There are two logical flaws in this essay, and I think a misperception in the essay as a whole.
The first logical flaw is to point out how developers love Apple's support for developing desktop software, and then a few paragraphs later say that they [Apple] "don't understand software". Obviously they do understand software.
The second is that Apple's control over the app store review process will create a closed monoculture. So the original iPhone development model of using web apps has been forgotten already? Mobile Safari is continuing to support new standards and APIs, enabling new kinds of app to be delivered that way, and it will continue to be a competitive option for developers in the future. These apps will work in other phones and do not require an approval process.
The misperception of the essay is that the app store, and specifically its approval process, is evil. But this doesn't make any sense.
Apple just handed to small, independent developers a way to distribute their software to tens of millions of customers with a real, working single payment mechanism that is so easy it affords impulse buying from anywhere at any time. The cost to enter this program is $99--less than the cost of the phone itself and an entry barrier so low it's practically nonexistent.
So we now have apps developed by the recently unemployed--while sitting on their living-room couch no less--making tens of thousands of dollars in a few weeks.
This is unprecedented and incredible. It's one of the best things that has ever happened for independent developers since the microcomputer. And then they made it even better by adding in-app purchasing through the same payment mechanism. This is huge.
The inconsistency of the app rejections points to the problem of hiring and training people to interpret the policies, not the policies themselves. They aren't likely to find people who want to do that kind of work, and I'm figuring that the turnover is probably as high as it is for call centers. And given some reports that app store submissions (or at least approvals) reach 2000 per day, I would be amazed if these kinds of problems didn't happen in even the best run and most benevolent company in the world.
But while everybody is calling Apple evil for these growing pains, Apple is busy learning how to do App Stores. Statements made by Tim Cook, the rejection-reversals that come from higher up, policy changes and clarifications, suggest that Apple does actually care and is (slowly) improving the process.
Apple has a clear vision of what they want to deliver to the customer, and the review process is part of how they're trying to make that vision work. I think they're going to stick with it until they get it right.
I think it's likely that Apple will eventually find a way to solve these problems. When it does, it will have a competitive advantage that Android and Palm and even Microsoft won't be able to match for years: an app store that customers trust and will readily make purchases from without second thought, and a simple, painless way for independents to get their apps in. This would pave the way for an Apple TV App Store, a iTablet App Store, a Book/Magazine/Newspaper store and so-on.
It'll probably take a while to make it as painless as it should be for developers, because these kinds of problems are _hard_. Harder than engineering.
This isn't Apple's Mistake, this is an extra $100 or more per share of AAPL in the next few years.