Yea, you got it.
This problem is mostly a downward spiral.

Checked baggage sucks in general, even though it's where the airlines charge today's premium, the service is absolute shit. It's either late, super late, damaged or lost. You can't really win here.

There was never enough room for everyone's max-sized carry-on to begin with.

People started to bring bigger carry-ons because checked baggage sucks and airlines crammed more seats in the same airframes, making carry-on space even worse.

Most people wouldn't mind forgoing the carry-on, or bringing a smaller carry-on, if they could reliably get their undamaged checked luggage on time at their destination.

Layovers where you have to grab your checked baggage inbetween flights is just annoying.

Me? I've always preferred traveling light, not just for the flight, but I generally don't wanna carry half the shit the average traveller brings with them.

Now, the airlines could mostly fix this by making the checked baggage experience less shit.
We all know that's unlikely though.
They'll just charge you premiums for the carry-on and change nothing else.

Next logical step is checked-in travelers, where they put you in a box in the cargo area.