Regardless of how it happens, rates are rapidly increasing in many industries, which makes it hard to build a long term business entirely based on adwords. I have been reading alot of books on the topic recently and all of the experts advise a balanced strategy, rather than a single source of leads. Far too much exposure otherwise when something changes to make it unsustainable.
Well that's true for anything in business, you would be crazy to rely on only one type of advertising method or revenue stream. You must diversify. Your problem may very well be that your reading too many books on it rather than getting the practical experience to make a better judgement about what works. Free traffic is great but the way Google keeps altering it's algorithym the whole thing is just too unrilable to scale.