Opt-in telemetry likely won't serve it's purpose.

Very few users change the defaults. To the point where you don't get enough data for useful insights.

That is exactly right. Almost no one would turn it on if it were off by defauly, which makes data collected by those few users strongly biased against general users and their usage patterns. (Meaning that the data you do collect will be useless.)

This is literally the only reason that telemetry is almost always on by default. There is no illuminati secretly buying developers to learn your secrets via application telemetry, and it's laughable to think that's the case, in my mind.

If people turn it off when they have a choice, and only leave it on when they are unaware it exists then obviously there is a problem. I don't see how it is laughable to be paranoid in this case.

isn't paranoia by definition irrational?

I suppose not when it is rational to be paranoid.

Rational people are cautious, not paranoid.

Opt out is when the tracking is on by default and the user has to take action to stop it. Opt in is off by default and action must be taken to enable it. What happens before the popup decides which one it is. If the user closes or ignores the message about tracking there should be none and there should have been none before the popup.

User perception of a default state.

There’s a good book called Nudge by Richard Thaler (and someone else I can’t remember) where he goes into great detail on the default decision.

Tl;dr; people usually accept the default so your prompts yield very different results.