While being good at Leetcode is not necessarily negatively correlated with being a good software engineer, is is also not positively correlated. Thus, by relying on it solely, you are still making a coin-toss decision about the software engineering skills of the candidate.
> it is also not positively correlated
Do you seriously think that claim is true? That coin toss predicts software engineering ability as well as leetcode? I don’t think any reasonable person can take this seriously.
Berkson's paradox suggests that even if they seem negatively correlated that may only be due to the selection process. For example, suppose that an interview has 2 components, a leetcode section and an engineering section. Both are scored out of 10, and a total score of 15 is needed to pass.
Among those who pass, the two components might seem negatively correlated. This is because you can score a 10 on one section and pass with only a 5 on the other. However, among the general population both sections might even be positively correlated.
What folks need to remember is the employers who are primarily known for asking this generally have no problem hiring people who are good programmers and ALSO good at e.g. Dynamic Programming. And no, as much as some try to frame it, the two skills are not directly at odds with each other. Therefore, between a good programmer who can “Leetcode” and one who cannot, why wouldn’t they pick ones that are good at both?
And sure, if your company don’t have that luxury, don’t cargo cult. Hire a good enough domain expert for your specific needs.