It's kind of unbelievable that anyone is even bothering to say _anything_ in this thread without addressing this point. Of course people sometimes overvalue competitions, and if it's true that Google did it, that would explain the effect whether competition winners are typically better or worse than other people who interview at Google.
Do I know it's true? Of course not. But it's such an obvious question to ask that your first question should be "how did measure/rule out that effect?". And if there's no answer, you go back to the drawing board and try to answer it.