a) it discriminates against people who cannot spare 4+ hours of focused time on evenings/weekends to work on the problem. People with multiple jobs, single parents, etc.
b) in the age of AI it is no longer a reliable measure of someone's skill, for obvious reasons
Unlike Yegge, I haven't worked at FAANG, but the companies I have worked at all followed the same hiring practices and suffered from the same problems as he describes.
Provisional employment (or, if that's not possible, then well-paid internships) solve all of those issues. The candidate gets 3-6 months of stable employment, you as the employer get a large number of work-sample tests, and you can see how they use AI and how much.