I understand your point, and I'm not trying to be a troll.
Humans are more complex than that. I don't think you can assume that candidates will perform the same all the time. Sometimes an excellent candidate can perform badly for multiple reasons (e.g. nervousness, poor preparation, bad interviewer, personal problems, etc).
It seems to me, that rejecting a good candidate, and have him/her interview again after some time, if that candidate was a 'good-hire', then it would increase the chance of hiring him/her, since it is most likely they will prepare better, and know what to expect.
And why don't they count the cost of good candidates who simply drop out of their hiring pool entirely, because they can't be arsed to bone up on the easily gamed idiotic hiring process?
I'd never even apply to Google based on the stories I've heard, and I'm sure there are plenty of others in the same position who are even better at what they do than I am. There are just so many stories out there of how crappy the hiring process is that everyone who's any good must have heard about it. Some significant fraction will have said, "Yep, not for me."
Of course, people hired after their second interview are more likely to be mediocre, because people with more options are more likely to not re-interview (like mxcl https://twitter.com/mxcl/status/608687283869503488)
Humans are more complex than that. I don't think you can assume that candidates will perform the same all the time. Sometimes an excellent candidate can perform badly for multiple reasons (e.g. nervousness, poor preparation, bad interviewer, personal problems, etc).
It seems to me, that rejecting a good candidate, and have him/her interview again after some time, if that candidate was a 'good-hire', then it would increase the chance of hiring him/her, since it is most likely they will prepare better, and know what to expect.