If he was underestimating the importance of software, I think the interesting point he raises is how much people underestimate the other side of things.
Granted this observation is made with 20/20 hindsight, with the XBox 360 problems and all. But the previous XBox was more or less a fine unit in terms of reliability.
I will say that from reading some previous articles about the XBox 360 and how they overlook certain issues that later came to bite them in the ass, Microsoft clearly could've benefited from more hardware experience that might have allowed them to better manage risk:reward in terms of releasing a console as early as possible while still managing the design/production process to ensure quality.
It is interesting that Sony wanted to keep all the internals in house with the Cell processor, which supports the argument that Sony might be able to better reduce manufacturing costs over time. But things turned out a bit differently due to other pressures- it ended up needing a GPU from another company, and Sony sold off the Cell operations anyway.
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