I have heard that before, actually. It doesn't help if they won't tell you who they hired, and why they were better. The fact that they picked someone "better" is obvious if they picked someone at all, and it wasn't you.
Also, when I hear that particular line, I follow up with "I'm glad you were able to find someone you like. Will you keep me in mind the next time you're hiring?" If I get a response at all, it is something noncommittal, like "We keep all applications for a minimum of six months."
Perhaps companies should not focus so narrowly on the current position. I have applied multiple times to the same companies for different positions, provided my experience with them remains positive.
But if, for instance, a company like SAIC schedules an interview with me on a military base, sends an escort to the gate to bring me to the work site, and only then tells me that no one is available to interview me that day, because the supervisors are all halfway across the country, that company lands itself on my blacklist. Later experiences with employees of that company moved them to my permanent, public blacklist. Not only will I not apply for any of their positions, but if they appeared on my doorstep with an offer letter in hand, I'd order them off the property. And I would recommend that everyone else do the same, for both SAIC and for spinoff spawn Leidos. They are the sole reason why I ask "Who's the prime contractor?" whenever I interview with a contracting company.
When you create an energy potential by posting an opening, candidate-anticandidate pairs don't pop into existence to interview with you and then self-annihilate after you reject them. Actual, persistent people stick around, remember how you treated them, and talk to each other about their experiences. They stay in the industry, and may one day be customers or competitors.
As it happens, Fog Creek is not on my blacklist, either temporarily or permanently. But I do feel like their interview process would be a waste of my time if I had to endure it again from the beginning, and I don't expect them to ever pick me up again from where we left off. So I ignore their job postings now. It won't hurt them any, because they get plenty of candidates anyway.
But it doesn't surprise me at all that anyone who doesn't believe that they are good enough to top the 99 other people all applying for the same position wouldn't bother investing all that energy to compete, especially when that won't help them in their search if they fail. With no feedback, no referrals, and no helpful suggestions, it really is a lot of effort for a high probability of no reward whatsoever.
There may be something embedded in our tribal caveman brains that makes high-risk behaviors more attractive to men than to women. If so, Fog Creek might be able to attract more female applicants just by guaranteeing something of value at the end of the interview process, regardless of whether the candidate is selected for the next round.