It's not a plot, just a derogatory term they use to belittle a trend they are most definitely not happy about.
I don't think they really give a rat's ass. There have always been small businesses. It's not something VC's invest in. If the economics of industries change, so be it; VC's will always have to seek out those industries where a big injection of capital makes success more likely. I know, you know, and they know that, so it's not some trend they need to quash, just a fact of life they will need to deal with.
And yet craigslist seems to have done a fair amount of world-changing...
As I wrote, "not likely". For every Craigslist, there are a zillion companies doing their small niche thing.
And that's ok by me, that's where I'd like to be too. Just that I don't think that road is very likely to lead to world-changing stuff, either.
A lifestyle business is one that isn't meant to grow beyond a certain point because it's "enough". Obviously, a business like that is not likely to "change the world" ala Google or Apple or something, but it's probably more realistic for many of us.