But as it turns out the M1 does quite well at quite a few real world aggressive desktop applications.
At least for the last 5 years an iPhone and a desktop would handle the exact same images, videos, spreadsheets and websites with any desktop and often with better performance. Why would anyone think that these are fundamentally different?
Desktops tend to be much higher latency, like say the AMD ryzen 5950X. In particular the R per RV range benchmark uses between 1 and 32 pages in a sliding window. The M1 gets around 30ns (which I've personally verified with code I wrote) and the Ryzen 5950x gets around 65ns. Intel does a bit better than AMD, but nowhere close to the M1.
Similarly programming, compiling, making videos, making music, etc is most often done on laptops and desktops.
Certainly you are right, the M1 is a very capable CPU for all of these things, just that it was a surprise for many.
I think the real next-gen mini should have been the iPhone 12 pro. Imagine a desk with just an Apple monitor, charger, and wireless keyboard. Pop your mag-safe phone onto the charger so you have a trackpad. The mm-wave connects to the monitor for video and giving access to it's USB-c ports. You get the normal mac desktop ready to start working for the day. It's not as powerful as most desktops, but it can give tons of plugged-in laptops a run for their money. More than good enough for 95% of users.