Knuth had previously built a couple of compilers in 1957 and 1958, as you can read in the interview I linked, but it's sort of ambiguous as to whether it was "in his free time" — his job gave him and his friends access to a computer but I don't think writing compilers was declared to be part of their responsibilities. It wasn't for free, though. I think what that says about modern development practices is that we have cheap computers.

I agree that tests are very valuable for the reason you describe, as well as for other reasons. What codebase are you working on?