1. Community doesn't scale well.
Reddit is a thimbleful of awesome floating in a bucket of shit. As I grow older, the best communities and sources online are small. I love watching youtube videos with less than a thousand views. My favorite sites and communities online I share selectively. They are so easily ruined. The magic is lost so easily (and by people who genuinely enthusiastic about things but, aren't in the same mindset as the people already there).
2. The smart thing financially would have been to let the community die but, he didn't and paid the price
Maybe it's just the internet changing but, he arguably should have just let it die (or rather change into what Reddit eventually became). Metafilter, SomethingAweful, 4Chan and Reddit all suffer from the reality of very few people creating and the vast majority consuming.