From my experience big tech interviews are not for making sure that candidates don't write O(n^2) loops. Code reviews are for that, some of the times.
Those interviews are there because we haven't figured out a better way to interview yet and this seems somehow correlated with the job. I don't think it is correlated, but it looks like it is!
Those interviews have also the hidden characteristics (your call of it is an plus or a minus) to select for quite confident engineers that usually can talk and defend their opinion. Which is quite useful in big tech.
For the reason why this does not get fixed.
It is not because no-one looked. People in the team know. We all know.
But we are being told not to focus on them.
With scales comes cost of running the whole machinery AND opportunity cost of not having the next product launched. With the scale of big tech, the opportunity cost easily dominate the cost of 1% increase in performance.
People don't realize it, but it is working well and as designed.
It is wasteful? Absolutely.
It makes a shit tons of money? Definitely!