The "small font problem" was practically unsolved until Adobe invented and patented declarative hinting in Type 1. Before, bitmap fonts were used. The bytecode stack machine for hinting used in TrueType, designed by MS/Apple, was specifically designed to not infringe on Adobe's patents.
Only when hinting became an option did vector font representation become viable at all for printing. Digital vector font display was accomplished much later.
While you are correct about Adobe Type 1 fonts, you are incorrect on display fonts. Apple System 7 had vector display fonts. There were issues on windows which is why Microsoft (and likely Adobe) improved TrueType. Adobe later responded with Adobe Font Manager which is likely what you are referencing.
Only when hinting became an option did vector font representation become viable at all for printing. Digital vector font display was accomplished much later.