how could middle managers double the headcount by themselves? nobody above them noticed that?

Probably exactly this. Each tier of management hired a fair bit more than they should have. Managers are generally incentivized to do so. The behavior was normalized and no one really noticed while money was cheap and all seemed well with the world.

No. There was a data science conference in the Western US a decade ago. Mark Zuckerberg showed up unannounced, with a job offer for every single attendee.

The strategy comes straight from the top, and it makes perfect sense. Even if they are not fully utilized, even a FAANG salary is small potatoes compared to what top-tier talent can bring to a company. Think of it as the HR version of what VC do, invest in many people knowing 90% will fail to live up to their potential, because the 10% that do more than make up for it.