Very few kids "get discovered" on any of these circuits. With how quickly technology has evolved over the past decade, kids that can play at the next level do. There aren't kids getting past up like they used to.
And to say it works out fine for most kids is disingenuous. Most kids would mean over 50% of them. Playing in more games in a singular sport leads to burnout, higher injury rates, sacrificing other interests, and a steep financial commitment on behalf of the parents. I really think the AAU and other similar circuits do more harm than good, for well over 90% of participants.