I worked for a Dreamhost competitor for years. These "managed VPS" accounts with providers like that are definitely not something where you can just throw your code over the wall. There were and are whole teams of unix weenies like me responding to the myriad ways that software or customers would bork their VPS install.
The situation on "shared hosting" was IMO much better in terms of reliability, since customers didn't have root, but these servers were definitely still pets and not cattle.
Basically, these companies are a way to outsource sysadmin labor to sweaty cubicle farms rather than a way to actually reduce the amount of labor that is needed. Arguably the same is true for cloud but I think in general the cloud paradigm is actually more labor-efficient. As a thought experiment, imagine if AWS tried to serve their current customer base with the techniques of Dreamhost-style hosting companies. They'd need to employee 1000x as many people! And it would still be worse!
