How Unprofitable Companies Stay In Business

In partnership with

There’s a reason 400,000 professionals read this daily.

Join The AI Report, trusted by 400,000+ professionals at Google, Microsoft, and OpenAI. Get daily insights, tools, and strategies to master practical AI skills that drive results.

Sign up now for free and work smarter, not harder.

The collapse came quietly for Yellow Corporation, a trucking giant once commanding a workforce of 30,000. For over a decade, it clung to life—not by thriving, but by borrowing. When growth stalled, the government stepped in with a $700 million bailout. It wasn’t enough. Yellow filed for bankruptcy, repaid just ₹230 of the principal, and left behind an expensive lesson for the economy.

This story isn’t unique. It's part of a growing phenomenon: zombie firms. These companies survive not because they create value but because cheap loans and bailouts allow them to shamble along, consuming resources better spent elsewhere.

Think about it. In a functioning system, the strong thrive, the weak fall, and resources flow to their best use. But zombies break this cycle.

Picture a forest fire. It's brutal but necessary, clearing deadwood so that new growth can emerge. The era of zero-interest rates—where money was cheap and risk was easy—stopped the fire. It let struggling firms stay alive when they should’ve made room for fresh, vibrant growth.

But now, the tide is shifting. Interest rates have spiked. The cost of borrowing has surged. Weak businesses can no longer survive by rolling over their debts. The forest fire has begun.

Some argue this is cruel. After all, each collapse means jobs lost and dreams deferred. But the other side of this coin is renewal. Economists call it "creative destruction." The old and unviable must give way so that innovation and efficiency can flourish.

This isn’t just an economic story; it’s a life principle. Look at your own pursuits. How often do you hold on to things—relationships, projects, or ideas—that have no future? Sometimes, we keep them alive out of fear, sunk costs, or sheer inertia. We delay the inevitable, hoping circumstances will change.

But the lesson of the zombies is clear: what isn’t viable must be allowed to die. Only then can you make space for something new.

Japan’s lost decade offers a cautionary tale. Their reluctance to let zombie firms fail in the 1990s turned a temporary problem into a generation-long stagnation. The U.S. faces a similar choice today: cling to the past or embrace the future.

As investors, entrepreneurs, or individuals, we face the same question daily. Where are we propping up zombies in our lives, and what would happen if we let them go?

If the Federal Reserve’s swift rate hikes teach us anything, it’s this: life is about evolution. Growth happens when you’re brave enough to let go of what no longer serves you.

Like a forest fire, it’s painful. But it’s also necessary. And, in the end, it’s worth it.