I'd agree with you if the above was true - but it isn't at Google, nor is it true throughout the majority of the industry.
Most companies (Google included) hire based on a fairly simple "first past the post" system. A candidate comes in, interviews, and a hire/no-hire decision is made shortly after. In cases where two candidates are interviewing simultaneously some comparison might be made between the two, but otherwise the candidates are decided upon serially.
I don't know of any companies that practice the "interview N people, choose best" methodology - if they did, then yes, I agree that "failing" 90% of people might be more reasonable.
I don't even know if that strategy is practicable - sourcing candidates generally takes a long time. Getting N people to interview within a short time window for the same position is nearly impossible for any N > 2.