Disclaimer: I have interviewed-trained twice at Google but I don't like the process for interviews. Athough I work there, My opinions have nothing to do with Google, just my own.

I think the process selects well for new grads who have recently completed algorithm courses.

I think the process selects well for people who are comfortable with doing work on a whiteboard.

I think the process selects well for people who are motivated enough to work at Google that they read and study books like you mentioned for weeks, and do a bunch of practice self-study interviews before coming.

Whether that set of people overlaps significantly with what makes a company do well -- I don't know. I'm not sure.

But I am pretty sure that the reverse assumption, that people who don't pass those bars are not good canddates, is an arrogant position that only a company of Google's standing and size can/should get away with.

What I don't get is the trend of small companies, startups, and the like, copying this interview process. It is entirely not a match nor a way to find the kind of motivated, culture-fitting, creative people you need in a smaller company.