It's assserting that there's a need to differentiate more situations from each other than there are real numbers, and basing its conclusions on the assertion, but it is not providing a convincing basis why that assertion/assumption/hypothesis is true.
The author demonstrates that a system without such a capability would not be able to solve a certain set of problems. However, going from that claim to a claim that this capability is needed for human level AGI is a non-sequitur - there is no evidence that such a capability is needed for human-level intelligence, and there's no evidence (at least not mentioned in the paper) that humans have the exact capability described.
The author demonstrates that a system without such a capability would not be able to solve a certain set of problems. However, going from that claim to a claim that this capability is needed for human level AGI is a non-sequitur - there is no evidence that such a capability is needed for human-level intelligence, and there's no evidence (at least not mentioned in the paper) that humans have the exact capability described.