There's actually a new documentary just on this very subject, Lost Emulsion (2016). Here is a link to the trailer.
A short answer is that nobody thought that people would be interested in most movies decades after they were made. Nitrate film, that was used for 35mm films up until about 1950, was very flammable, and there were disastrous film lab fires many times. A lot of early film studios went out of business and nobody wanted to pay to preserve their films. And when the sound era came in, nobody thought that anybody would want to see silent and early-sound era films. Since storing highly flammable films was expensive, many companies destroyed their old films and negatives to save money. It took TV, small guage film and later home video to make people interested in classic film. (The same thing happened with classic TV episodes of the 1960s and 1970s, as studios reused video tape to save money, erasing the only copies of many TV episodes that were recorded on video tape.)