The reason we want to grow YC is (a) to see how big an effect we can have and (b) as PB says in the article, because it's better for the startups.
As for not being able to support 1000 startups, maybe we couldn't. 1000 is a lot. But if you'd asked me in 2005, I would have been skeptical about the idea of supporting 66 startups at a time, and yet the last batch turned out better than ever. That's the thing about scaling. You can always do better than you expect. I'm not saying there's no upper limit, just that experience has taught me to reserve judgment about where it is.
As for not being able to support 1000 startups, maybe we couldn't. 1000 is a lot. But if you'd asked me in 2005, I would have been skeptical about the idea of supporting 66 startups at a time, and yet the last batch turned out better than ever. That's the thing about scaling. You can always do better than you expect. I'm not saying there's no upper limit, just that experience has taught me to reserve judgment about where it is.