> Why does AI need that folder structure? Why not a flat list of files and let the AI agent explore with BM25 / grep, etc.

Progressive disclosure, same reason you don't get assaulted with all the information a website has to offer at once, or given a sql console and told to figure it out, and instead see a portion of the information in a way that is supposed to naturally lead you to finding the next and next bits of information you're looking for.

> use cases

This is essentially just where you're moving the hierarchy/compression, but at least for me these are not very disjoint and separable. I think what I actually want are adaptable LoRa that loosely correspond to these use cases but where a dense discriminator or other system is able to adapt and stay in sync with these too. Also, tool-calling + sql/vector embeddings so that you can actually get good filesystem search without it feeling like work, and let the model filter out the junk.

> let the AI calculate this at run time?

You still do want to let it do agentic RAG but I think more tools are better. We're using sqlite-vec, generating multimodal and single-mode embeddings, and trying to make everything typed into a walkable graph of entity types, because that makes it much easier to efficiently walk/retrieve the "semantic space" in a way that generalizes. A small local model needs at least enough structure to know these are the X ways available to look for something and they are organized in Y ways, oriented towards Z and A things.

Especially on-device, telling them to "just figure it out" is like dropping a toddler or autonomous vehicle into a dark room and telling them to build you a search engine lol. They need some help and also quite literally to be taught what a search engine means for these purposes. Also, if you just let them explore or write things without any kind of grounding in what you need/any kind of positive signals, they're just going to be making a mess on your computer.