While deleting data does save space, one 10-minute YouTube video is far bigger than a few years of browsing history. Google isn't turning auto-delete for storage reasons.
I just don't get how Youtube recommendations are so bad. So often it recommends me things I have already watched.
Or the algorithm knows I like David Bowie so recommends me "Changes". The most boring possible recommendation it can give to a David Bowie fan.
I really wish it had a setting to up the daring of the recommendation. It seems designed to just never recommend something that I would really hate but in doing so it never recommends me anything all that interesting.
YouTube watch data is used to personalize recommendations, and browsing data is used to personalize ads: https://policies.google.com/privacy#whycollect.
Disclaimer: I work at Google.