I'm not going to poke holes in his logic since this pertains more to his specific goals and we don't know exactly how he wants to achieve them, but if it were me I would see letting Walter go as a mistake. He had the perfect chance to solidify Walter's loyalty and make him into a faithful and strong follower, but he ended up getting confrontational. He has to be able to empathize with people to earn their trust. He doesn't have to change how he feels, what actions he takes, or his priorities, he just has to present himself in a certain way.