We study the behavior of a simple string bit model at finite temperature. We use thermal perturbation theory to analyze the high temperature regime. But at low temperatures we rely on the large $N$ limit of the dynamics, for which the exact energy spectrum is known. Since the lowest energy states at infinite $N$ are free closed strings, the $N=infty$ partition function diverges above a finite temperature $beta_H^{-1}$, the Hagedorn temperature. We argue that in these models at finite $N$, which then have a finite number of degrees of freedom, there can be neither an ultimate temperature nor any kind of phase transition. We discuss how the discontinuous behavior seen at infinite $N$ can be removed at finite $N$. In this resolution the fundamental string bit degrees of freedom become more active at temperatures near and above the Hagedorn temperature.
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