I'm guessing you've probably never sent a greeting card with a Strawberry Shortcake on it. The company that makes those, American Greetings, sold $1.5 billion dollars worth of product last year. Much of it was paper, although they also have an online division which charges a lot of people a lot of money to send birthday cards. (I only know this because my mom says she pays $50 a year for the animated flash cards she mails me all the time.)
What relevance does this have for desktop software? Simple: it should remind you that there is an entire universe of users out there who do not have Paul Graham's problems. Many of these users have problems which can be solved best by desktop software. Those users will keep desktop software companies in business for a while. (Did I mention one point five billion dollars of paper greeting cards? And this is HOW many years after email?)
As long as I'm on the subject, ubiquitous net connectivity gives us desktop developers some interesting options against piracy. One is moving value from the client to the server. I do it a little these days (for non-piracy reasons), and if I can figure it out I'm sure the rest of the industry can.
You can't pirate a desktop app that requires connecting to a server to function (+) any more than you can pirate Basecamp by downloading Firefox.
+ Edit for clarity: I don't mean in the sense of "phone home", I mean in the sense of "value is provided by code or data which only exists on the server". Think WoW: without connectivity its the world's most expensively engineered paperweight.