I agree that most people don't use hierarchy to organize files and folders. But I disagree that most people are bad at navigating an existing hierarchy.
At my work, we've organized all our documents in Subversion and even the non-technical people have no problem keeping things in a nicely-organized hierarchy: agreements, leads, quotes, etc.
Once you show people a hierarchy and show how easy it is to use, they just get it in my experience.
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