Edit: After having read the link, yes, McIlroy has a point. For quick prototyping, a one off, above all else small project, the UNIX way fits, and fits well. It's a philosophy I agree with and use on a very regular basis as a sysadmin.
But as a developer on larger projects, where chunking them into pipeable tools would probably result in 1000 pipes, any one of which might break, and you want to hand it off to people who don't even know what a pipe is, well, I'm sorry, but I'm going to make something in the tools that they understand and use, and I'll make it more fault-tolerant to boot. And yes, I've run into exactly this sort of situation multiple times in my career.
I might prototype with pipes and commands, but Larry Wall invented Perl for a damn good reason.
Really, TL;DR is that Bentley picked an over simple problem (count words in a file), asked Knuth to write a program in the literate programming style, and McIlroy completely missed the point of the exercise. What a shame, he might have had something useful or insightful to say had he understood what Bentley and Knuth were trying to achieve.