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The Baby Pokemon were a good idea, and I don't think his quote is specifically referring to the Baby Pokemon, rather other design attributes from Johto (like rounder and softer features in their anatomy and simpler palettes.) I do think that the idea goes deeper than just a design level though, rather it lies in the aftermath of Pokemania and the younger audience latching onto the trend late after it normalized, thus becoming 'uncool' in a sense, and you can tell in every aspect of Gen 3 from it's creature designs to marketing, it was overly trying hard to 'be cool!'
