He suggests that people will start out downloading convenience copies of books they already own (as a New York Times ethicist suggested was perfectly all right several months ago), then will start downloading dead writers’ still-in-copyright books, and books not available as e-books in their country yet, and entire collections for the convenience. “Then they’ll start wondering why they should buy any ebooks at all, when they cost so much. And then you go bust.”
As I said in my discussion on the future of e-books, the publishing industry has had years to prepare for this. They've even had a guinea pig in the form of a similar entertainment industry (music) to observe. (And even further, they've had a canary in the digital coal mine—comic books—running just ahead of them.) They could've planned for the eventual digitization of books and the piracy that would undoubtedly follow. But they didn't. And now they're fucked.
My only advice for publishers looking to avoid piracy? Give away a digital edition with every hard copy sold. I know it isn't easy and will require some drastic changes to the current system—how do you handle it, for instance, when customers have already downloaded the e-book and they want to return the physical book to the store?—but it's the best way to rout piracy off at the pass. If people feel like you're giving them a fair deal, they'll be much less likely to steal from you.