Welcome to the latest episode of “How to Lose Billions Without Really Trying,” starring Rec Room—the platform that allegedly hosted 150 million users but apparently couldn’t convince a single one of them to cough up enough pocket change to keep the lights on. After being valued at a staggering $3.5 billion, the company is folding on June 1st, citing the classic corporate exit line: “the path to profitability has gotten tough.”

Let’s dissect this masterclass in economic fiction, shall we?

First, let’s talk about that “150 million users” claim. In the world of tech startups, a “user” is a term used as loosely as “organic” on a bag of Cheetos. Most of these 150 million were likely eight-year-olds who downloaded the app, realized it wasn’t Roblox, screamed into a headset for five minutes, and then never logged in again. Having 150 million users and failing to make a profit isn’t a “headwind”—it’s a statistical miracle of mismanagement. If you can’t monetize a population the size of Russia, the problem isn’t the market; the problem is that you were running a digital charity masquerading as a unicorn.

Then there’s the $3.5 billion valuation. It turns out that venture capital valuations are less like actual math and more like a fever dream had by someone who spent too much time in a Mark Zuckerberg keynote. Rec Room was “valued” at billions based on the assumption that “eventually” they would figure out how to sell digital hats to children. Newsflash: a $3.5 billion valuation for a company with “overwhelming costs” and no revenue model is just a fancy way of saying a group of investors got caught in a game of “Pass the Potato” where the potato was a burning bag of cash.

The company also pointed to a “shift in the VR market” as a reason for their demise. This is a delightful piece of revisionist history. The VR market didn’t “shift”; it simply remained exactly what it has always been: a niche hobby for enthusiasts and people who enjoy motion sickness. To blame the market for your downfall is like a boat manufacturer blaming the ocean for being wet. Rec Room wasn’t a victim of the “metaverse” cooling down; it was a victim of the realization that the “metaverse” was mostly just a place for corporate HR departments to hold awkward meetings and for kids to troll each other in low-resolution 3D environments.

Finally, we have the “broader headwinds in gaming” excuse. This is the industry-standard phrase for “we didn’t realize that making a game people actually want to play is harder than drawing a pitch deck.” While Rec Room struggled to find its footing, the actual gaming industry continued to see massive successes from companies that—wait for it—actually sold products people wanted to buy.

Rec Room’s legacy won’t be as a “Roblox competitor.” It will be as a cautionary tale for the “growth at all costs” era of Silicon Valley. You can’t pay your server bills with “active users” or “potential,” and you certainly can’t build a sustainable business on the back of VC hype and VR goggles that most people use as expensive paperweights. Goodbye, Rec Room. We’ll miss the chaos, but we won’t miss the delusional math.