This is missing the elephant in the room that HN is not
the (or maybe even
a) money bringer for YCombinator. Were this the golden goose for a publicly traded company, the decision process could quickly shift to "make me money or GTFO".
Being a "benevolent dictator" moderator is the ideal model: you have clear values, a clear strategy, an overview over everything, and the unbridled power to execute. Benevolent dictatorships don't scale the moment you need more than exactly one such benevolent dictator. dang's clone will have all I mentioned above except probably slightly different of everything and now exactly half of the power to execute. And that's where it gets close to impossible to exercise the "correct" and desired level of power to support the individual values, overview, strategy.
When you need 1000 moderators it becomes a crapshoot if the moderation you get is any good. And the community is only as good as the worst mods and users that are allowed in it.