I’d phrase this a little differently: the people there can be relied upon to at least have some “baseline” technical ability. Having worked at both FAANG and more mediocre companies, one thing that stands out is that while not everyone at FAANG are super-wizards, you’ll never have to sit there and explain things like “what is a stack trace” and “what happens when you write past the end of an array” and “what is the difference between O(n log n) and O(log n)”. You’ll never have to argue whether using source control is a good idea. You’ll never have people who spend weeks just trying to get Hello Project” to compile. All of which I’ve seen in other companies.
The big guys hiring processes might not be great but unlike most companies they seem to be able to filter out the complete know-nothings, and that alone is probably what raises the average.
TLDR: it’s not that they hire smarter people—they just avoid hiring way-below-average people.