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First, your premises are wrong. Each prototype Starship launch almost certainly doesn't cost $1 billion. Per SpaceX, the whole development program is expected not to exceed 10 billion dollars. Estimates of the production cost of the Raptor engine is about $250000 each, so round that up to 50 engines per flight, double and you're still at only about $25 million. The rest of the ship is made out of relatively inexpensive stainless steel coil sheet, and the thermal tiles are made in-house. $250 million would be a liberal estimate, and more conservative estimates are about $100 million per launch.
Second, there is no desire to just rake the cash in. As with Amazon, the goal of SpaceX is to rake in cash for the purpose of further development, so as to obtain a position that is not just nearly unassailable by competitors, but creates a completely new market. And of course, Musk, as the controlling owner of the company, has goals for the company that do require Starship, which is capable of orbiting more than 100 metric tons of payload per launch, such as establishing a continuous presence on Mars. This requires lots of bulk mass, which only Starship could possibly deliver. One reason it was selected for HLS despite the development work needed is because you'd be landing not just a small landing craft on every mission, but what amounts to an entire base.
SpaceX has been quite explicit that the goal with Starship is to completely cannibalize Falcon 9 launches, and to eventually discontinue Falcon 9 altogether, as they expect a fully reusable Starship launch cycle (even expending $1 million in propellant per launch) to cost less not just per kilogram but per launch than Falcon 9 which does requires a new upper stage for each launch. (Though I think Falcon 9 + Dragon will remain the preferred human launch system to LEO for longer, unless some kind of Starship transporter with more robust abort modes is developed.)
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