That isn't true. For any particular search, yes, if one site goes down another site will necessarily go up. However, in aggregate, SEO creates value. Think of StackOverflow, for example: the primary mechanism for success isn't taking traffic from ExpertsExchange -- that is just a much-remarked side effect. The primary mechanism for success is successfully incentivizing the creation and distribution of answers for a broad universe of expert questions to which no responsive answers have ever appeared in the SERPS before.
Similarly, an algorithmic change in Google which cleans up the long tail can help businesses in a variety of fashions. I mean, I'm not actually seeing major changes yet, but if my rankings for five thousand variations of "how do I make X bingo cards" over the universe of ten Xs which content farms deem valuable to target, that gives me additional resources to develop value-producing things elsewhere (like, e.g., subsidizing the development of AR, or ramping up my publication efforts from my current speed of ~250 to year to a higher number on progressively more obscure topics which real teachers really do want to teach lessons on tomorrow).
Similarly, improving the value of the SERPs for any field of endeavor or user community results in an increase in the aggregate number of searches as user behavior changes. That is a change that lifts all boats.
…except for the boats it sinks. Namely, the long tail that they cleaned up. I'm not sure I understand when you say "SEO creates value" if you mean the so-called good/relevant SEO or the low quality/sketchy SEO. I assume you mean the former.
SEO can mean "help make my site easy for google to honestly evaluate and judge the quality of my content" or it can mean "game google into thinking my content is what people want to see even though they probably don't".
I can see how having a better index creates value but I'm not sure how SEO contributes to a better index. It seems like google changed the rules, some companies are doing worse, some are better (zero sum) but hopefully the index is better and people can find what they want (unlocking value). Is that what you're getting at?
I'm not sure how SEO contributes to a better index
Alright, by analogy: you understand how a properly functioning economy has positive effects for participants in the stock market, right? Economic growth means investors win. Do you understand that a properly functioning stock market also helps the broader economy, even if we assume that each participant in the market is just trying to manipulate the market into serving their own selfish interests? The market converges on more efficient allocation of capital than other sorts of non-market capital allocation schemes we have tried.
Google's tremendous expertise with algorithms is one reason why the experience of searching the Internet generally does not suck. The input people create to rank on Google is another reason. Good, descriptive titles are the single easiest on-page way to influence rankings on leaf pages -- they're also the single easiest way for an engine to tell what a page is about without linking signals. Thus, the practice of putting titles on pages improves the index. What's the first thing your SEO consultant is going to do? Look at your title tags. Systemwide, this converges on an Internet where most pages that people actually end up seeing have good, descriptive titles.
Somewhat but not totally, if the wrong sites win the SEO game there are going to be more users either driven to the wrong site or giving up on their search. The more users being sent to the highest quality place they can go for that query the bigger the potential pool is for profiting from search position.
