The best interview question in my life, a few years ago, was one where they gave me an open-ended question, a laptop, and the whole afternoon with occasional checkins to see how I handled it. The evaluation was completely subjective.
That's hard to standardize at an industrial scale, I understand why FAANG can't do that, but smaller shops really should and stop denying themselves acquirable talent.
So far we're batting fairly well. Folks don't generally lie about their experience.
If I were more experienced, I'd have been able to ask the right questions about their alleged experience and smell the BS.
I've used this process for about ten years now, and it hasn't really burned me yet.
Maybe your company is too small for data structures and cutting every 0.1ms latency count. As an example at Google I needed director level exception to introduce 0.1ms latency to the ads server (which wasn't needed at the end, but the monetary damage for timeouts is real).
Understanding basic data structures and how the computer works is important in these cases, even if you just need it once in 3 years.
Probably >99% of developers will never encounter something like this in their career.
There's no surprise that people are screening for the roles they are trying to fill.
Algorithms absolutely matter, and that will be evident from work experience and education.