The easy answer is to say that without DA at the older age groups, the kids leave TFA for DA clubs and therefore the kids who remain are, almost by definition, the weaker kids with fewer options. And there is a lot of truth in that. Just like there are a lot of regular clubs and great coaches out there who could get teams to superior heights if their kids didn't leave for other clubs perceived to be bigger names, better competition, etc. But there is more than just that at work.
First of all, TFA is not exactly a "home-grown" club. It assembles teams that include many great players from elsewhere and so the question of who really "developed" the player can come up even at these younger ages. TFA 06, one of its strongest teams, had kids from as far away as Santa Monica and Simi Valley in its starting lineup last year, and it has two kids from Santa Monica this year. Those kids were already accomplished players, recognized as the best or among the best on their teams, when they went to TFA. TFA 07 was a decent team last year, but nothing special. The success of the 06 group led a bunch of players from elsewhere to come out to the 07s.
Nevertheless, it's fair to say that these great players were attracted to TFA, at least in part, because of the coaching, the intense environment, and the constellation of strong players. Money, however, also plays a role. TFA offers fully funded top teams at the younger age groups (which they can do because of PW's fundraising, not because other teams in the club have wealthy parents). There aren't that many pre-DA teams that are fully-funded, so that helps attract great players who need the subsidy, which in turn helps attract great players from wealthier areas who don't need the subsidy, but recognize that there are a bunch of great players in one place at the club. So, even if TFA didn't do all that much to polish its diamonds, so-to-speak, just providing full funding at the younger age groups, while providing professional coaching, in a central location, and access to great tournaments, is going to give them a strategic advantage in recruiting and competing even if they didn't do anything else to develop the players.
So, what do they do special with their teams? In addition to the intangible benefits provided by recruiting great players and forcing them to compete hard for every minute of practice, TFA has a system. It's part of the curriculum it sells to convince clubs to affiliate (and thereby pay funds to allow them to subsidize their teams). It's primarily a tactical system for players that are already technically sound. One of the most difficult things for younger age group kids is problem solving. They freeze when faced with too many choices, they make the wrong decisions, etc. TFA coaches give kids something like four things they should do from every position depending upon the situation. Then they drill those things home until the kids get very good at them. It's pretty formulaic, although I don't want to overstate that. Lots of coaching at the younger ages is formulaic. TFA just teaches the formulas better. That, plus the fact that the kids are already very technically good, they have been conditioned well and hustle/compete etc, makes them very good compared to other younger teams.
What happens when the kids get older? Some of them build upon that initial foundation of tactical strategy and become very good. Others never develop the ability to adapt and think on their own, especially when faced with teams that shut down their options. It's made worse when they aren't with kids taught the same thing, though, since the options don't work if the your teammates aren't looking for them. That isn't really a knock on TFA, per se. Many, if not most, of the latter group of kids might never have had the ability to come up with the four tactical options if left to other coaching so it's not like they were really made worse for it. And those kids who can build upon that initial foundation may have greatly accelerated their development by getting there a lot faster. The bottom line, however, is other teams eventually catch up because (1) there are more fully-funded options or fewer teams and therefore less talent dispersion, and (2) because the advantage in tactical acumen is reduced as other kids get more mature and understand the game better.
