Sancho hasn't proven anything yet, so I'm not sure if you can use him as an example.
It is a problem that our academy hasn't produced many regular first team players in a decade. Our last graduate who got regular first team appearances was Dedryck Boyata under Mancini, and he was hideous. You could argue that Kelechi Iheanacho was an "academy graduate" of ours too, but you'd be stretching the rules a little. But I'd put our problems down to those players being vastly overrated by our fanbase while in the academy and turning out not to be good enough - maybe they lacked talent, maybe they weren't coached well enough, maybe they weren't given chances, maybe it's all three.
But you said it yourself, "If you're not [talented enough], you are a bust anyway." The amount of young players we've been promised at City since that Youth Cup-winning side in 2008 that have ultimately failed to deliver is through the roof. Of the twenty-five academy players who've made at least one appearance for our first team since then but are no longer attached to the club, only nine of them play in the the top five European leagues, and only two of them make regular appearances for "big clubs" (Denis Suarez, Marcos Lopes).
With those odds, it'd be better for Foden to stick around at City and try his hand at getting some game time here instead of taking a backwards step that has just as much chance of damaging his career prospects.