Is this some close knit "paypal mafia" corner of the industry where people only work with people they already know?
When I interviewed for my current job, it turned out that I had separate, personal, previous-work-experience connections to all four of my interviewers and it only surfaced during each of the interviews.
And this is after changing my role/specialty.
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It turns out that he was learning the ropes to transition to a huge leadership role in the company and no one knew it. He had previously led an entire division of a massive computer manufacturer, but 2008 wiped out most of his retirement and he had to come back to work. The very first thing that he did with his new responsibility once his role was announced was to give me a huge promotion to work directly under him with no interview.
All complex rewarding software jobs but it’s not the same as say, web development, in terms of choices and volume
I've found myself approached by recruiters for the exact large company and sizable department that one of these people has substantial rank in. It's already had an impact on my decisions.
That said, I have seen whole teams set the bozo bit on other parts of the organization. For example, I saw the head of an infrastructure group refuse to maintain or patch key services while insisting on ownership. The security organization set the bozo bit on this person and worked to protect the organization from the consequences of their choices. As an organizational tool, it can be a useful caution about known bad-faith actors.
As to your broader point, I think you're correct. Programming is difficult, error-prone, and thus benefits from an intellectual humility. Approaching it with the mindset that you are incapable of error makes this much more challenging.