Picking the top applicants backfires because people game it.
For example, consider Students A and B who're mostly identical except Student A likes to binge on Wikipedia while Student B spends every night doing SAT practice problems. Colleges that select only the top applicants get the B's of the world, who optimize their observables, while the A's seem somewhat less competitive on paper.
If you change the rules -- like you start focusing on clubs, volunteering, or even just skipping the Top-1% -- the gamers'll adjust their strategies, out-performing the non-gamers who develop actual talents. The top colleges end up getting flooded by gamers who're focused on looking good.
The pragmatic solution proposed in this article is to randomly select "good enough" applicants. This allows colleges to take in the top-performing non-gamers who have a wealth of actual skills (rather than gaming hacks) while also reducing the incentive for gamers to waste their time gaming the system.