Earlier quoted context omitted.
Because the expected value of using AWS is greater than the expected value of self-hosting. It's not that nobody's ever heard of running on their own metal. Look back at what everyone did before AWS, and how fast they ran screaming away from it as soon as they could. Once you didn't have to do that any more, it's just so much better that the rare outages are worth it for the vast majority of startups. Medical devices…
Agree with your first point. On the second though, at some point, infrastructure like AWS are going to be more reliable than what many banks, medical device operators etc can provide themselves. asking them to stay on their own hardware is asking for that industry to remain slow, bespoke and expensive.
It is incredibly difficult for non-tech companies to hire quality software and infrastructure engineers - they usually pay less and the problems aren't as interesting.