I worked on the original (long since superseded) implementation of the metadata store for Google Drive, i.e. the system which was responsible for tracking file / folder relationships. The requirement to allow an item to appear in multiple locations was a huge complication, in part because of the way it interacted with permissions being inherited from a folder to the items in that folder. I imagine this change may be…
This was my understanding as well. The original Drive was built effectively as a directed graph (with cycles allowed). Any file or folder could be stored in multiple locations. And permissions were at a per-file basis, so 2 people viewing the same folder may see different sets of files.
And permissions were definitely a hard part of it, as if you applied new permissions to a folder and all children, it had to walk the entire graph to update the permissions.
This is the advantage of the Team Drive style structure that the Drive team put out. It follows the classic filesystem design of a tree, which allows for easier permissions modeling, among other things. It's also why all "hard links" are now becoming shortcuts / Soft-links.