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> it makes sense for that company to have people attempt very challenging programming exercises

Perhaps. I would also encourage companies to look past programming ability, and consider things like work ethic etc. I would argue that once you can do the job, reliably showing up and working hard every day has a lot of impact.

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You are 100% correct. As a manager I would love to test for work ethic, honesty, being a team-player, etc. The problem is I can only infer those qualities based on signals that are inherently noisy. The only way you really know of those qualities is by working with them over a period of time. A solution to this is to hire through your network, especially via someone who has worked with the candidate. But that certainly limits your pool.

I feel that is a false dichotomy: programming ability is strongly correlated with work ethic.

Has that been studied? It doesn't match my experience, I saw them pretty unrelated.

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