Steemit is mathematically designed to collapse in on itself (yes, I've read the whitepaper).
The white paper is out of date. The business (economic) model has been changed.
As for the rest of what you said, I'd only ask why that same logic hasn't caused the demise of every social media ever developed, and, if not, why not? (Then you'd probably be on to why Steemit just might not only survive, but also thrive.)
I think you are right. I read about the hardfork 19 they made and it changed the business model totally. there is no more inflation of 90% as there was before. so most of the stuff now makes sense on steemit