Taking the tennis example, sure, it would be beneficial for the top players to have a flatter payout structure. But this ultimately leads to the ATP tour being solidified and newcomers being barred from entry as now the player ranked 250 is now earning an income that they can afford much better training than outsiders. It isn't immediately clear that this system is better from a social point of view.
Relating it back to elite institutions, randomly assigning professors and students to random institutions definitely raises the floor but also lowers the ceiling. Is that socially better? Not immediately obvious. I'm of the opinion that we want to maximize the max possible achievement of an individual to improve the human condition. Very few individuals are responsible for key advancements of civilization.
Finally, the closing statement about Milton Friedman seems rather contradictory to me. The argument that changing the entire cultural attitude of business is somehow different than regulation seems odd to me. Stigmatizing certain actions is just merely the weakest form of regulation that allows for unethical behavior to be rewarded even greater.