Then he assumed that given y effort you could then find bug #2. Again a reasonable assumption.
Third assumption, that x=y. This is FALSE. For that assumption to be true, then bugs are being found randomly, not by effort. The truth is x is ALWAYS less than y, because it takes skill and effort to find them.
Each successive bug is more and more difficult to find. However, it is an exponential chart. This means when just starting out, it APPEARS that x=y, but the further you go along, then Y starts being significantly greater than x.
This is a common problem, faced by mothers cleaning their house and by cops facing criminals. By the time they clean up one mess, a new one has popped up. But that does not mean you stop cleaning. Your efforts do mean something. The idea is to always be one step AHEAD of the mess, not behind it. That way you always end up with an acceptably dirty situation, rather than a virus infected/crime ridden area.