I prefer the complete lack of privacy settings because it is open and honest about the reality of what Lemmy is able to provide.
Even if you’re running your own instance, you are necessarily submitting your data to another party. I don’t have to trust the platform as much when my data isn’t private. It’s much easier to engineer a system around that assumption.
If we suppose that anything I submit to Lemmy is submitted to the public, I can’t be misled. My data cannot be leaked because I’m presenting it to the world already. Lemmy is a young social project with many problems to solve, still trying to gain traction and hold on to users and with an uncertain future. In brief: bigger fish to fry.
Maybe privacy controls could be on the list, but I don’t think it addresses the main problems or applications of the platform and creates its own set of issues. Keep it simple and stupid.