I've always interpreted this "law" to mean just throwing resources at a problem without understanding the root cause will make things worse.
Like the idea of throwing good money after bad, if the problem isn't rooted in lack of resources (e.g., if the problem is actually rooted in bad communication, bad training, bad requirements, etc.) it's not going to help.
It's more that there is an amount of people that will minimize costs, any more or less than that and costs will increase, and another amount of people that will minimize time, again, any more or less and time increases; also, adding people in the middle of a project imposes a nearly proportional loss on time and costs.
He didn't even get deeply into differences between people in that chapter. It's just very basic stuff that is on project management 101 since forever. Yet he had to write it down, and most people still don't seem to understand it.
Like the idea of throwing good money after bad, if the problem isn't rooted in lack of resources (e.g., if the problem is actually rooted in bad communication, bad training, bad requirements, etc.) it's not going to help.