I think they changed because search became affordable enough to become a valid strategy, not because some genius figured out people are confused by folders.
It changed the up-front effort in FILING for a greater but later effort in FINDING (assuming keyword search).
To compensate, of course, users can invest a greater upfront effort in NAMING and TAGGING.
Several decades ago, I made filing mostly go away by creating files in the directories in which they would eventually be filed. This requires the ability to create nested subfolders, without which no substantial filing system is viable.
There's probably an order of magnitude at which hierarchical filing systems become the only rational approach (depending on the material). It might be 1,000 in some cases, or 10,000 in most cases, and maybe 100,000 in a few cases.
I think they changed because search became affordable enough to become a valid strategy, not because some genius figured out people are confused by folders.