You say, everyone starts learning with hands on experience. Then why do people tend to have double degrees, post graduate, phds for that matter. Moreover, why is the preference given by the industry is for those with degrees/diplomas.
The basic idea of formal technical education is to arm yourself with more powerful analytical tools, to expose yourself to varied subjects and to put yourself into a competitive environment where you have to work hard and keep pace with others, while meeting certain standards along the way. In principle, when you're done, you have more skills to apply to problem solving which will help you work with your hands better, or help others work with their hands and achieve the technical goals. Ultimately engineering and business involves actually doing something, not studying and writing papers. Also, in principle, the degree becomes a way for employers to understand what basic skills you have.
Now, a person can, in principle, do all this on their own without a formal education. But, it is difficult and it is difficult for an employer to understand such a person.
As an analogy, think about modern day Olympic athletes. There was a time when a gifted person could train in their back yard, and be competitive. Those days are gone. Now, talent and advance training techniques and experienced coaches, and all the best equipment is needed to compete. Likewise, a modern engineer needs the inborn talent, training, coaching, mentoring and a good environment to excel and do their best.
I like to use the example of my father who worked as an engineer, but only had a history degree, with a minor in physics. It's much harder (although not impossible) to do that now.
Another thing is that advanced degree work in engineering typically does involve hands on work with experiments and building of prototypes. This is not always true because there are engineers that specialize in theory and modeling and never touch anything real, but it is a mistake to assume that all, or even most, do that.
In a nutshell, a mediocre Ph.D. level engineer will often be able to do things that the most ingenious self taught person just can't do because he never learned a critical theoretical tool to apply. However, your point is well taken because sometimes an average self taught person can do things that an ingenious PH.D. level person can't do. - Humans are strange that way.