Lithium-based batteries suffer chemical degradation of their electrodes related to time as well as charge cycles. Even an unused lithium-ion battery can die before it's ever installed in a product. The electrode damage is what causes the capacity to decline.
For the record, lead-acid batteries can suffer similar degradation due to sulphur build-up on their internal plates, but regular use keeps this at bay and a well-maintained battery will just keep working. Part of the problem is that it's nearly impossible to maintain modern batteries as they're all sealed by design.
Smartphone battery degradation is indeed a consequence of design choices, but I think those choices are reasonable. I prefer battery power and processor power now over long term battery life, as long as the battery is replaceable.
Many folks (most in the last couple of years?) are firmly entrenched in the Apple ecosystem. Wanting a nicer camera and nicer screen, while not having to worry about migrating data and apps, forces the 'lighter/thinner' option on people. People moving from an iphone 5s to a 7 aren't necessarily "voting" for a thinner phone. They are more likely "voting" for a better camera or more storage, but are forced in to 'thinner' as a byproduct.
I've never met anyone in the last 5 years who's upgraded to a new phone based on their current device being 'too thick'. Camera, storage, speed and screen size are factors; thickness has never been a motivating factor I've heard from people.
(And to preempt the typical responses to this: I know battery cases exist, but they're a substantially inferior solution.)
If you had both choices before you in the store, who wouldn't start to wonder if they'd regret the thinner/lower capacity choice?
Imagine a "Black Edition" of the iPhone that's thicker, has a headphone jack and an integral rubberized case. The aesthetic would be similar to military style watches.
Imagine a thicker MacBook Pro that doesn't require dongles. Don't announce them initially but show it in some hacker movies. Make them special order initially. I can dream...