Warning: SPOILERS for Cobra Kai Season 4.
Samantha LaRusso (Mary Mo) didn't win All Valley tournament. Daniel and Johnny Lawrence (William Zabka) put aside their lifelong rivalry and ed their dojos to stop Cobra Kai and their senseis, John Kreese (Martin Kove) and Terry Silver (Thomas Ian Griffith). But according to the wager Lawrence and LaRusso made with Kreese, the losing dojo would have to close its doors forever.
Daniel isn't accustomed to defeat in The Karate Kid/Cobra Kai saga. LaRusso has always been the protagonist of the franchise, especially in Johnny's protege, Miguel Diaz (Xolo Maridueña) beat Daniel's pupil (and Johnny's son) Robby Keene (Tanner Buchanan) in Cobra Kai season 1, it was the first time LaRusso tasted defeat in the saga and it redoubled his determination to bring down Cobra Kai. However, despite reconciling his Johnny and filling their dojos with capable young students, fighting Cobra Kai has gotten harder, not easier, and the stakes have grown significantly higher.
Sam losing the first-ever All Valley Girls' Karate Championship to her arch-enemy, Tory Nichols (Peyton List), in Cobra Kai season 4 had far greater implications for Daniel. Beyond the fact that Sam's failure meant that Samatha didn't continue the LaRusso legacy of becoming All Valley Champion, Daniel had to experience the pain of watching his beloved daughter Sam defeated at the All Valley. Further, Daniel had finally just accepted that his way "isn't the only way," and he encouraged Sam to combine Miyagi-Do's style with Johnny's offense-based Eagle Fang methods to create her own system against Tory. Although Daniel didn't know that Terry Silver bribed the ref to score the fight in Nichols' favor, in the moment, Sam losing despite using both dojos' methods was a stinging rebuke. As Sam cried, they did "everything the right way" and they still lost, and Daniel has no answers as to why.
Miyagi-Do losing at the All Valley also meant Miyagi-Do has to shut down. But Daniel decided at Mr. Miyagi's grave that he wouldn't honor the agreement he and Johnny made with Kreese. Although LaRusso is right that Cobra Kai's senseis Silver and Kreese have "no honor," he also dishonored himself by not abiding by the pact he made and recruiting his "karate cousin," Chozen Toguchi (Yuji Okumoto), to fight alongside him in Cobra Kai season 5. How Mr. Miyagi would feel about Daniel-san's decision to back out of the deal he made will never be known but, on one level, it does feel like LaRusso is betraying a basic tenet of Miyagi-Do in order to continue the war against Cobra Kai.
Throughout Cobra Kai, Daniel-san measured his abilities and progress as a sensei against Mr. Miyagi, who was and continues to be The Karate Kid franchise's gold standard for wisdom and always knowing the right thing to do. LaRusso sincerely tried to impart Miyagi-Do's knowledge to his students using the methods Mr. Miyagi taught him. But Daniel still feels like a failure, especially compared to how Mr. Miyagi somehow had the correct answer to every problem they encountered together in The Karate Kid movies. Sam losing at the All Valley confirmed Daniel's worst fears that he's a failure compared to Mr. Miyagi and in his beloved sensei's eyes. While Mr. Miyagi would never see Daniel-san this way, Cobra Kai season 4 left the defeated LaRusso at his lowest ebb since he first became the Karate Kid in 1984.
Cobra Kai Season 4 is streaming on Netflix.