Indeed. And this is a particular problem in tech and the valley especially. In many other industries and other locations is perfectly acceptable to just run a business. Make stuff that people want and get on with your lives. But in an SV startup you exist in this bizarre world where if you're not changing the world with engineers who are the best of the best of the best then you're somehow fucking up. They don't actually hire the top 1% (or even 10%) of engineers but they create an elaborate kabuki dance which gives them plausible rationalizability that they do.
The downside is more than just passing up good engineers though. Lots and lots of research has shown that more diverse teams come up with superior and more robust solutions to problems. When everyone thinks the same way about a problem they come up with the same solutions, but this just exacerbates the problems of satisficing. When there's diversity and a true interchange of ideas combined with robust intellectual skepticism and criticism innovation is enhanced and it's easier to break out of the local minima trap.
The downside is more than just passing up good engineers though. Lots and lots of research has shown that more diverse teams come up with superior and more robust solutions to problems. When everyone thinks the same way about a problem they come up with the same solutions, but this just exacerbates the problems of satisficing. When there's diversity and a true interchange of ideas combined with robust intellectual skepticism and criticism innovation is enhanced and it's easier to break out of the local minima trap.