Grad studies are selective, they just select based on conscientiousness. Look up big 5 personality, its the gold standard for personality research and life outcome prediction. Conscientiousness controls the degree people are willing to work. A person with a score reaching the extremes of conscientiousness in the population will just work 16 hours a day and sleep 8 hours so they can get right back to working. Conscientiousness is the biggest predictor of academic and workplace success. IQ is good, but it doesn't surprise me that its not the be all end all.

In my experience you can boil doctoral students that succeed to be one of: hard working, anxious, or successfully creative.

Degree inflation is just a different thing altogether though. Its schools jamming people through higher studies for more money, while reducing the level of training and oversight. Which leads to people who can't answer the question "How would you go about researching a completely new topic/field you have no experience in, to solve a particular question/reach a particular goal?"

I've asked that question to dozens of professors, and only like 3-4 had a good answer with a philosophy and methodology.