Man, I feel bad for these people who were hired on for an experiment just to be dumped after a few months. That sucks.
One of our partners had agreed to terms on a project that required us to staff up. When the project fell apart on their end the whole thing was cancelled. We just didn't have the budget at the time to keep those people on.
It absolutely sucked. We tried to be generous with severance.. but these were people who had just turned down other jobs to take this one. We just kind of dumped them back into the market. It absolutely sucked.
I vowed then and there to never hire people unless I was absolutely positive the money was in our bank account.
Perhaps as someone round here suggested some time ago, you should treat these companies as film projects. A group of freelancers get hired in to complete a project then when their work finishes they go on to the next project?
But remember that the opposite scenario, where companies only hire folks when they are sure they have a permanent role for them, is far worse.
As far as "the 37Signals way", that path isn't right (or even available) to every company.
In my little bubble, everyone is a developer and never leaves the house without a large stick to beat off the hordes of roaming recruiters :)
I was only in the job market very briefly before giving up on the whole mess and starting a business. I didn't finish college, so it was brutal. The jobs I did get were non-traditional companies who took a chance on me. Sales jobs in particular will give anyone a chance to prove themselves. I came to deeply appreciate that.