The industry has always been insular and had its nepotism, but it's never been more incestuous than it is today, and it's harder than ever for fresh blood to find its way into the talent/gene pool, so with each generation it just gets more inbred. For the most part, it's a gated community and the gates are locked and you need to have the right unlisted number to call to be seen at all (although becoming independently famous might get you in). They aren't out scouting for the next star in coffee shops around the country anymore. And the kids of celebrities also have those same unlisted numbers and have also been attending the same parties with the people you need to know for years and their parents have favors to call in, know what to use as leverage, or just have the kind of name you think twice before saying no to. And while the kids of celebrities can be Jane Fonda and Gwyneth Paltrow and Drew Barrymore and Jennifer Grey, they can also be the result of what happens when you smash Bruce Willis and Demi Moore together. And then these children of celebrities who inherited their parents' looks in all the wrong ways and get acting careers anyway and stay in the fishbowl have children together, and... This is compounded by the realities of fame and how it makes it troublesome to venture out more into the real world among normal people instead of just holing up with other famous/industry people forever.
The area is a Mecca for attractive people from around the country/world hoping to break in and become a star. The industry is swamped in supply even as the demand is drying up still further. You know what typically makes people the most beautiful? Having the most average features. All of these beautiful people competing with each other who all kind of start to look the same because that averageness is what makes them beautiful. And getting cosmetic procedures they don't need done desperately trying to get an edge on the competition, but getting the same shit done by the same surgeons, making them look even MORE the same. Meanwhile, being pretty or beautiful, even when accompanied by talent, is usually not enough to get cast, particularly with a bit of a crackdown on casting couches, you need a big name with some pull attached. Being distinctive looking, having noticeably unusual features, on the other hand, can make you the one for a niche character role, and if that role becomes popular enough and makes you a household name, the industry will then try to capitalize on that popularity by (mis)casting you in all kinds of roles. But you are now in the fishbowl, contributing your 'striking' or outright weird appearance to the pool, while the all of those new pretty people remain shut out. And you will marry Ron Perlman's children or Danny Devito and Rhea Pearlman's children (tongue in cheek examples, no shade to the actual people, whom I've heard nothing at all bad about), and your own weird looking nepo babies will continue the cycle alongside Anya Taylor-Joy's, Timothée Chalamet's, and other actors-discussed-here's hypothetical future kids.
The industry is collapsing under its own weight. Streaming services changed the game, people don't go out to the movies much anymore, and the newer generations often don't have the attention spans to watch things much longer than TikTok videos, even as everything has gotten more expensive to make. So producers are trying to play it safe and only want to put their money into projects that seem like sure bets, most obviously seen in the constant soulless, cash-grab, nostalgia-bait reboots. But also in continuing to rely on casting actors who were big names when new movies were more culturally relevant, even while the screenplays they're choosing often aren't age-appropriate for those actors. They don't want to make movies about people in their 50s, 60s, 70s, they want to make movies about young, sexy people doing exciting, sexy things. They don't want to cast a beautiful no-name actress, they want to cast Nicole Kidman from ~20 years ago, and they'll settle for miscasting Nicole Kidman now and just not acknowledging that her procedures haven't made her look 20 years younger. Which means actresses of her generation are going to keep doing drastic things to try to look like that forever, with more and more unsettling results, because there isn't work in looking and playing their age.
Everyone is kissing everyone else's ass trying to climb the ladder, so there's a very 'Emperor's New Clothes' effect where you don't SAY that aging big name celebrity's latest plastic surgery looks freakish, you gush about how great they look, everyone gets it, and it becomes the new normal. You stop seeing the pillow face because so many people you interact with every day have pillow face. You lose track of what looks normal and even what looks believably human. And you cast that celebrity's still noticeably weird-looking kid in a part in your next movie and hope that now you have a favor to cash in from that celebrity.
And that's it for my central thesis on why Hollywood keeps looking more and more weird and doesn't seem to notice.