I haven't missed the point at all, I've understood it perfectly well. I just do not believe it to be true.
To put it bluntly, if you are trying to start a tech company that does something with hosted services, and you cannot afford to purchase servers as you grow, then you should not be in business. Servers cost absolute peanuts compared to most everything else, even if you include maintenance and setup costs. You *should* be investing in the core infrastructure for the service you are providing.
And as for "latency stymieing your ability to scale", when does that *actually* happen? Because it sure is an argument that cloudycloud providers love to trot out, but I've just never found it to actually hold true in a real-world business setting. The scaling problems are pretty much always on the (non-maintenance) staffing side, not on the hardware side, and it doesn't actually take that long to get a bunch of hardware shipped to a datacenter with ample room to expand, if you've done even the most minimal planning ahead.
You're running a business. You're expected to have some long-term planning skills to turn it into a success. "Scaling instantly with zero planning or foresight" is a completely unrealistic expectation that *will* wreck your business on another front, if not on the technical infrastructure side.