The most important bit of research he relates has nothing to do with the servers, but with the customers - an individual customer will tip about the same regardless of service. This means that the incentive for waitstaff is not to serve everyone better in hopes of better tips, but to compete for the perceived highest value customers (white business men) and provide them with the best service. I don't have links to studies but this confirms what I've heard from friends in the restaurant industry - the strategy is to serve those with the highest expected tip better.
At this point the disconnect should be obvious. A customer who tips well but doesn't fall into the "expected good tipper" category will not get good service so how is the system "incentivizing good service" in a general sense?
Except it only incentivizes good services for white men without accents who drink and dress well. That doesn't seem like such a great benefit.
Seems like the equivalent of a software system that only works on weekday afternoons, except in March where it works every other Sunday too (maybe).
Possibly, but I don't think that is generally true. I eat at a (pretty damn touristy) place two or three times a month and the owner behind the counter is always overjoyed to see me and throws in extra stuff for free all the time. Now, in that particular case it isn't tip motivate, but he absolutely appreciates the regular reliable business. I think that regular reliable business is most important to many small restaurants, which is why you see so many of them offering punch/stamp cards to regulars. If you frequent small locations, it becomes clear pretty quickly that the business owners really do love regulars.
If preferring repeat customers was actually bad for business, the business owner would be well within their rights to forbid tipping at their business and instead pay their staff the proper minimum wage. I suspect this isn't ever actually the case; either repeat business makes up a significant chunk of your business and is more valuable for its reliability, or your business is so touristy that the occasional regular getting better service has no significant impact. Maybe there is some sort of middle-ground between those two, but I suspect it is elusive.
Finally, in the video linked elsewhere in this thread, Bruce McAdams talks about the effects tipping has on turnover among waitstaff (it increases it). This is probably detrimental to serving repeat business better.
Edit: For that matter, what if you're a repeat customer that tips lower than average? Now the interests of the owner and the waitstaff are at odds. The owner wants you to come back and spend more, but the waitstaff will treat you (relatively) poorly.
Server turnover in practice is unlikely to hurt repeat business unless we are talking about unprecedented amounts of turnover on the period of days or weeks. A churn period of several months or more is unlikely to dramatically harm repeat traffic. Certainly I have never stopped visiting a bar because my preferred bartender left.
Furthermore, presumably if a repeat customer repeatedly gets poor service, then that customer does not care about the quality of service. I get fucking awful service from the coffee shop I usually spend my Saturday mornings in (perhaps because I only take my coffee black, or perhaps because I refuse to tip baristas...), but I don't care because I don't need frequent coffee refills and I mostly like them for their decor.
tl;dr: If tipping really is bad for business, then the business owners would be fighting it. They're not stupid, knowing their customers and maintaining a customer base is their livelihood.
Is that based on things said in this one article or did the article point to actual research attesting to that fact? (I didn't read the entire multi part article so I'd like to know if you've identified where that fact came from).
Now, they will not necessarily get a bigger tip or even necessarily get a tip if they do a wonderful job, but it does make some people.
Even a small negative externality is reason enough to ditch a system that offers no benefit.