[chubs]

I don't understand: Who's lending the $2B in situations like this? Wouldn't they be worried that the above situation (company gutted, then going down the drain) is going to play out and they won't get their $2B back? Or is that the root problem with this whole YC submission: banks are being hit by defaults because of this exact problem?

[stuartjohnson12]

It's from the rapid exploitation of an asset. If I have a cow, I can milk the cow or kill the cow. If a cow costs $1, maybe I can get $5 worth of milk over the cow's lifespan, or I can kill the cow immediately and get $2 of meat. The man with $100 who buys all the cows in town and kills all of them doubles his money in a short timespan, but now there's a shortage of both meat and milk next season.

[iamflimflam1]

That is the exact problem. The people who put up the $2B thought they were safe - after all they were putting up money to buy a successful profitable business.

Problem is they didn’t really understand the business and trusted the PE guys to keep running it well…