It does assume these things - but they're relatively reasonable. If your next closest competitor is doing worse than you, then your best employees, on average, must be better than their average employee. If an employee leaves your company for your competitor, they're adding value Day 1, whereas you have to go through the process of hiring a replacement, and hoping that they're just as good.
It also assumes that you don't pay your employees well enough to retire immediately after leaving ;)
It also assumes that you don't pay your employees well enough to retire immediately after leaving ;)