And you end up left with only mediocre devs who just want to take the salary and be home by 5pm because they care far more about their family/hobbies/life more than the quality of the app they're building at work.
I think it's amazing that in your mind this is a negative thing.
The economic prosperity that affords us the opportunity to spend leisure time with our loved ones comes exclusively from great creations.
Sure, when the market was hot this was most likely the case, but not everyone lives in the Bay Area and the choice of jobs that _aren't_ like this is much more slim.
If your company relies on no-lifers to be successful, you’re running a bad company. This is a management issue.
You don't iterate fast or slow when dealing with this shit. You do it at the exact speed you need to to fully understand the domain, failure modes, validation processes, etc. Similarly, you don't write "awesome software", you write exactly what is needed -- nothing more, nothing less, and what is there needs to go bang every time.
There is no reason to believe an enthusiastic day-tripper who starts getting bored when the grueling FMEA, design validation, etc. starts to kick in is a better choice than the salaryman who's prepared to do what needs to be done for the next 10+ years of the product lifecycle.
I say this as somebody that worked on an unreleased product that was on the cusp of safety critical and am glad that it didn't go to production in hindsight. It desperately needed less "awesome" software and a lot more "paperwork".
Let me put it this way: If you had a team of EE's and ME's who all made between $150k and $250k, you would basically have the cream of the crop. A team that could make mars rovers or infallible pacemakers.
But a team of SWEs making that much? You get buggy weight loss apps and serially broken web access portals.
Doesn’t mean that competent SWEs will be destitute but salaries will probably trend more towards other typical engineering salaries—solid middle class professional salaries.