourselves comfortable with who we are and how we behave.
Ignoring the reality of who you are, how you are perceived by others, and living in a fantasy world is just as dangerous as ignoring external realities to anyone who wants to be an effective leader.
As you apply the concepts of reality in your leadership life, a clear understanding of both external and internal realities will help you develop the two critical characteristics of great leaders - Authenticity and Competence. (There is more at this Blog Entry - Authenticity, and this entry - Gaining Competence)
PS - If you can't deal with reality, you might be interested in a world called Second Life. Take a look at this short summary with links to the Second Life web site. There are people that now spend as much (if not more) of their time in a virtual reality, as they spend in the so-called "real world".