I wouldn't characterize it as a 21st century phenomenon, but I'm completely in agreement about it being taken too far. I'm a firm believer in the philosophy of making everything as simple as possible, but not simpler. Your issue finding this Gmail setting is a perfect example of what happens when you go past that point. It appears simpler but in reality the opposite is true.
The real problem is that the reason for oversimplifying isn't, done to serve the user. Instead it's used to further the interests of the interface provider which are often, arguably more often than not, at odds with the user's interests.