But humans don't, in any meaningful sense, interact with 7 billion people when they use social media any more than they interact with the entire population of their city whenever they go out. And most people living in any reasonably sized city - to use that as a real world analogue for social media - aren't only interacting with small, high trust social networks of the same culture and beliefs, and they manage just fine.

Your hypothesis (which seems more and more common) seems to me to be a "just so" story, but it doesn't correlate with what I've observed of real human behavior.