If it helps, you will find the Y-combinator described (indeed, derived) in the first edition (https://cs.brown.edu/~sk/Publications/Books/ProgLangs/2007-0...) of the author's programming languages book (https://www.plai.org/). (Page 228, if that helps, though the derivation begins on page 223.)

For added fun, the day he teaches it in class, he wears a t-shirt from Y-combinator the startup accelerator (and explains what its name means).

Now that we've gotten that out of the way, it remains unclear what is surprising or unpleasantly surprising about the code.

This reminds me of when John Nagle showed up in a thread about his algorithm on here.

Shriram invoking Shriram ... (λ.x (x x) λ.x (x x)) forever \m/ :)