I told him that most of the software using this model is simply more reliable than proprietary software, but he just didn't get it. There was already plenty of "reputation" even back then, he just wasn't a hacker and couldn't understand any other perspective other than his own.
The evolution of open source software in the twenty years hence suggests that this particular question is not as silly as you frame it.
You're right that open source had been a thing for quite some time in 1998. GNU was started in 1983 after all.
But I respectfully disagree that open source was "obvious" in 1998. Hell, at that time, one could argue it was not obvious for a lot of people how much the Internet and computers would alter our lives. Open source was the least obvious part of quite a few a mind-bending paradigm shifts.
One of PG’s essays has a line like, ‘any competitor using Oracle was easy to ignore.’ Successful OS software needs to be good enough not to need marketing and happens to be free. It might not be the best, but cheap and good enough generally has a lot going for it.
Therefore his criticism made sense at the time.
While open-source code and open-source maintainers are critical parts of the ecosystem, I think open source users are underrated. If nobody shared their experience about how a piece of open-source software is actually behaving once you put it to use in production, open-source software would have much less value than it currently has.