It, in a very real sense, IS the way guitars work. When we start playing, we tend to stick pretty close to the nut, down in open-chord territory, and for good reason: that's where we can keep track of what we're playing by using open strings and relying on the proximity of the nut to count our way up the fretboard.
Anything past the fifth fret become no-man's land where panic sets in. However, as we progress, we need to move up the fretboard in order to access those high notes. We can't let ourselves be restricted musically by the seemingly undecipherable layout of the fingerboard. There must be some logical way of dealing with the maze of strings and frets, we tell ourselves, and that way is the CAGED template.
I explain it all in the video below.