I was amazed initially (though that quickly faded) how few truly "smart" undergraduates there were at MIT in the 9 years I hung around there. I put smart in quotes because I really don't like that word, but I don't have a great substitute either. Obviously they were smart enough to get in. But most were significantly lacking in at least one necessary area to be labeled "smart" IMO (often several), including intuitiveness, creativity, being a self-starter, analytical thinking, breadth and depth of knowledge, intellectual curiosity, etc.
Putting exact numbers on it is difficult due to the self-segregation at MIT and subjectivity obviously at play. However, I would say perhaps 30% fall into the seriously lacking category, another 30% in a substantially lacking category and another 25% in a good but not great category (perhaps lacking only one major thing). That leaves only 15% or so of people I came across I would say were "smart" in the sense described above. When you move to people with the essential qualities necessary to work successfully at a really early stage startup, I would say it drops to 7% or so. I'm not saying found one, just work at one as one of the first employees. When you move to people with all the founding qualities, the % probably drops to 1-2%. I know this first hand after trying to start companies with people in the "smart" category.
The above has really hit home other times as well. Here are two more occasions. First, when graduating, 62 people in my class out of about 1,080 (~6%) were inducted into Phi Beta Kappa. I was shocked at a) how many of these people were my friends at MIT; b) how many of these people I had come across (given that I didn't meet all 1,080; and c) that this list included pretty much all of the people I had previously labeled "smart" myself in my class that I had come across.
Second, my wife taught statistics at MIT for several years. One time a kid came up to her complaining about an exam grade and told her it was not possible to have gotten an A on this exam. He said all his friends studied real hard and yet they all ended up with Cs and Ds. To which she replied, actually roughly 30% of the class got As. The point is, they were completely self-segregated by "smartness" and didn't even really know it.
All that being said, an MIT degree really does go a long way in terms of impressing the average person/company. I have done independent consulting and applied for jobs where they basically stopped researching me when they saw MIT. That is the rule, not the exception. And that was in Boston. Now that I live in PA, it seems even more shocking to people to come across someone from MIT. Given the above, and in agreement with PG, this behavior is unwarranted. I of course am thankful, but it also annoys me that so many people are free-riding on the name.