Yours, on the other hand, is predicated on the belief that they're all super-incompetent and have no capability of doing anything right ever
Nope. It's only this specific thing that I necessarily think they're doing a bad job of. And I'm right; they are. Their algorithm is a struggling baby compared to TikTok and YouTube at large is not a major profit center (and indeed may not be profitable at all -- but they maintain it because abandoning it would be too costly for them).
TikTok is so good at doing this thing that it is a profitable business for them. YouTube is struggling, and we can clearly see why.