This article briefly touches the real explanation:
> When we listen to prestige, we're often opting for a path of certainty, while foregoing whatever promising thing was just around the corner.
But it doesn't quite dwell on it as the important component of the answer that it truly is. Prestige and credentialism certainly have to do with peer pressure, but they also have a lot to do with risk reduction. And this is true on both sides of the equation.
If your job is to obtain a top 0.01% quality engineer, should you just hire from a top tier university? Probably not. That's not to say that a top 0.01% engineer wouldn't go to a top tier university. They well might. But it's not a very strong filter for that level of quality. What it is, however, is a very strong filter for say, top 30% quality.
When you hire from a top tier university, you aren't getting the very best. What you are getting is a very strong guarantee that someone is at least a certain level of quality. A Harvard or Stanford degree most certainly does not guarantee excellence. But it does guarantee a minimum standard of competence and work ethic. When you hire from one of these places, you can be reasonably certain that you are not hiring the human equivalent of a lemon.
The same is true on the flip side for an employee seeking jobs. If you go work at FAANG, one of the big three consulting firms, or Goldman, you are almost certainly not choosing the absolute best possible career path at that moment for yourself. What you are doing is selecting a career path that will be very good, with very high certainty.
In finance terms, these choices are optimal, because they maximize the Sharpe ratio of your career/hiring process. That is, they maximize the risk-adjusted return of your decisions. People who go to top tier universities have already demonstrated a preference for a lower risk path in life.