I see where you’re coming from, but I don’t think there’s reason to despair.
For a start, this isn’t a “This is a thing that happened”, this is “once upon a time…”. It doesn’t even count as FOAF, it’s “I heard a story about this guy, a long time ago, somewhere, it doesn’t matter where.” So to that extent it’s just an anecdote about the little guy showing up the people with power in a small, meaningful, but ultimately inconsequential way.
At a deeper level, it doesn’t say he didn’t deserve the degree: you don’t get to the point of defending your thesis without some sort of chops to back it up. (It’s the Stephen Bradbury win: people think he only won by default, but he actually won by not making a mistake, and he was only able to do that by being good enough in his own right to be there in the first place.) It’s also possible to read the anecdote as that the actual defence part was being treated as a formality, so he made a bet that they would. That they weren’t going over every single page as readers with the same exacting deliberation that he had in writing it… but that doesn’t mean they hadn’t read it at all, or that they weren’t ready to engage on the important points and assumptions, and further, he was fully prepared to meet them and answer them. And he did so in all good faith, before it made his reveal. Or so the story goes, anyway.
At another level, there have been people who’ve lied and cheated their way into degrees. Sometimes they’re caught at the time, sometimes afterwards, sometimes decades later. But the whole point of the process is that most of those who try it are caught, or weeded out before they get to that point.
Also, does anyone doubt that academic panels and the process can be, and has been used for gatekeeping as much as for progress? You have to find a supervisor, you have to satisfy the (sometimes mindlessly contradictory) whims of the reviewers (when my father was going through reviews of his doctoral thesis, he got feedback from one reviewer that all instances of “that are” must be changed to “which are”, and from another that the reverse was mandatory), you have to have access to funding and resources. And yet, knowledge increases, and the process continues to work, for the most part.
So even in the cases that people lie to get degrees, and that the academic process is used to gatekeep and block the unpopular/unconnected worthy as well as the unworthy, that doesn’t mean there’s a reason to be pessimistic about the idea of it, or despair at its implementation. It just means, like with so much else, that we have to be vigilant about that sort of failure mode, and crush it when it appears.