Terry, Kreese, Johnny, what it means to be a Cobra Kai, 'villainous values' and the love of (evil) karate father for his karate son
I've been thinking about this moment:
But it also got me thinking....why does Kreese feel so strongly about Johnny?
And as much as his contempt for Lawrence is motivated by jealousy, Terry's inability to see why Kreese believes Johnny is his best student (and why he loves him more than Terry) says so much about the divide in the two men's philosophy, approach and the fundamental values that drive their actions.
(TL;DR: it's his guts and heart, not what's in his head)
Terry and John could not come from more different backgrounds. Kreese was working class and completely self-made. His mentally ill mother's suicide made him a social pariah back home. His motivations for joining the army seem to have been twofold: a way of bettering himself and a genuine sense of patriotism/purpose. I think we can infer he never went to college and he was field promoted to captain. Kreese is naturally courageous, in his best iteration someone who has no fear of death or getting hurt. In his ideal form this courage is rooted in protecting someone (ie when he got his ass kicked helping Betsy.) In its worst form he becomes domineering and controlling of his loved ones, justifying any number of deranged actions as in their best interests.
Terry, meanwhile, came from money and probably was only fighting in Vietnam because his father wanted to "toughen him up" (if he's rich he could have gotten out of it so this is an extrapolation but I think it fits his character.) He even outright tells Tory that he is different from Kreese in this respect: he didn't have to scrape his way through life, but he did learn to use every advantage available to him. He is both intelligent/a survivor and values loyalty even more than Kreese does—you see this in KK3 and in the flashback of Kreese saving his life. He expects that loyalty to be reciprocated (John disappearing on him for thirty years is an obvious betrayal, John caring more about Lawrence is the nail in the coffin.) He admires the qualities Kreese has he doesn't, while secretly chafing against his friend's condescension even as he longs for his attention and approval.
Kreese is unpretentious, has never cared about Terry's money (and has been borderline too proud to take it since Terry was introduced as a character in KK3) while Silver is urbane, cosmopolitan in his outlook—comparatively "forward thinking," an ambitious, big picture guy. Kreese forms deep and personal connections with students that he has "gut" feelings about and sees himself in—as much as he sees Cobra Kai as his baby and legacy, he will only get emotional satisfaction from knowing that someone he personally loves is carrying it on (though he kicked Johnny out in S2, that was only for compromising what Kreese sees as the core 'principles' of CK, and he spent all of S3 trying to get Johnny to come back and S4 focused on grooming Johnny's son to do so in his stead.) For Terry what matters is the actual philosophy and its efficacy at helping weaklings channel their fear and turn it into power (though he's not beyond connecting with a student on a personal level, e.g. Kenny.) The "legacy" is the Cobra Kai "way", carried on by the ubiquitous nature of dominating a global tournament and making dojos, not any one surrogate son figure.
Kreese is a classic macho American archetype, unironically hanging American flags on the dojo walls and going off on political correctness/'snowflakism' while Silver is buying $500K samurai swords and enjoying stolen fine art before pimping merch on instagram. Silver has intellectual pretensions and business sense while Kreese's brain is rooted in animal cunning. These two are very different types of men and villains.
So...why is Johnny 'it' for Kreese but not Terry?
In S3 Kreese tells Robby the story of when he knew Johnny was "the real deal." What impressed him was not that Johnny won a fight, but rather was willing to go all-in against someone way beyond his skill level. Terry is not wrong that Johnny is not the most intelligent character on this show by any stretch of the imagination, which is something that is central to his idea of what a CK student should be, but I don't necessarily think it's central to Kreese's.
Kreese admires guts more than brains, something he does not think Terry has ever or will ever possess.
Kreese compared young Silver to Johnny in the prison scene, both scared and fearful—it's clear he views them both as "his", dependents that he "made", relationships his attitude towards has ranged from protective to condescending to controlling at various stages. But the difference is that Terry will always be a follower, a number two, whereas, at least in his own mind, Johnny is a true heir apparent, someone who he can project his own legacy onto.
He cares for Terry, in his own twisted way, but there's a fundamental lack of respect. Certainly he often treats Johnny like a child, but he's also his karate son that he believes sincerely is the best and who was "robbed" of his chance by Daniel in '84. Johnny is an extension of himself in his mind, someone who has the potential to carry on the legacy and philosophy he created, which is the thing he cares about most. He really, sincerely believes it helps children, that it helped Johnny.
By his own admission, he wanted Johnny to be better than him.
And he is—in spite of Kreese, not because of him.
Nothing exemplifies this more than the parallel of the S3 finale Vietnam and S5 finale fight. Contrast this:
The loss of Betsy (the metaphoric shedding of his humanity) gave Kreese the motivation to let go of all moral questions ("No mercy!") and the strength to kill Captain Turner, whereas the hope of his family, his children and need to live the rest of his life protecting and caring for them—the most primal human urge, embracing his humanity—is what gives Johnny the strength to keep fighting against all odds, people with greater strength and technical ability than him.
Johnny has become the man Kreese might've been, he has the same core values, heart and guts, as the man still buried deep within him.
At some primal, deep and subconscious level Kreese sees his own best self in Johnny, even if he doesn't understand that it was through rejecting the worst of what Kreese gave him—learning from his mentor's mistakes—that has made him a better man.
Well, that and the fact that Kreese can only get the emotional satisfaction of Johnny understanding what he tried to do in therapeutic hallucination form.