Maybe an example would help.
Let's say you hard reset everyone's rating to 1200. Consider three players: player A is horrible and loses like crazy. Player B is average and wins about 50%. Player C is a pro and wins like crazy. After they each play 100 matches, they might have records and MMRs like this:
Player A: 20/80, 400 MMR (B5)
Player B: 50/50, 1200 MMR (S4)
Player C: 80/20, 2000 MMR (G1)
If you start everyone at "500", it'll look more like this:
Player A: 20/80, 0 MMR (B5)
Player B: 50/50, 500 MMR (B5)
Player C: 80/20, 1300 MMR (S3?)
You can't climb significantly in MMR unless you can win >50% of your matches. The players who are currently in mid-Silver will stay around whatever rank you start them in, because by definition they're average players.