The best camera is the one you have with you…

The phone is always with you though, unlike the camera which got left at home.

The old point and shoot cameras didn't really have better, or larger sensors. Phones are mediocre cameras compared to a DSLR or mirrorless camera in the hands of a skilled user. But I'd wager that most people would actually take better pictures with their phone than pro equipment.

the point is that 2000s digital cameras are even more mediocre (except the high-end kind it mentions at the end that aren’t seeing a revival)

This can be true, but ultimately it's up to the target user group. Smartphone cameras are more than fine for the general consumer, and classic cameras have bulky size to accomodate the proper hardware for pros. The average consumer wants to both take photos at any given moment, and in parallel never carry bulky hardware for pro-level photos.