I think a lot of self-taught developers (myself too earlier in my career) fail to realize this.

If you've got 1,000 applicants and your job is to schedule 10 interviews from that pool, you will do anything that won't absolutely destroy candidate quality. It's not about the finding the best, it's about finding someone who wants the job and will be able to do it. The name of the game is not minimizing false negatives (disregarding good people), but minimizing false positives (interviewing shitbirds).

So if you work for BigCo you say the person need three years of corporate experience. You're down to 800 applicants. One year of experience in the JavaScripts. 750 applicants. Maybe the phrase "SQL Server" has to be on their resume. 400 applicants. College degree. 320 applicants. Computer Science degree. 120 applicants. Maybe you want to filter by your preferred recruiter, because they only charge you 11% of base salary instead of 18% like that other firm. 22 applicants. Now you can actually read the resumes and pick the top half to interview. Anyone who actually wrote a cover letter and is in this pile is pretty much guaranteed an interview.

It's true that it's costly and hard to test one's skills. The trouble with grades though is some people cheat brilliantly on their tests and others, some of them really good, test badly (if they're bored they don't prep, screw the grade average, etc) and some of the latter are actually extremely pragmatic on the job. I don't quite understand it but it's there.