I can't imagine an aphorism I disagree more with. I constantly come across companies with similar-sized platforms where one has a development staff 10 times the size of the other (both in cost and size), all due to the complexity and quality of the code. In the long run, few things are more expensive than a mediocre programmer.
Disagree very much. Mediocre programmers are very good for mediocre tasks, of which there are plenty of. The problem is only, if mediocre programmers work on advanced tasks.
Competent project lead/management
Assigning the right person for the right job. But yes, nobody ever said that is easy.
But in general: by definition there can be only some excellent programmers and lots of mediocre ones. So it simply would not work if every company only would hire excellence.
And it is also not neccesary nor useful, since there are so many boring, mediocre task around, meaning the excellent programmers can focus their time and energy on the complex, interesting problems.
Purposefully hiring mediocrity? Big companies do it, but not on purpose. Survivorship bias is in play here. Taking that approach is a form of managerial cargo culting.