- Code duplication should be avoided, but not if the alternative is complicated or highly-coupled code. Duplicated code is increased liability, and complicated code is increased liability. Sometimes two similar but separate functions is just easier to read, use, test, and maintain; assessing the "liability" helps you make the best decision.
- Tests are good because they decrease liability of other code, but they are themselves are a liability, so you can go too far (as many other commenters note about TDD).
And "Code is a liability" is not a silver-bullet. It isn't specific or prescriptive enough, and that's a good thing. It requires experience and effort to understand what that means and to make use of it on a case by case basis. But I think it does point you in the right direction by posing the right questions and focusing on the important trade-offs.