I think this is largely true, though it takes a while for reputation to spread. There are some brilliant young developers who haven't yet been noticed by anybody in a position to hire them -- but they won't stay in that situation more than a couple of years.
The exception is somebody who is excellent, but stuck inside one company and not producing any publicly-available code. If she isn't actively promoting herself, it's possible nobody will ever notice her talent.
Needless to say I'll most likely approach him as my first hire when I get to that stage with my own startup.
You need to do a lot of footwork and networking to build an accurate picture of the employment market in a region.
I'm not arguing that they are a factor. Just asking -- in part, as a thought exercise.
Their boss will.. and their coworkers (above and below) will. There have been a number of times that I've been asked for a recommendation and referred someone that was a past supervisor, team lead, etc.
Do you mean, "other people who work with them" or "other people who notice them"? I ask this because how do you tell if someone is a great hacker unless you work with them?
A quick example: http://9fans.net/archive/?q=rsc&go=Grep
There is a big difference between watching someone code and watching them talk about coding. Ability in the latter is not indicative of ability in the former.
"We have to interview so-and-so. I know him from Hacker News and he's clearly smart."
-- http://news.ycombinator.com/user?id=pg -- http://ycombinator.com/howtoapply.html?s2011