Leet Code style questions are a shorthand assessment for two things:
1. Raw mental horsepower
2. The ability to just repeatedly do focused learning, aka just grinding
And sure, it probably does favor #2 these days - but that is a critically important skill. You can trade one for the other, but everybody has some amount of both, and these questions figure out, roughly, your computed aggregate score of these.
They have a very high false negative rate, but an exceptionally low false positive rate for a 60 minute interview, so it works very well in companies with large interview candidate pipelines.
Why is 2, the ability to grind/memorize random problems, important for any company? I can't think of any company I've worked at, where that would be useful during my day to day work.
You don't think rote learning is a desirable skill of candidates that employers look for?
Can you think of anything we do for, say, the first two decades of our life, that could send this signal?
Maybe I'm in the minority, but I don't think the ability to memorize dozens of algorithms and then spit them out on demand is really that useful to most practicing software developers, nor is it a good signal about one's technical expertise.
It's def not "Raw mental horsepower" it's more knowing an obscure algorithmic trick.
People love to say things like this. In my experience on both sides of these coding interviews in FAANG companies, the questions are basically never algorithmically intensive.
The furthest I've ever seen it go in practice: binary search, BFS/DFS, hash tables. I've never seen any more obscure algorithmic trick than standard uses of these algorithms and data structures.
I'm not saying leetcode doesn't have more insane questions, but interviews tend to be straightforward.