This is clearly a deliberate design choice, similar to Dark Souls, they want you to dodge big hits, which is why they are unblockable, unavoidable, and basically ignore armor. You're not supposed to be able to build your way through it, at least not for a while. Stacking defenses is only really supposed to prevent you from getting oneshot so you can make a mistake and pop a consumable potion.
Did you actually watch the video? It's only armour that behaves like this, ES and evasion are not affected (and you can easily stack close to 10k ES if you are not warrior, monks get both evasion and armour with one ascendancy node and they have aura that gives pure 'more evasion' which is not there for str spirit gems), you get more phys DR by equipping just one fairly common item (cloak of flame) as compared to fully armour packed character that sacrifices everything else to stack armour to the max. So if you start in the left bottom part of the tree, you basically have no defense at all as compared to deadeye (which is ridiculous if you played poe1). Not only they've reverted formula to where it was in PoE1 ages ago, but also there is no extra defensive layers (like molten armour, es on block procs from Aegis - maybe it's there but since you have no int at all, you won't be able to stack ES to sizable levels, lel) that make armour competitive in PoE1 as compared to pure evasion.
ES is not affected, hence why its a balance issue, and likely not conversion mechanics, either.
Evasion and block are affected from what I understand. these types of big attacks fall under the broad umbrella they described as "unlockable attacks." Those attacks also essentially negate armor. Meaning you can either use a large health pool (inefficient) or energy shield (more efficient) to prevent getting one shot.
The other problem I think is that I believe resistances do not have the same big hit penalty for elemental damage, which is why conversion works better.
Its a bit tricky because high percentage reduction actually gets increasing returns from a lot of damage, and you get higher returns the closer you are to hardcap. They just do not have a graceful system here like they have in, for example, World of Warcraft, where armor and effective mitigation has been placed on a graceful, nonlinear diminishing returns curve to counter the inherent increasing returns of additive damage reduction.
But its partially on purpose, like I say, they clearly intended for certain things to be unlockable to force *most* players to Dodge these mechanics rather than simply build through them. I view what players are doing with ES as a kind of loophole where the developers forgot to close, which was exacerbated by bad itemization.
Before you bring up acrobatics or turtle charm, yes, I know. But those mechanics also have severe penalties to the base rate, meaning they're also a tradeoff requiring comparable investment to, say, stacking huge amounts of armor.
Why are people complaining about armor now as if it was a new problem? PoE has always had armor that scales really poorly to large hits. Or did they somehow make it worse in poe2?
According to the guy in that video's source, yes, the scaling is significantly worse than poe1.