He first notes that the race classifications we make are mostly derived from sensory constraints of our species. He doesn't deny that, say, black/white exist as categories and have a genetic underpinning. However, it seems extremely unlikely that those differences are good trackers of the genetic diversity. Thus, he continues, it is implausible that complex traits, such as intelligence, would cluster exactly in what gives rise to the observable differences between races, and so equally implausible that differences in IQ can even be in part explained by genetic differences.
Let me try to make David's argument clearer with a car analogy. Say the Betas, an extraterrestrial species, were to land on Earth, knowing nothing about cars or mechanic, but having very good eye sight, were to classify cars based on their color. Say the Betas had evidence that black cars have more accidents than white cars, and wondered whether the difference was explained by the underlying mechanic of black vs. white cars (in humans, what we would call "genetic factors"), or due to something else (in humans, what we would call "environmental factors").
David could explain to the Betas how car color is a very bad tracker for mechanical differences between cars, unlike, say, horsepower, MPG, torque, etc. David would tell the Betas that knowing color is a very bad tracker for mechanical differences is enough for them to conclude that the difference in accident rate they observe doesn't come from mechanical differences, but rather from "environmental factors". This sits well with our intuition: if black cars indeed have on average more accidents than white cars, it most likely isn't because they are made in an inferior way, but because they have human drivers, and maybe humans don't see black cars as well at night, or humans who are on average prone to take more risk (men?), like black cars better than white cars, or some other "environmental factor".
After having done my best at steel-manning David's argument, hopefully in Daniel Dennett fashion, I'll have to admit I'm not convinced by it. Continuing on the car analogy, say another extraterrestrial species were to arrive on earth: the Alphas. The Alphas were as clueless on cars or mechanics as the Betas, but they classified cars on geographic provenance. They arrived in the 1980s, and noticed that Japanese cars were more reliable than American cars. In this case too, geographic provenance is a poor tracker of mechanical diversity, however in this case, David's argument wouldn't hold, as we know that the difference in reliability was explained by differences in American vs. Japanese car manufacturing processes. As it turns out, for cars, geographic provenance was strongly correlated with factors that had an influence on the way cars were made. And this was true, even though geographical provenance was far from being a perfect tracker of mechanical diversity; for instance, there were significantly more reliable cars made in the US in a lean manufacturing factory.
In conclusion, even if we grant that race is a bad tracker of genetic difference between individuals, it seems to me that David's argument alone does not provide us with enough of a justification to rule out that part of the observed difference in average IQ between races does have a genetic underpinning.