Okay, apparently it was too obscure. To clarify, my interpretation is that Tom Riddle went to that monastery, learned martial arts and how to (pretend to) lose, and once he was done, put on the glowing-red-eyes schtick and killed everybody (except his one friend) to prevent anyone else from learning what he had. He wasn't foolish to want that story spread by the one survivor - he wanted to be underestimated, to make people think he was murderously impatient when he was coldly calculating.

Rule Twelve is more general than just "kill Slytherin's Monster," it applies to all sources of power.

(The account is about halfway through Chapter 19, btw.)