Why does mining profitability tend towards zero?

This is a loaded question, as it assumes that profitability will tend towards 0.

However, for any given piece of mining hardware it’s almost certainly a fair assumption for the foreseeable future that it’s profitability will tend towards zero. This is because, from an overall perspective, as new processing hardware is developed (improving both efficiency and processing power), the cost per hash of mining decreases.

While this holds true, there will always be a point in time when the cost of operating a given graphics card (or other processor), with all ownership costs included, exceeds the cost of purchasing new hardware.

The most important issue for miners purchasing new hardware is whether the break even point can be reached before the hardware becomes essentially obsolete (because the costs exceed the revenue). Predicting this currently involves taking a gamble on what the future price of bitcoins will be.

All this means that the profitability of mining doesn’t necessarily approach zero, as long as you continue to optimise your mining equipment to maximise efficiency.