It provides a sense of validity to people who may know your boss and see you, as an employee of theirs, as being competent and proficient at your job role.
Say I work as a design engineer. My boss is probably older and more experienced. He may have worked at competing firms previously and has connections there. I connect with him, and he's connected with former colleagues. They want to recruit and so start looking around the networks of people in the industry and region.
Because I'm connected to my boss, I am more exposed in their ads. They see the mutual connection and consider that partial confirmation that if I'm employable under him, I'm probably a decent employee.
Networking with existing colleagues, including your boss, helps create exposure of your profile to others in the industry by utilising the connections that your (usually more experienced and more connected) boss has. I'd almost be willing to bet that connecting 'upwards' to more experienced people is on the whole far better for your profile exposure than connecting 'downwards' to lesser-experienced employees (e.g.: you as a mid-level employee connecting to new graduates entering your workforce).
I understand that connecting 'upwards' is better (I'm connected with all my former bosses). But if my boss's former colleagues got into the habit of shopping for new employees in his current workforce, they would not remain connected for very long. Perhaps this is a regional difference (I am not in SV). After I'm no longer a current employee (and socially OK to extend a job offer to), I still get all the benefits you mention, except that I also have the benefit (in several cases) of my former bosses sending me tips about jobs in their network that aren't listed on LinkedIn, and I don't have the downsides of announcing to my current boss if I'm shopping around.
I'm not in SV either (AU mech. engineer). My industry (rail) is pretty insular however, so there's usually a lot of crossflow between the various parties involved in it.
I agree with you that the inability to customise who your updates go to is pretty bad. That's a pretty basic feature and I'd expect to be more integral to LinkedIn than, say, Facebook.
Say I work as a design engineer. My boss is probably older and more experienced. He may have worked at competing firms previously and has connections there. I connect with him, and he's connected with former colleagues. They want to recruit and so start looking around the networks of people in the industry and region.
Because I'm connected to my boss, I am more exposed in their ads. They see the mutual connection and consider that partial confirmation that if I'm employable under him, I'm probably a decent employee.
Networking with existing colleagues, including your boss, helps create exposure of your profile to others in the industry by utilising the connections that your (usually more experienced and more connected) boss has. I'd almost be willing to bet that connecting 'upwards' to more experienced people is on the whole far better for your profile exposure than connecting 'downwards' to lesser-experienced employees (e.g.: you as a mid-level employee connecting to new graduates entering your workforce).