I do the same as well, I think it is a great approach. It is just a paring exercise, the language of their choice, their equipment, full internet access. We just build something like a calculator or pig latin translator. Something that you build up in layers. I usually read off the test cases one step at a time, in hopes that they write their own tests along the way.

But hiring good people is very time consuming. The reason GitHub as a portfolio makes sense, is that it helps compare potential candidates--that I know nothing about--faster. Biased or not, I have had the best experience with people that are very active publicly. From Battlebots competitors, book authors, to startup founders, etc.

Ivy League Colleges, VCs, even Y-Combinator works very much the same way--trying to make an assessment based on past accomplishments. The more visible, the better. With the caveat being a strong direct reference.

I am sure we all have extra circular activities besides coding, but depending on how strong your experience or professional network is, really depends on how much you need in a portfolio. I have been coding since I was nine and have decades of experience, I still have stuff I hack on that is public, from SlackBots that control GPIO pins to Sonos controllers, etc. I would think the more experience you have, the better chances you would have more stuff you can add to your GitHub (portfolio).

At the end of the day, as a someone hiring, I am going to gravitate to engineers that have more and better examples of their work ability and output vs where they worked on their Resume. Not to say that we should ignore anyone that doesn't have public projects--but they are certainly at a disadvantage against someone that has.