It is at least in part because of how recruiting works, especially in large tech companies. Companies have many candidates for each role, and can't easily review all of them. Between bureaucracy, how busy the hiring manager is, etc. many candidates get lost in the process.

This is why 1) it really helps to have a referral and 2) tell the recruiter when you have competing roles. Neither will change much about getting or not a role, but they will really help the prioritization and avoid you getting lost.

Paradoxically, that effect is bigger nowadays when the market is not as hot as it used to be, because recruiting is more stretched. Even some FAANG are very understaffed on the recruiting side

This is the same logic as dealing with VC investors. Nobody feels confident saying yes so they drag the process out. Then someone else does say Yes and they assume this other unknown party has figured out something they haven’t. Now they have a sense of urgency over losing out on something. Even if they don’t know what quality the entity offering the first Yes even saw.

In addition to your (presumably positive-enough) interview performance that the later company has themselves, they also have a "hire" recommendation from an entire other interview loop at a different company.

That's a strong signal, and probably puts you ahead of most people interviewing at the later company, who only have the one set of positive feedback.

I have also experienced this and subsequently bluffed it.

I told a startup that I “was talking to Meta”, and they were like ok we cant compete with that. I hadnt even done leetcode yet I was just doing emails with Meta’s recruiter. I told the startup that its okay because I will be stuck in team matching for 6 months, and the startup bumped my salary 30%.

Perhaps having the 6mo contract in hand increased your confidence and changed the way you were carrying yourself and interviewing (subtly to you, but meaningfully).

Literally nothing involving human behaviour is entirely logical. Coincidentally, as a hiring manager, hearing people describe “illogical” human behaviour with any sort of surprise is an inexperience indicator for me.

Why would someone not then just tell every recruiter/company they are interviewing with that they already have offers are are in the pipeline at other companies even if they don't.

We've heard nowadays how hard it is to even get to the interview for many companies so theres probably plenty of candidates who do not have many other offers prepared or even close to prepared.

Another issue is timing. Theres been times when I've started the interview process with two companies but one is on a much shorter timeline than the other so now I have an offer for one whereas I am still waiting on an interview that isn't for even a couple weeks for another, if not longer.

Not gonna lie, last time I went through the interview process I just told them I have other offers already even when I didn't. It worked in my favor I believe but feels like to get the best outcome you just have to be okay with basically lying out your ass - and that goes both ways, as the employer and the employee since it seems like even the companies feel fine with dragging their asses on concrete unless you have other stuff going on.

It’s always easier to get a new job when you already have one.

Quantum entanglement

As a hiring manager, if I was on the fence, knowing someone I'm not thrilled with has an offer makes me try to figure out what I/we missed and I would reexamine potential gaps in our recruiting processes with the candidate, which are always wrought with biases. And luck is such a big factor (on both the company- and candidate-side) in getting a positive signal.