1. For config, it spreads the config across a bunch of nested directories, making it hard to read and write it without some sort of special tool that shows it all to you at once. Sure, you can easily edit 50 files from all sorts of directories in your text editor, but that’s pretty painful.
2. For data storage is that lots of smaller files will waste partial storage blocks in many file systems. Some do coalesce small files, but many don’t.
3. For both, it’s often going to be higher performance to read a single file from start to finish than a bunch of files. Most file systems will try to keep file blocks in mostly sequential order (defrag’d), whereas they don’t typically do that for multiple files in different directories. SSD makes this mostly a non-issue these days, however. You still have the issue of openings, closings, and more read calls, however.