It’s hard to tell between those who know their stuff, and those who are good at memorising all the various courses that tell you what to say. By telling the candidate what system to design you make the latter’s job easier.

If someone can quickly learn enough about a system that they can convince a domain expert they understand it well in a deep technical discussion, they're probably a good candidate for hiring, since your business likely consists of many complex systems, and the candidate will theoretically be able to onboard faster.

Attaining high level understanding and speaking convincingly about it are entirely different skills from knowing how to build it. Interviews are always a proxy anyway, your job will never be solely comprise of convincing people of your expertise. Sooner of later you have to do exercise it somehow. Unless you're the CEO, that is. The higher you go the easier it is to make a career out of being in the right places at the right times.

I’ve seen first hand people hired who’ve aced the system design interview but then fail to get much done. Building systems in the real world is much more than a few high-level components and algorithms - it’s about all the edge edge cases, tricky stakeholders, ambiguous and changing requirements, sequencing and coordinating small pieces of work.

That candidate is the best one... the one that can understand and apply any knowledge to resolve the problem in front of him.

If you can't distinguish between those two types of people by asking additional questions about their design, are you capable of accurately evaluating them in the first place?