If you are Mike the Megavillain, then the protection this sort of set-up buys you is from Fred the FBI officer who raids your volcano lair for some other purpose, and bags your laptop as part of a general sweep for evidence without really knowing much about technology. By the time Charlie the CSI gets to it, there's nothing left to recover to reveal your even-more-nefarious plots.

Yes you are right with regards to encryption. However, law enforcement agencies nowadays make sure to freeze devices like telephones in order to prevent them from locking/logging out. In case of (desktop) computers that are turned on, they make sure to splice the cables and hook them onto batteries in order to preserve their on state. I assume they are also aware of things like this self-destructing drive, but I am not sure what their attack vectors are. Most likely they just beat you until you tell them the code.

In case of traveling with sensitive data however this system is pretty good. Normally you'd be forced to give up the encryption passphrase, but when the data is destroyed there is nothing to give up.