Another nice quote from Alan Kay (immediately after the above):
Think about what literacy actually is. Literacy begins with ideas, and literature evolved as a way of communicating those ideas. Computer literacy, by extension, cannot possibly be about learning how to put a disk in a machine, and it cannot possibly be about learning a spreadsheet.
Computers are really for helping us understand systems that are too complicated to think about in classical ways, such as political systems or the AIDS epidemic. They are really for letting children build models of complicated ideas and understand these powerful ideas in a direct way at a much earlier age than they would have without the aid of the computer.
Which, in the video, is followed by a nice comparison between SmallTalk and a deceptively similar UI in the Macintosh.