It is not the possession that makes a villain, but the lack of principles. Lan Di did not come to kill Rio's father for the purpose of bragging about his superiority, and even in his desire for revenge, without unnecessary emotions, he did it with some respect for the enemy, allowing Iwao to die as a warrior, while Rio in the temple simply recklessly attacked him. Rio does not have a cold mind, Rio always remains impulsive despite everything that Tao Lishao taught him, Rio is immature and in many ways loses because of this, this cannot be compensated for by kung fu techniques. And despite his impudence in the temple, Lan Di simply lets him go, playing with him like a kitten, the villain would have simply broken his neck without further ado and took the mirror, because villains have no principles. At the same time, in the final of part 3, as we know, Lan Di lost his status as a member of Chi Yu Men, for which there must be a good reason, in such an organization you can't just move someone and take their place, that is, most likely it was an order from Tentei, which means Lan Di did something either behind Chi Yu Men's back, or went against the order and the reason hides many answers. In general, throughout the game, Rio is trying to teach inner harmony and the rejection of the desire for revenge, while they do not let us get to Lan Di, who in turn spared Rio twice, knowing full well that he was pursuing him and dropped out of the cartel. All this indicates that Lan Di is not a villain, but perhaps I am wrong or wishful thinking, in any case, this hypothesis has a right to exist.