This seems to be the type of employee Google is looking for, in which case, it works great.
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Maybe it's not what they are looking for. Maybe it's only the easiest test, like looking for the keys under the lamp post. It could also be that this way of hiring people turned the company into a specific direction, more attention to the sw and less to the customers.
Or visa-versa, that the company always cared more about the sw than the customers, and the hiring methodology reflects that.
It seems to be working fine for them.