Here in Brazil we are having a similar problem...

Also I witnessed closely, its bad effects.

Example: In Brazil universities frequently has students separated in classes, then the whole class go to see the necessary teacher (ie: very different than the "credit" system used in US where each student choose what he will attend), the university where I went, they had a common, but rarely admitted practice of separating the classes according to the ranking in the entrance tests.

I ended in the A class, we had a B and a C class. Yet, the C class (not only of my course, but of some others too, or of other years) frequently outperformed the A and B classes, even if their students were frequently obviously outright dumb... The reason is that the C class students learned to do two things: one, work hard, including being very creative in cheating if needed, C class students never shied from hard work if it was needed, and two, they were really, really good at being friends of teachers and other staff, and socialize their way into success.

The A class, that theoretically had the best students (example of difference: A class students frequently already had past experience in the job we were learning, and was the class that least needed to ask questions to teachers, also in simple enough tests always scored very high), but it don't worked, most A class students didn't knew how to hard work, they would just coast, and when some advanced teamworking was needed (example: team of 7 students asked to make a 6 month long project that would affect the grades of all subjects), the A class students would often start to fight each other (sometimes physically), have big egos, don't cooperate, and so on.

Altough this is what I saw from personal experience, I got curious and looked more into it, and saw this everywhere, the smartest kids fail in real life, they don't work hard, don't socialize decently, and when facing a big challenge they fail, they panic, or get confused, or procastinate or lot, or give up before even starting.

The "C class" kids although they often are the typical party animals (frequently going to bars, getting drunk, being rowdy, skipping unecessary work, etc...) when they face a challenge, they take it, they work hard, either to do it the right way, or to do it the wrong way, or to figure how to avoid it completely, but they don't give up, they just figure how to do it somehow.

Practical final example: I once went to some seminars in a hard to understand subject, the speakers were all students, it was mandatory to all students to speak. The brightest students, gave boring seminars, everything was correct, but not really detailed, and the work was clearly half-assed. Now, watching the seminars of the students that were infamous for being often drunkards and dumb was awesome, some of these just creatively figured a way to nail it. One guy gave a really, really awesome seminar, 100% correct, 100% charismatic, and very detailed. Later I learned that what he did was meticulously create a script for the seminar using his comedy skills to copy, paste and edit parts of books, then record himself reading the script, then play that recording during the seminar while hiding the headphone on his hair, it is work intensive, and he don't understood half of what he said, but he got a 10 of 10 grade, and I understood the subject he needed to teach very well. Another guy just tried to learn everything he needed to say like if he was an actor, and just acted his way through, he also don't understood shit of what he said, but everyone else did, and he got a 9.5 of 10