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Built something to scratch his own itch, turned it into a ubiquitous service and still a one-man-shop. What is there not to like?

This:

[...] geeks like us are always tempted to implement very complex, never-ending features because they’re academically or algorithmically interesting, or because they can add massive value if done well [...] These features — often very easy for people but very hard for computers — often produce mediocre-at-best results, are never truly finished, and usually require massive time investments to achieve incremental progress with diminishing returns.

I've come to believe that the number one thing a user cares about is a smooth, obvious and consistent workflow, and if you are not giving them that, you shouldn't be working on anything else.

I think that is exactly his point; if those features (the interestingly academic or algorithmic but very tricky) are the ones that are most likely to make the workflow lumpy or weird.

My interpretation (based on the actual text, not the abbreviated quotation) is that Arment prioritises straight forward user experience over wizbangery

I don't agree with Rands' framing of Instapaper as a Delicious replacement but appreciate the interview.
It's replaced one small slice of Delicious for me: I no longer tag things 'toRead', I send them to Instapaper instead.
Agreed. I just tried instapaper based on this statement. I use delicious for saving things for reference and tagging them, mostly as an alternative to bookmarking, particularly for saving obscure stuff that I don't want cluttering my bookmarks and I may never return to, but I really want to be able to find again if I have to. Instapaper looks cool, but doesn't seem like a replacement for that at all.
I agree; I see the two services as complementary. I use Instapaper to keep track of writings that I intend to read. I use Delicious (and/or Pinboard) to file away URLs that I intend to refer to. (Secondarily, I use Delicious/Pinboard to share links with the minority of my friends who also use the service.)

What really bums me out is when an app that I like integrates support for one service but not the other.

"If a one-person company is going to build a product, it can’t have any of those huge time-sink features."

"I built Instapaper...with a custom high-performance MVC framework"

I'm confused: how does he square 'use mature tools that are widely used, and 'as a one-person shop, only build one or two features of moderate complexity' with 'write your own custom web framework and ORM'?

He was talking about "speech or handwriting recognition, recommendation engines, or natural-language processing".

He got the custom MVC framework for free — they built it for Tumblr, IIRC.