Although Kreese barely evolves in season three, keeping his cold-blooded attitude throughout, a series of flashbacks shows us just how he became so evil. The beginning of the season shows us that Kreese has fully taken over Cobra Kai, leaving former sensei Johnny out for good, and he continues to impart his cruel tactics on new students.
A flashback to the '60s shows that Kreese was once a soft-spoken waiter at a diner, bullied by the popular kids. He uses his karate skills for the first time when he sees a a girl suffer abuse at the hands of her football star boyfriend. But going off to the Vietnam War changes Kreese forever, giving him a killer mentality he'll apparently never be able to shake.
By the end of the season, we see young Kreese make a mistake in Vietnam that leads to the death of his friend Ponytail. Later, as a prisoner of war, he must fight his captain to the death, learning beforehand that the love of his life, Betsy, was killed in a car accident. These moments at war teach Kreese he must "kill or be killed," and it's clear that his trauma informs his approach to life. Back to the present, Kreese demonstrates that he can have tinges of compassion, such as when he defends Tory from her building's landlord and convinces her to go back to Cobra Kai, or when he gives pep talks to Johnny at a bar and Robby at juvie. However, his treatment of Daniel and Amanda is downright evil, even letting a snake loose in their car dealership.
Once Johnny creates Eagle Fang, it's open season on both them and Miyagi-Do, but by the end, Daniel and Johnny team up to beat up Kreese. Afterward, Kreese proposes an official tournament to see who's the real winner after all.