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Dear Sir:

We are dealing with raw data, not with embedded JPEGs. Those are large chunks of data.

The nested structures can be very deep, nesting of 10 and more, and each subfolder can contain several hundreds if not thousands of shots. Many people have terabytes of raw files saved in nested folders. File systems are actually not very fast, especially when we need to monitor the changes. Such an option shall cause a dramatic decrease in speed.

Another reason why we don't do it is safety. Oftentimes people make copies of the same image in different subfolders of the same folder. Seeing several identical images with the same or even different names in the same grid/thumbnail might be confusing, and might cause mistakes in adjustments or ratings/labels applied as well as with move / copy / reject file operations.