I think the author is missing the parody on ignorant/naive tech-optimism in face of the factual constraints of reality. The "make the world a better place", but really fuck things up joke.
We have plenty of lossless compression algorithms already[0], am I misunderstanding what you meant?
[0]: https://en.wikipedia.org/wiki/Lossless_compression#Lossless_...
>It's provably impossible to create an algorithm that can losslessly compress any data.
https://en.wikipedia.org/wiki/Lossless_compression#Limitatio...
I think that's the joke in Silicon Valley.
Edit: And for the "New Internet" Argument, you especially cannot compress encrypted data efficiently, as that would mean you can discriminate information against random noise, and therefore break the encryption. So you cannot overcome the bandwidth limitations, can't scale the decentralized network arbitrarily. The Silicon Valley New Internet is based on magic. It's a take on the "Problem -> [Hype-tech magic box] -> Solution" type of "idea", you find a lot in people... When people dream, not solve problems. It's 6 seasons around something not possible fundamentally.