You do realize this is Microsoft we're talking about here? Not merely a couple dudes in their bedroom doing this in their spare time? I guarantee you that a non-zero percentage of the code in VSCode was paid for.
Then they can pay those developers to sandbox vscode extensions at the very least. I like using vscode sometimes but I'm sure as shit not going to use it if my work bans installing extensions due to security risks.
> You do realize this is Microsoft we're talking about here?
Fiscal responsibility: required
> Not merely a couple dudes in their bedroom doing this in their spare time?
Fiscal responsibility: optional
I would also point out, the malware-infested extension we are talking about presents more as the “two guys in a bedroom” model (though possibly a state-sponsored actor).