Honestly, I think he picked the wrong times to be a warrior. Against Edger low kicks and takedowns worked, but he couldn't get his jab established. Still, if he threw 3 punches and shot a takedown it worked. Instead of using low kicks and takedowns to control the fight, win rounds, and maybe force Edger to make mistakes he tried to bomb him out with punches and his corner never said boo about it.
This last fight he was capable of hurting Diaz with punches, 1st round shows this. His wrestling should have been enough to get the fight to the ground if Penn made it a priority even if Diaz was good enough to avoid getting mounted or beat on. Rather than use takedowns to break Diaz's rythm and win rounds, and possibly set up the punches that could lead to a stop, he opted to stand and bang against someone with a good chin, a 6 inch reach advantage, and cardio that allowed a much better work rate.
Penn's camp had to know that they could get outworked because BJ has never had tremendous cardio and Diaz always does. They also had to recognize that BJ needs to establish his jab in order to make things happen with punches, see Edger 1 and 2, and that it is traditionally hard to get a jab going against a much taller AND busier fighter.
It seems like they didn't come in with any solutions to these problems. Instead BJ came in aggressive, did damage, got frustrated, and then got beat up. BJ has always been a force in the 1st round. He often struggled to work what he could get done early into a foundation that put him in a good position in later rounds, see GSP 1 and 2, Hughes 2, and Fitch.
I do not mean to be overly critical. He was a tremendous fighter and was always worth watching. He did it his way, and brought us some tremendous fights. I am sure he will make plenty on the seminar circuit/operating a gym/promoting if he wants.