What he actually means is making the AI smarter isn't fun for their hamster brained dev team who can only work with the most cookie cutter systems.
What Todd doesn't tell you - and he doesn't to preserve your innocence - is that the devs at Bethesda Dev Studios, helped with some people from the team of Zenimax Online (in charge of TESO atm), have actually spent the last 3 years working on a top notch, high-end, most elaborated machine-learning based AI. They've been testing it on the long run, in order not only to feed it with genuine player interactions, but also to analyse its behavioural evolution.
During the last months of the testing, this so-called "luminescent AI" started to spew out some... unsettling comments to the players. It started by what was then considered a joke made by one of the developpers : the NPCs would occasionally comment on how "the High Elves did nothing wrong". Further testing clearly revealed how this wasn't due to someone's input in the algorithm, but a natural evolution of the NPC AI which, fed with the dozens and dozens of bits of lore regarding Tamriel, has started to integrate the centuries of loathing and animosity between each nation of Tamriel to feed their unique take on the story®
During the most recent playtest which still included "Luminescent AI" (or LAI for short), the player was invited by some random breton to, I quote, "go suck a redguard's cock in High Rock" before said breton assaulted him with a dagger.
They removed it from the next build and went back to a linear, traditional scripted dialog arborescence.
TL;DR Todd's LAI made the experience very unpleasant for the player.