An alternative answer is that PG, et al have said time and time again that they invest in people not technology. The partners are probably expecting one (or both) of the start-ups to change dramatically down the road

Off-topic point about horse racing - plenty of people place multiple conflicting bets on races!

Because it is considered sub-ethical by the rest of the industry.

How is competition "sub"-ethical? Competition drives innovation. VC's say it all the time, the IDEA is worthless without excellent implementation. I find it perfectly admirable that a VC would invest in two companies that have the same idea. It helps the VC feel more comfortable with their investment and adds enough competition that the two (or more) companies will have to do their extreme best to come out on top. The VC wins, the best company wins and the customer wins. Sounds like something Apple might consider unethical, but it's really not, it's competition.

He's just stating a fact. It is considered a no-no by most people.

The most common problems happen when privileged information is exchanged between the competitors.

An example: Company A discovers a killer marketing technique that gives them a big advantage but they keep their success quiet. Then the shared VC tells Company B about it. Company A loses their competitive advantage (driving up their costs, etc).

That's one of a myriad of scenarios where information exchange can be unethical and highly damaging. The hard part is that even if your VC is 100% ethical they can easily make mistakes that cause problems.