Sure, it's tautological post-hoc rationalized corporate Darwinism, but it's also kind of a clever motivator if you don't think to deeply about it.

In practice, it stabilizes corporate hierarchies by implying that everyone is exactly where they belong.

The people below you are there for a reason, or they'd be somewhere else, and everyone above you is simultaneously less incompetent than you but not perfectly competent, so you should work hard and strive to beat them. If you don't participate or you fail, hey, you just discovered your level of incompetence.

If you can think of any examples that might disprove this principle, then you've merely highlighted where Peter demonstrated his own level of incompetence, proving its validity. Obviously, though, we don't need to worry about that, because if there were anyone more competent than him, we'd all be using their principle instead.

I'm being ridiculous, but so is this.

Think about it. If you're great at the job you're doing, companies tend to promote you because they assume you'll be good at the next one up too. That happens until you're at the top or no longer doing your current job well enough to be promotion eligible.

It's actually a very rational perspective, but companies aren't rational. So I'm unconvinced that this actually exists despite seeing several examples of it in the wild.

It seems more like a satirical observation than a calculated goal to strive for. That's how I understood it when I first read it, and also when reading this article.