For years they've literally hired very smart and capable people, and then shoehorned them into working on some ad-tech engine that an intern could do, just so they didn't work for a competitor. And now they're angry that their employees "don't work hard?"
Holy fuck, for being Google, they sure have some idiots in leadership.
Trophy hires? Sure, occasionally, but they were all doing stuff for the company. And the idea there was some sort of policy is wrong. It may look like that from the outside though, because there was never a strong connection between hiring and need.
Isn't this a failure of the free market? This leads to the obvious question, which is: what could be done to improve optimal talent distribution?
It seems bad to society if rich companies can monopolize talent to control development and output in order to ensure greater political power and control.
I'm one of those that agree with that claim, I've said something similar a couple of times during the last few years on this forum (I remember that once I even used the term "golden handcuffs" in order to describe the whole situation).
As to why and how this came to happen in relation to the free market? The short answer is that both Google and FB are de-facto monopolies. In a way that can also be extended to Apple and MS. Of course that these companies will make tons and tons of a money during a period when software is eating the world (I know it sounds marketing-ish, but it's the reality). As such, they can use that money to "park" the best developers available among their ranks, so that no real competitor can emerge.
i highly doubt they are really parking developers, because innovation that endangers those companies don't come from individual developers.