Privacy potentially comes in when you're searching for a keyword in your own private local files, and Apple submits those searches to Twitter to see if your tweets or anyone you're following contains that keyword.
So now if you type something in to Spotlight search it will be sent to Microsoft (currently) and Twitter (rumored). And if you type something in to Maps search it will be send to Yelp, TripAdvisor and Booking.com. "Your privacy is important to us," says Tim Cook, "you are not the product."
Shipped doesn't mean sold or even preordered, right? I think he is just saying that by the end of March Apple had manufactured 631k Watches. And shipped them off to a warehouse somewhere to wait for release day.
I don't think he's somehow lost his logistics/organisational abilities. I think maybe he's pushing the boundaries of technology more than has been done in the past, and that is giving the manufacturing partners difficulties. As for the Apple Watch being a solution in search of a problem, I think the reason people are confused about what it's for is that it doesn't run a web browser and the web browser is the killer app of today.
He's not saying people won't like it though, he's just saying Apple will be production constrained. And production line people seem to be where he gets his info from, so maybe he knows something WS doesn't in this case.
I agree with Jony's comment that too many things are not made with enough care. You really notice that a lot when you work as a software developer, people think no one sees the code, only the user interface, so you often find a real mess behind the scenes.