That's definitely an interesting thought experiment, and wish it was a real problem at some point.

However, that thought experiment doesn't make individual stock pickers and active fund managers better (skilled) investors in any way.

Not sure what you're trying to say. The market needs a small number of investors who, based on perceived value, engage in price discovery. Once prices are discovered, as per the Efficient Market Hypothesis (which isn't 100% efficient!), one's marginal ability to pick stocks and beat the market is slim to none. For passive index investing to work though, it's necessary to have some people attempt to beat indexed investments. In the end, indexers can be lazy and free-ride on that price discovery. ;)