I was recently driving a friend and hit a mile-long backup at a freeway exit. At some point in the lineup, a car abruptly cut in front of me to merge into the line. The friend asked "why'd you let them in" - but I didn't let them in on purpose, I was just maintaining a reasonable following distance which people seem to interpret as "hey cut in here for free"

The balance between safe following distance and letting people cut in varies a lot by city. Maybe he learnt to drive elsewhere?

I remember being too aggressive when I got to the Bay Area, and learning how nice it was to be let into the lane I needed to avoid being forced on a 5mi U-turn. When visiting back home I was too nice and people told me so.

I've reached a balance. Aggressive enough not to be taken advantage of, but being nice to drivers in need, specially when it doesn't really change things for me, like when letting a driver in costs me nothing because of how bad traffic is.

It is called the zipper merge. You were in the wrong for waiting in the stophed lane and the other person right for passing all you thinking you are better.