It's all well and good for MG and Arrington to say these things, VCs aren't the ones who're going to be called up to face the FTC. In all my dealings with VC-types, they've tended to be pretty cavalier when it comes to advising founders how to treat users' private data, maybe because they themselves aren't really on the firing line. Hockey-stick growth is more important to them; if the money comes, the fines will be paid and all will be well. This is business. Sony's still making money, after all. And Facebook, look at Facebook! Just look at that S-1 glow! I'm blinded, that's for sure.
But founders and fellow entrepreneurs, we need to hash this out internally (pardon the pun): Sure, harvesting address books can gain you explosive growth, but at what eventual cost? Can you really sleep at night? George opted in to address book sharing to find his friends in your shiny new app, but he didn't really think that his CEO would get a push notification saying "'GeorgeTheFurryStud' would like to talk to you!" when his CEO eventually signed up. Even if you're using SSL, even if you're hashing addresses (which isn't a cure-all, being able to intuit connections divulges a lot of info), are your servers really that secure? And what if you're not Facebook? It's highly unlikely that you're even in the league (no offense, none of us are).
Either way, politics is afoot here. Would advise other founders and developers to do what they believe is right & lawful, and not bow to pressure or any of this "no one cares about privacy" stuff, 'cause while the money guys and gals may lose a little investment, we're ultimately responsible for our companies' actions. It's us (and our companies, and our users, and our team) on the line here.