Cobra Kai demonstrates that Daniel LaRusso would've learned more had he lost the original All Valley Tournament in The Karate Kid. As a shy, misfit high schooler, LaRusso becomes a local karate legend when he knocks out the much larger Johnny Lawrence with a flashy crane kick. But as Lawrence points out in Cobra Kai, the kick should've been deemed illegal due to excessive force and excessive contact to the face.
LaRusso's illegal kick doesn't incur him a penalty or a warning; instead, it wins him a first-place trophy and ignites his ego in a manner that Mr. Miyagi, LaRusso's beloved sensei, would likely find concerning. This begs the question: would losing the tournament have helped LaRusso become a better, more balanced character in Cobra Kai?
Cobra Kai establishes rather quickly that Daniel is far from the shy, humble teen that fans remember from The Karate Kid. Now grown, LaRusso owns a successful car dealership, and uses karate and bonsai trees as shtick to improve his sales. As LaRusso quips in his TV commercials, "We kick the competition." LaRusso's prideful commercials, coupled with the fact that he brags openly about his tournament win in front of a jobless, down-on-his-luck Johnny Lawrence, offer clear indication that LaRusso's early success at karate has inflated his ego to unhealthy proportions.
The most unfortunate part about LaRusso's character in Cobra Kai is that he often disavows Miyagi's teachings without realizing it. In The Karate Kid, Miyagi stresses the importance of "balance," not just for karate poses, but for spiritual harmony as well. As Miyagi puts it, “Balance is key. Balance good, karate good. Everything good. Balance bad, better pack up, go home." Miyagi would likely take issue with LaRusso's self-aggrandizing use of karate, not to mention turning bonsai trees into the car dealer equivalent of a Happy Meal. Even the wise sensei would agree that LaRusso's ego has become overstuffed in the wake of his big victory.
Nor would Miyagi support LaRusso's tendency to constantly berate Johnny Lawrence, LaRusso's rival. Upon meeting Lawrence in the showroom of his dealership, LaRusso's first impulse is to aim a few verbal jabs at a clearly dispirited Lawrence. During a subsequent confrontation in Cobra Kai, LaRusso quips, "Johnny Lawrence calling someone else an asshole? That's rich, man." Now an adult, LaRusso chooses to deny the possibility that maybe Lawrence has changed for the better. Season 2 is loaded with callbacks to The Karate Kid, and Miyagi's ghost seems to linger in the background. And yet, LaRusso's tendency to make snap judgments clearly runs counter to Miyagi's point that, “For man with no forgiveness in heart, living even worse punishment than death.” LaRusso still has not forgiven Lawrence for past misdeeds, indicating that LaRusso is still fixated on old grudges, and has devolved into a "sore winner."
The prevailing character arcs in Cobra Kai seem to suggest that LaRusso is headed for some manner of downfall. Lawrence has already seen loss of employment, loss of various romantic interests, loss of his car, loss of family, and loss of his overall dignity. In order to make LaRusso a better character — the kind of character Miyagi would be proud of — Cobra Kai may have to "balance" the narrative by subjecting LaRusso to some hard knocks while Lawrence becomes a more prominent sensei. Would LaRusso be better off if he'd lost the All Valley Tournament? It's impossible to know for sure, but there's reason to suspect that season 3 of Cobra Kai will show LaRusso humbled by defeat.