But I, like most people I expect, also use my phone for many other uses some of which make good use of a larger screen at higher resolution: in-car GPS and while running/walking out on the trails, web browsing and social media stuff that would not be pleasant on smaller screens, occasionally video. The better screen necessitates a bigger battery too, increasing the weight and size a bit more.
I'm not sure there is a solution for that, other than perhaps carrying two devices around. Most people would not be happy with that solution and tethering the bigger device to the smaller ones (so they share internet connectivity instead of both needing SIMs & paid accounts) will reduce the battery life of the small device noticeably (running the 4G/5G and WiFi radios constantly being quite a drain I find, when tethering a laptop to my main current phone).
For a lot of people who would want the smaller phone, there is a secondary need for which they want the larger one too, and putting up with a big device for everything is likely to be the preferable “compromise” compared to carrying two devices.
I've considered the two device approach, but the only really small phones (significantly smaller than my current main device) I found were cheap Chinese imports and one of the first corners cut on those is using a cheap battery that won't last long on active use. Battery life is why my current phone is large than the previous one (which was already larger than I'd prefer often) as it can last a goodly while in active use (GPS and screen on).
tl;cbatr: I suppose the point of this directionless rambling, is that I think the market for a smaller device, people who would actually buy one rather than just those who think it is something that should exist, is smaller than you hope.