Watson shared her experience with more than 6000 young people who gathered to learn how to build resilience amid Australia's youth mental health crisis.
Students from schools across NSW - some travelling more than 700 km - filled the auditorium at Sydney's International Convention Centre on Thursday.
They were brought together by Stand Tall, the largest youth wellbeing event in Australia.
The crowd heard motivational speeches about overcoming adversity from inspiring figures such as Watson.
The former Australian of the Year - who etched her name in history at the same age of many listeners - spoke of the day she set off to become the youngest person to sail non-stop around the globe.
"I still had this niggling doubt in the back of my head," Watson said of her 16-year-old self.
"About whether I'd fall apart, whether I'd go back to being that scared, timid little girl".
When Watson set sail from Sydney Harbour in 2009, she was forced to return to land the next day after a crash with a 63,000 tonne ship dismasted her 10m-long vessel.
She was met with a media scrum on land who demanded to know if she was truly ready to take on this feat.
"It happened for a reason," Watson told the audience.
"This is really going to sound quite strange - I walked away from this incident with more confidence, as the rest of the world lost confidence".
Stand Tall began about two years after Watson completed her journey and returned home.
It was initiated in 2012 after three mothers became alarmed with the prevalence of mental ill-health among young Australians.
Nearly half of all young Australians are experiencing high or very high levels of psychological distress, according to the National Youth Mental Health Foundation.
The federal government reports more than a third of Australian teens aged 14-19 have experienced suicidal thoughts and behaviours.
"I started Stand Tall along with two good friends because tragically my kids, who were in late high school years, had been to more funerals than I'd been to," co-founder Angela Farr-Jones told AAP.
"We wanted to do something different. We knew a lot of programs going into schools, and we thought, 'let's get kids out of school'".
Other speakers at the event included Duku Fore, a Ugandan refugee born with a speech impediment, and James Chapman, who has a rare form of dwarfism.
Despite the sometimes serious subject matter, the assembled students cheered and danced to classic pump-up tunes such as Journey's Don't Stop Believin'.
Emma Carey gave an inspiring speech about a skydiving accident that changed her life when she was 20.
Her parachutes failed and she plummeted to the ground in Switzerland.
The accident left her a paraplegic, but Ms Carey insisted it gave her a yearning for life.
"Every day since that date is essentially extra time that I get to live," she told the students.
"It's a reminder to not take it for granted".
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