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How to write a compelling hero without creating a Mary Sue

The Elements of a Compelling Character
It is crass but true that physically attractive characters draw more audience interest. I’m not here to tell you to take advantage of this stone-age vulnerability in the reader’s psyche, but it would be malpractice not to inform you that typing “he was handsome” will keep more eyes glued to the page than typing “he was ugly”.

Witty characters are more interesting than dull characters: most people enjoy amusing commentary and dialogue, and are attracted to people and characters who provide plenty of it. Note that you, the author, must be witty to pull this off, but fortunately you have the advantage of being able to think about it for months until you come up with just the right line. Always beware of the overuse or poor use of wit, which turns it into irritating snark and sometimes outright assholery.

Insightful characters are more interesting than dense characters: the reader will learn more about the world and your other characters from an insightful protagonist, and if you've created an intriguing world filled with intriguing people, that insight will be appreciated.

Capable characters are more interesting than useless characters. Capable characters doing what they’re good at is often immensely satisfying, e.g. the entire Bourne series of novels by Robert Ludlum. A useless character can be interesting in many other ways, but be aware that the reader will be hoping for them to become less useless, and will be frustrated if this doesn’t occur.

Readers enjoy characters that take action and do their best to solve the problems in front of them, even if those actions fail or prove counterproductive. Nothing is less appealing than a character who mopes around instead of giving it the ol’ college try. Give a reader a hero with the courage of their convictions, and you will find that nearly any other flaw or personality trait will be forgiven.

Nothing breeds empathy for a character more or faster than suffering. Reference to suffering that occurred before the story started or that occurs off-screen receives empathy at a steep discount to suffering that happens to the character on the page. Readers will forgive an astonishing number of flaws in a character that has suffered sufficiently. This is a critical tool to employ in building an audience connection to an arrogant, anti-heroic, or otherwise privileged protagonist.

The Mary Sue Trap

"Mary Sue" is a label for a character, either male or female, that comes across as juvenile authorial self-insertion and source of wish fulfillment. The hallmarks of a Mary Sue are
 (i) capabilities beyond what their backstory suggests is reasonable (note that many non-Sue heroes have one or two special, inexplicable talents - Sue-ness picks up steam exponentially as the number and scale of those inexplicable talents accumulate),
 (ii) few if any real character flaws (not counting "flaws" that are actually virtues, like caring too much), and
 (iii) a tendency to dominate every scene they're in: winning every confrontation (physical and social), "getting the girl", and upstaging other characters regardless of whether it's logical that they would be able to do so.

Part of the difficulty of determining whether a character is a Mary Sue is that the more closely a reader identifies with a character, the less likely they are to recognize or care that the character is being used for unvarnished wish fulfillment. A straight white male reader is going to be much more forgiving of Sue-ness in a straight white male hero than a gay black female reader, and vice versa.

If your target audience is sufficiently narrow in terms of demographic, it might not matter that your hero is a Mary Sue, because they'll all closely identify with the hero and enjoy the wish fulfillment as the hero kicks ass. Mary Sue complaints tend to arise when the audience is diverse, and the hero's basic characteristics aren't sufficiently similar to the audience's to automatically earn the audience's empathy.

When that happens - when the audience doesn't look at the hero and see themselves - unearned narrative domination by the hero will quickly engender loathing.

Putting It All Together

Combining all of this advice, consider Tony Stark in the Marvel Cinematic Universe. As Stark himself jokes at one point, even without the super-suit that allows him to fly, blow up tanks, and punch out demigods from other worlds, he’s still a genius, a billionaire, a playboy, and a philanthropist. This should be a recipe for total audience hatred.

So how is it avoided? Well, from the start to the bitter end, Tony suffers a lot. He is routinely physically assaulted, emotionally battered, and publicly humiliated. His world is filled with people who constantly take the stuffing out of him, including his love interest, who is often totally unimpressed by his behavior. Tony absorbs it all while making funny quips and working his ass off to solve his problems, usually via a skillset that’s fun to watch him use (e.g. building his super-suit).

What does this look like in practice? Consider the beginning of the movie Iron Man, where we first meet Tony. He’s a weapons contractor selling cruise missiles to the American military, acting high and mighty with enlisted soldiers while bragging about his sexual conquests…for two minutes, thirty-four seconds. Then he gets blown up with one of his own missiles and kidnapped by guerrillas. He spends most of the next half-hour of the movie as their helpless captive: threatened with death, forced to work for them, physically crippled by shrapnel, and trying desperately to escape. When he finally does get away at the 40-minute mark, it’s an event that costs him a friend’s life, involves the slapstick failure of his prototype super-suit, and ends with a mocking comment from his rescuer. By then, you’re completely on his side.