If making your own instance were something common for normal users, then I expect the federation would have to face thousands of single-user instances made by random people without ever being sure which ones are safe and which ones are just bots/spam/illegal-stuff.

A lot of instances would (understandably) want to disconnect from the fediverse if that were a common thing.... or at the very least they would use allowlists for federation instead of blocklists (in fact, some already do). So it would just result in more fragmentation, not less.

This means the process for your instance to initiate federation with all other ones would likely become more complex/inefficient than directly creating one separate user account in each of the instances you want to visit (if it isn't already).

I feel the issue is in the design of how the fediverse places so much responsibility in each individual instance... instances shouldn't be required to mirror third party content just so people can access it. It should be possible for people to simply connect to third party websites if they want to (with their home instance only acting as a sort of identity provider, like OpenID), without the home instance having to proxy/host that content if they don't approve of it.

And can you see how that could end up with a) all users shouting into their own personal void or b) a few big instances filled with complacent users mindlessly consuming what the algorithm feeds them?