I think you might be confusing beauty with design.
The HN favicon is not beautiful at all. It's not "good-looking". But when I look at 20 tabs open, you can instantly tell at a glance which ones are Hacker News -- or in a list of bookmarks. That's good design. It's working.
A bad favicon, on the other hand, is reddit's [1], for example. It tries to cram the whole reddit "head" into a 16x16 space, with a small white head against a light blue background (too little contrast, especially against a light-gray tab), with thin black lines. Glancing at it in a list of tabs or bookmarks, it doesn't stand out at all (due to bad "background-y" color choices), and isn't easily recognizable at all (too much detail, no obvious clear central element).