The challenge is that a bad hire really is a liability, especially on a small team where the effects aren't diluted and there's little room for waste.
How to separate "this person is likely to be a good hire but has had some bad luck in the past" from "this person has had some bad outcomes in the past and is likely to continue to have those bad outcomes if we hire them" is a hard but important question.
I think this is a very reasonable comprehension of the problem. It’s tough. I think caling these thing “bad” is a little more assuming than would be ideal if we intend a fair trial. Many of the things are just things, results of not having a wealthy family, results of not having parents who made your life choices for you and striking out on your first couple tries. These are far from bad things and very often great things
How to separate "this person is likely to be a good hire but has had some bad luck in the past" from "this person has had some bad outcomes in the past and is likely to continue to have those bad outcomes if we hire them" is a hard but important question.