This is great. Now what would you do if after three months, your new hire can still not ship code that benefits your business? Fire the person? Keep teaching?
I also believe algorithmic knowledge is important, and tend to give algorithm questions to my candidates, but it matters more for those who will write databases and game engines than for those who will write CRUD apps.
I was good at the algorithms and data structures part of my university course, but as a developer with ten years experience, I find it is very rare to actually use these now.
Far more important is how / when to index an database table, how to design the tables in the first place.
If I need an efficient algorithm, in most cases someone has written (and tested) it and put it in a library.
Bringing it full circle, a puzzle is just a peculiar form of algorithm, most of the time. You don't want to hire someone who will sit around thinking about graph puzzles and how to measure 4 liters when you only have a 5L and 3L beaker. Google it and get on with the job.
I also believe algorithmic knowledge is important, and tend to give algorithm questions to my candidates, but it matters more for those who will write databases and game engines than for those who will write CRUD apps.