I think the idea is that the continuation of the quote reframes "shouldn't" from a moral to a practical exhortation, saying that not being observed is unrealistic and so doing things you would want to keep private is a bad idea because they won't be.

I just went and found the video clip, though, and I think that reading is incorrect. Schmidt isn't saying "don't do those things because we can't hide you from the feds". He's very clearly making two distinct different claims about privacy; the second half is about people with 'legitimate' reasons to need extreme privacy, while the first half looks like exactly the moral judgement everyone portrays it as.