Disclaimer: I don't necessarily agree with Doctrow's position, but I also have looked into it very deeply, either.
His claim, however, is that Google settled with the Authors Guild to pay a one time fee to authors if their books are indexed. I know this because my wife, who is a novelist, filled out the form for her publisher. The settlement was going to be quite small. Anyway, Doctrow's position is that Google, being a big honking company with deep profits negotiated with the Authors Guild to Google benefit *because* it was cheaper and IMHO, not Doctrow's, better PR. The Authors Guild, on the other hand, was not funded enough for a prolonged legal battle, so too the settelment. The Guild gets some press.
Now lets say you have an innovative idea to do something with book text. Maybe it falls into "Fair Use", maybe not. You haven't thought of that because your spending time developing your idea. So you build a service and start indexing books. Uh oh, the Authors Guild gets their dander up and gets their lawyers on your ass. Your start-up company is in a vastly different position than Google. You don't have deep pockets and you don't have market power to throw around, nor are probably going to be able to fund a prolonged legal battle which you may or may not win. In Doctrow's view, you won't be able to negotiate a favorable settlement and you will close up shop. Thus, you and your innovative idea are stifled.