One of the advantages of Google Drive is the ability to share files and folders with collaborators, but this can make keeping your Google Drive organized the way you like it difficult. This is particularly true for files or folders that are shared with you. The Shared With Me section of Google Drive by default lists items in the order they were shared (by date) which can lead to frustration when people go looking for shared files.
The Shared With Me folder should be thought of as an inbox and not a folder. The files you see in Shared With Me are not actually in your drive, they do not take up space, they are only links to files in other people’s drives. The ephemeral nature of Shared With Me is one of the reasons you cannot make folders in Shared With Me.
Learn more: docs.google.com/document/d/1FXrR4UyDYUNVOb3th0NJ-jiwafqGZOUxL7bUlmsDla4/edit