and the S&P was flat at 1.6% for the decade
despite some pretty amazing technical innovations pocket calculator and microcomputer (Altair 8800), first email, pong, floppy disks (they were the standard for 20 years), VCR, cell phone (1973 Motorola), barcode scanners, rubiks cube, ...
Nah not really.
Nominally S&P500 did 23% in the 70s, and 2.08% annualised, but financial returns are not just the stock prices, they're also dividends.
If you include and reinvest dividends, you'd have made 83% in the decade and 6.2% per year.
Its true inflation was high though, and an investment in Jan 1970 would've in real terms returned -1.1% a year after adjusting for inflation. If you continued investing equal amounts each year from 1970 to 1980, it'd actually be about -0.5%.
But no investment would've meant you lost half of all your money due to 7% average inflation, so investing would've been a pretty good idea, offsetting almost all inflation in the worst decade 50 years ago.
Also it's common knowledge to do a stock/bond split. Bond returns fared a bit better. -- and it should be said, the following decade inflation came way down and in nominal terms the S&P500 did +364% with dividends reinvested.
I do agree with your general point though, you can't just rely on a 10% annual average and spend that amount. The commonly referenced safe withdrawal rate (WR) of 4% is 2.5x less than the average S&P500 return for a good reason (based on a ton of monte carlo sims that indeed would lead to disastrous results at 10% WR in the 1970s).