Needing to hire more than just the top schools graduate is certainly a reason companies can't limit themselves to university selection processes.
But that's not all that's going on here! CalTech is pretty selective as far as US schools go (6% acceptance rate). Slightly more than MIT, slightly less than Stanford. SAT score stats all in the same 1500+ range.
But they're offering this course, and that makes me think that no, the worst student from these schools in the US, at least cannot nail any algorithm interview with minimal prep!
And that makes sense, from a US perspective! Getting into CalTech or Stanford or MIT is about doing well at high school/early-college level material in high school, and about extracurricular activities, with a dash of being able to afford it and being told it's something you should try for. Most of that high school curriculum - even most college-level CS material - isn't super applicable to a software engineering job. It's heavier on memorization (we have google for that!) and it's heavier on theory than on creative application of things.
I might argue that any test or course where the answers to the exams come straight out of the textbook isn't worth as much as it used to be, since we've got Google and SO and all the books too!
That's a big part of why a lot of these whiteboard interviews aren't simply "write out Dijkstra's algorithm" (boring, textbook!) but are about seeing if you can figure out how to use apply CS in a situation where the way the problem maps to the algorithm isn't immediately obvious.
Creative work has a long history of not aligning well with traditional US university admissions criteria and evaluations.