This is what I expected when I went from undergrad at a solid but not elite shool (top 100, ~50% admission rate) to grad school (top 10, single digit admission rate).
It's not what I experienced. The undergrad students I taught and TA for at the elite school were no better, on average, than my peers at my undergrad school. They were more ambitious and entitled. They were not smarter or harder working or more engaged or motivated.
If your peers in undergrad were your friends, you were probably selecting a non-representative group (smart people you liked) and your job as a TA shows you a more random sample (or even skewed negative, poor students grubbing for grades).
At least that’s my guess (selection bias).
Of course if I’m wrong there’s an even bigger opportunity in undervalued students, but I’ve done enough interviews to believe that’s not true.
In terms of raw smarts I wouldn't make so bold a claim, but in terms of what folks can realistically assess in a single minute of interaction...