exit ~ ex-it = out + go

prospect ~ pro-spect = forward + look

decide ~ de-cide = down + cut

alarm ~ a-(l)-arm = to the weapons

I think what he's basically saying is that when English became a fusional language, forged by the collision of two alien languages -- one Germanic, one Latin; each with its own morphological building system -- everything just turned into a big jumble, and people forgot all these (once) nuanced rules for compounding / deriving words -- leaving us with the comparatively limited ruleset we have now.

At least that's my basic interpretation of the coldly functional, atonal clusterfuck that is modern English.