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.