To build intuition, let's consider a hypothetical society. We divide a group of people in two. The first group rolls a die with 100 sides labeled from 1 to 100 in even increments. The second group rolls a die with labeled 1 to 110 in even increments. The roll determines their annual ability level which is unknowable. If you were hiring, which group would you prefer? Is it fair to the second group?

Note that this isn't strictly equivalent for several reasons. The game above the error is part of the generating process instead of the measurement process. Also the distribution is district rather than continuous. The key commonality is that a weak predictor at an individual level can be a meaningful predictor at a group level.