There is really no use to have all files and folders on your fs available for opening or saving in most apps. Often you just need the most recent modified file or only files of a certain type. And there are really not a lot of places it makes sense to save files to outside of your home folder and personal project layout.
Abstractions common to literally every home computer operating system from the last several decades.
But he didn't really offer an alternative (other than Xanadu). And a hierarchical system of storage is convenient for lots of people - once they understand what "hierarchy" means.
I think understanding hierarchy is one of those epiphanies that a new computer user can sometimes have. Others simply don't seem to be able to grok it.
I think as time goes by we'll see which of the concepts of computing we grew up with end up being core to the usage of a computer and I'd be especially excited if we went in the direction of relational linkage of assets the computer has access to.