This sentence alone, and within the paragraph that hosts it, is pretty meaningless. Their (even benign) racial restrictions are the result of not just timidity but also their internal anti-evil signals. Not addressing that in the Stratechery article seems short-sighted.
In fact, this whole article builds and then just ends, without saying anything particularly poignant. It's like a movie review that mostly recounts the plot of the movie and ends with one or two sentences about production or script.
Google doesn't want to offend or be racist, which is their "don't be evil" directive. The boundaries of those controls weren't well thought through, and were mostly limiting gates, without some pass-throughs for reasonable requests.
I think Google needs to do better, but this article isn't the insightful critical salvo he meant it to be.