> What, exactly, is wrong with the expectation that people make senior level eventually?
The problem is when you base too much on promotion systems and performance reviews, that end up as a form of bias and favoritism not closely approximating the truth. Some amount of people are doing useful work for you (like cleaning up after people you think are the high performers) that does not surface there, and when you crap on them, pass them up, bust their morale, make them afraid of their next review, etc., you risk losing their valuable contributions.
Modus operandi in these companies is to rewrite/reintroduce whole products instead of fixing bugs from already discarded people. So if you lose a critical amount of worn out higher paid contributors, you just make a V2 or introduce a new product with a completely new fresh team that will get discarded after another 3 years. This requires fresh supply of motivated and hungry people willing to take sacrifices and a much smaller amount of people willing to exploit that.