I don't know why he discounts the cost of hardware, that seems at least as important. Maybe he was imagining only CPU mining and considered them "free" since we all have them anyway.
We may get to that. Mining has been exceptionally profitable recently because the sudden burst of attention rapidly drove up the price of BTC to the point where people started building these dedicated mining operations large and small. Difficulty has yet to catch up (though it's trying hard), but when it does and mining becomes a lot less profitable again, those operations are going to suffer from their diseconomies of scale relative to people who have free electricity and/or free computers.
There are some other issues that might reintroduce economies of scale though, so it's hard to say how things really turn out.
