While I don't disagree with his point, instapaper isn't a great example of this, as it started off free. It had a quite sizable following of devoted users before money changing hands ever came in to the picture. Had he charged money from day 1, the dynamics would have been different. Not saying it wouldn't have made money or been successful, but I don't think it would have been the exact same outcome.
I wonder if Tumblr would be where it is today if it took that approach.