It is indeed true that folders are the least efficient aspect of operating systems but it is strange that we're still holding on to them.
Let's look at two examples of most-used aspect of folders. A document file and photograph file.
For me, the least efficient aspect comes with not being able to store a single document at multiple places (folders). If I have a document on Subject A written by Author B and C (two authors), than I may want to have this single document show up at multiple places, for example, the Subject A for me could be XYZ, ABC etc. The best I can do is create shortcuts of this file in a multiple folders (I shouldn't duplicate the file). So here, the tags would come handy.
Now, I don't know about you but I have spent significant amount of time thinking over how to folder my photographs (and I am not a professional so not talking in GIGs).
All in all, the folders are not very efficient on their own.
Curious, how would an OS work with no folders? All the system files just have a "system" tag?
Personally, I've learned folders. Now I have trouble thinking about a filesystem that wouldn't have them. How would you organize files on a physical disk with no file structure?
This would be a lot of work, since all existing software looks for users' files in folders, looks for its own internal configuration files in folders, loads DLLs from paths which are lists of folders, creates folders to put itself into when it's installed, calls APIs to open files with hierarchical names, uses current and temporary directories, etc., etc. This is true for every operating system that I can think of, not just Windows.