I think what he's saying is that no matter what you flag, the portion of the rewards that are removed go back into the rewards pool – but odds are that the person that you flag has other posts awaiting vote payout, so in theory you are rewarding everything else that the person that you flag has written or produced that isn't that specific thing that you have flagged.
I would go a step further and point out that when you flag something, you are literally taking the rewards that you have control of from the reward pool and giving them to literally everybody else – including every bad actor that you couldn't catch or didn't have the SP to do anything about.
This is one of the core problems with the entire idea of downvoting as a means of community management that I have been talking about for quite a while. It doesn't matter how much SP you have if you are literally just rewarding every other wrongdoer or bad piece of content anytime you flag something. Ultimately you're just making your life harder because your rewarding more things that you don't want then you are hurting things that you don't want.
In theory, you're also rewarding things that you do want but odds are good that the vast bulk of contents on the blockchain is stuff you either don't care about and thus don't want to reward or stuff that you don't want and thus don't want to reward, and only a narrow slice of it is stuff that you like and want to reward.
Upvotes are far more focused and useful tools than downvotes have ever been.