> a naive way to think about pricing (though it's probably consistent with the way finance people think about it)

you don't understand finance, and why it has to work the way it does, hence your naive thinking :)

when a manufacturer sells a product to a distributor, the mfr ships the goods but they don't get paid right away, they get paid later. Invoices are marked "net 10" or "net 30" or "net 60", where the numbers refer to how many days the buyer gets to pay the bill after receipt of the goods. (length depends on your credit worthiness and potentially the goods in question, dairy for example is perishable)

And the same goes for the distributor selling those same goods to the retail merchants. (and, with credit cards, the same goes for the consumer buying the item)

but let's go back to the mfer above: they've sold the goods, but they haven't been paid... and they still need to manufacture more goods to have on hand for the next order that comes in, and they need to keep paying rent on the factory, and they can't just lay off all the workers till the money comes in and then rehire them, and they don't want to tell new customers to wait for their orders.

So the manufacturer has to buy more raw materials and keep the lines operating. So they go to the raw materials suppliers and say "hey send us more stuff, so we can manufacture more, we promise we'll pay you later" and the raw materials supplier said "you said that with the last order and you haven't paid it yet" and the manufacturer says "well we didn't get paid yet..."

so, as you can see, already there is debt ("financing") at every stage of the supply chain. Now consider that the manufacturer has introduced a product that's growing in popularity, and growth is the goal if you want to make more money and or spread your costs. In this instance the manufacturer is asking his suppliers for a double or triple order of supplies, because the retails and the distributor are clamoring to double or triple their orders over the previous orders... that they haven't paid for yet.

To smooth this process out, these different entities go to their banks and say "hey, I can sell triple my previous orders if I can just borrow some money short term, demand is so good that I can pay you interest". And the bank says "yes, borrow the money, it's the same interest rate, but borrowing triple at the same rate is triple the interest you have to pay, right?"

or the bank might say "that's waaaayyy too much money to borrow, look someplace else" and the manufacturer might instead be forced to sell stock on a stock exchange, giving partial ownership to investors in exchange for the cash they need for expansion.

This is why banks exist; this is why the stock market exists; and this is why it is not naive but incredibly sophisticated how finance works.

Most people on HN love to hate on MBAs, but this is just what they teach you in the first couple weeks of your first accounting class, a tiny piece of the curriculum.

For anybody who really wants to grok thinking this way, I'd highly recommend a book titled "The Goal" by Eliyahu Goldratt. It's written as a novel, it's a breezy and fun read with some deep ideas in it.

EDIT: addressing the complaint about something I susposedly left out: When you want to start a company, you need some seed money for a computer, a chair, a desk and a place to sit. If you are going to manufacture, you need equipment; if you are going to sell, you need space to store and display.

This entails money which you get from somebody else who will want interest, with higher interest for higher risk; or which you fund yourself from your savings but you were making money on your savings which you need to forego (cost of capital) so that's essentially the same thing. And when you are successful and expand, at some point you run out and need to go outside to finance anyway.

It has nothing to do with fixed percentages of profit on goods or services. Instead look only at the flow of money and what you are required to pay your financiers. You can tell your financiers "I'm willing to make less profit, so charge me less interest" but they will say back "you're making less profit? you just got riskier, we need to increase your interest rate"

if less profit is charged at any stage in the chain, that stage will have less money to reinvest in the next round of growth, and will need to borrow more. Sellers are not choosing their own profit margins, these numbers come from market bid-ask norms.