You're not quite right with your conclusion. Sorry you didn't read all the way through.
The main issues revolve around some topics I hadn't seen elsewhere.
1) Will Paul's talent filter function work as the influx of applicants grows? One poster suggested he doesn't think a 3x is possible. I disagree.
2) What happens when older, more seasoned folks see this? Will they see this reduction of risk as the opportunity they have been waiting for to start something? Don't underestimate the power of "what if" and "what could have been" for people who have been working for 10+ years, but kids/mortgage got in the way of starting something.
3) What will the angel response be? Offering more money in the next go round isn't the right answer. Yuri have removed the risk premium from angel investing. That's huge.
4) Is it possible that there is too much of a choke point, now, for talent selection for YC? Will the ecosystem continue to flourish, or does it run the risk of stagnation, because the selection criteria doesn't allow for random mutation?
5) Will financial engineering take hold? With a few players doing this, things could get messy.
I suspect that the profile of applications that YC gets are 1-3% "We should definitely interview this team" (bucket 1), 75% "these are quick rejections for one (or many) reasons" (bucket 3) and 20-25% that need a deeper read to handle (bucket 2). Even if applications tripled (which I also doubt), a small number of the "extra" applications will fall into the first bucket (and may well be a consequence of #2 above), which may crowd out a few of the applicants in the second bucket who may have gotten interviews and ultimately selected but will now miss the interview cut. Loss for them surely, and maybe a small loss for YC, but one that is being more than offset by the increase in applicants from the first bucket.
I think the Start Fund announcement is certainly damaging to the other "competing" programs as it makes it slightly more likely that a "bucket 1" team will apply to YC rather than TechStars et al, probably has harmed other angel investors' prospects slightly, but in the short term is an enormous win for YC and the startups that best fit the YC "mold" (to the extent that there is one).
But I'm still a little confused by the collective hand-wringing that's going on in the last 72 hours. It's not like the Start Fund has cornered the market here. Anyone else could come along and say they'll match or could do it with Tech Stars or any of a number of other responses. I think that Yuri is being especially bold (some would read as reckless) and that's naturally going to cause some disruption. I don't view that as bad, unless my own application to YC S11 is a "bucket 2" application that is now de-selected for interviewing, an outcome that I view as a quite realistic possibility, but even then I have to say that it caused YC to select for "better" applicants, and I need to dust myself off, pull on my big boy pants and get back to working on it.