Its just a numbers game if you don't have a relationship with someone who can get you a new job.
> refuse to hire unlucky people
Not getting hired there seems to be the 'lucky' move. Arbitrary hiring guarantees, over time, some pretty terrible characters that a proper hiring process would filter out. If you're pissing away 50% of your potential and, say, there's a 20% chance of getting a 'good' person, now there's a 10% chance of that. Over time, a place with such hiring standards would most likely build out a corporate culture that's subpar. The rare 'good' hires would probably take off much earlier than need be because there's so many more 'bad' hires. Eventually the 'bad' hires rule the roost and then people act surprised at gross incompetence as the norm in many companies, shameless dishonesty, and various forms of harassment being normalized.
I worked at a place that didn't take hiring very seriously and this is exactly what ended up happening.