Rand Fishkin is a very smart person and one of the top SEO experts in the world.
Please understand that good merit based link building is by far the #1 ranking factor in SEO.
You can separate SEO into two main categories.
1. On-site SEO - e.g. what you do on your web pages. There is a finite (limited) number of ranking points that you can obtain for good on-site optimization.
2. Off-site SEO - e.g. Link Building, who links to your web pages. There is an infinite (unlimited) number of ranking points that you can obtain from great link building. So a site with superior link building can and will outrank a perfectly on-site optimized website.
This is a good thing and there is science behind this and also why Google created the term and concept of PageRank. This is why Google grew so fast and why their search results are superior to their competitors.
If you do a fantastic job of on-site optimization you will also need less high quality backlinks. It also will help you if you have wonderful SEO Tools to use for both on-site optimization and for off-site optimization.
