Why can ordinary people never outrun capital?
If we use one sentence to sum up the underlying changes in the global wealth pattern over the past four decades, it is this: Labor creates value, but capital takes the vast majority of the increments.
IMF data shows that in 1990, the share of global labor compensation in GDP was about 54%, and the share of capital income was about 34%; by 2025, the share of global labor compensation has dropped to 41%, while the share of capital income has climbed to 52%.
In just 35 years, the weight of labor in distribution has fallen by 13 percentage points, corresponding to a trillion-dollar level wealth transfer.
The tangible result of this set of data is the reality we are seeing now:
The market value of Nvidia alone has exceeded 5.7 trillion US dollars, surpassing the full-year GDP of Germany;
The total market value of the seven tech giants in the US stock market has exceeded 24 trillion US dollars, surpassing the sum of the GDP of all countries in the world except China and the United States.
It has only been three and a half years since ChatGPT ignited the AI wave at the end of 2022, and the appreciation rate of capital has far exceeded any period in human history.
However, most ordinary people still remain in the linear cognition of "hard work leads to wealth", firmly believing that working hard, getting promotions and raises, and saving money is the correct path in life.
But few people deeply think about an essential question : Why are you working harder and harder, but your income growth is getting slower and slower, while the wealth gap is widening?
The answer may seem very harsh.
01
Essentially, labor and capital are two completely unequal wealth growth engines.
Farming in the agricultural era, doing handicrafts in the handicraft era, working in factories in the industrial era, and going to work in the information era seem to have iterative forms, but the essence has never changed: exchanging personal time and physical strength for one-time remuneration.
This model inherently has three unbreakable underlying constraints that determine that labor income can only grow linearly forever.
Labor is an indivisible and non-replicable factor of production. Your 8 hours a day can only be sold to one employer, doing one job and getting one income.
Even if you double your efficiency, there are only 24 hours a day. The physical boundary of time is the absolute ceiling of labor income.
But capital is completely different.
A sum of capital can be invested in dozens of enterprises and hundreds of projects at the same time, generating multiple incomes simultaneously; a share of equity can be held by millions of people, sharing the dividends of enterprise growth. Then they continue to circulate, accumulate and grow in successive investments.
Becker, the Nobel laureate in economics, clearly pointed out in *Human Capital Theory*: The marginal return of human capital diminishes much faster than that of physical capital. If you work deeply in a position for 10 years, you may hit the bottleneck after your salary rises 2 to 3 times; but if a sum of capital is invested in a high-growth industry, it can rise dozens or even hundreds of times in 10 years.
This is the essential difference between linear growth and exponential growth.
The value of labor is attached to people's skills and physical strength, both of which are continuously depreciating.
In the industrial age, a craft could support you for a lifetime;
In the information age, the half-life of a skill has been shortened to 5-10 years;
In the AI era, the half-life of skills for standardized positions such as basic programming, data processing, customer service, and accounting has been shortened to 2-3 years.
The skills you spend three years mastering may face technological iteration as soon as you become proficient;
The workplace experience you get in exchange for your youth may become worthless once industrial upgrading occurs.
But capital does not age and does not become outdated. As long as it is attached to the right factors of production, it can continue to circulate and appreciate.
In addition, assets can be mortgaged for loans, equity can be pledged for financing, and even future cash flow can be securitized.
But labor cannot be mortgaged. You cannot use your salary for the next 10 years to leverage large amounts of capital, and banks will not give you low-interest loans just because you are "diligent and hardworking".
This means that ordinary people can only climb slowly with the meager principal accumulated through labor, while capital holders can use leverage to amplify returns.
In the cycle of rising housing prices, property owners can mortgage their properties to buy more houses and realize asset fission;
While people without property can only save for a down payment with their salaries, and the more they save, the more they cannot keep up with the rise in housing prices. This is the wealth differentiation brought about by leverage.
02
Many people think that "not investing and keeping money in the bank" is the safest choice, which is the most profound misunderstanding of the monetary system.
Inflation never devalues all money evenly, but transmits layer by layer along the path of "financial system - asset side - industry side - resident income", and the people who are further behind are harvested more severely.
This is the famous "Cantillon Effect" in economics: Newly added money will not be distributed to everyone at the same time and in equal amounts, but first flow into financial institutions and large enterprises closest to the central bank, and then gradually penetrate downward.
People who get the money first can buy assets before prices rise, pushing up asset prices;
By the time the money is transmitted to ordinary salaried people, prices and asset prices have already risen, and purchasing power has shrunk significantly.
This is the reason why China's broad money M2 has increased by more than 40 times in the past 30 years, but the prices of consumer goods such as pork and rice that ordinary people feel most deeply have only increased by 3 to 5 times.
In fact, what has skyrocketed are the prices of real estate, equity, core assets and other assets, because the vast majority of the overissued money has settled in the asset field, forming "asset-based inflation".
This kind of inflation hurts the salaried class doubly:
Income side: Wage growth always lags behind the rise of asset prices. The rate of your salary increase can never catch up with the appreciation rate of housing prices in core cities and high-quality equity;
Savings side: Cash purchasing power is continuously diluted. Over the past 20 years, the real money growth rate after excluding GDP growth has remained at 2%-3% all year round.
This means that if you have 1 million yuan in cash in the bank, your actual purchasing power will evaporate by 20,000 to 30,000 yuan every year, and shrink by nearly 30% in 10 years.
The more diligently you save money, the more money you put at the very end of the money transmission, and passively accept layer upon layer of dilution.
This is not because you are not thrifty enough, but the rules of the game themselves do not favor cash holders.
03
Many people marvel at "Nvidia's market value exceeds Germany's GDP", but few people think about the underlying logic behind it: Why did the giants of the industrial era such as General Motors and Ford never reach a market value at the national level, while tech companies in the digital age can easily achieve this?
The answer is "the qualitative change of the production mode brings an exponential jump in the rate of return on capital".
Enterprises in the industrial era are strictly limited by physical boundaries. Producing a car requires steel, factories and workers. For every additional car produced, the marginal cost increases by one unit. At the same time, the market is limited by region, and expanding to a country requires building a factory. Therefore, the growth of traditional enterprises is linear, and the return on capital has a clear ceiling.
While tech enterprises in the digital age follow the rule of "marginal cost tends to zero":
Nvidia develops an AI chip, the R&D cost is fixed, the marginal cost of selling one more chip is almost zero, the more you sell, the higher the profit margin;
After Microsoft's Office software and Google's search engine are developed, the cost of serving 100 million users and 1 billion users is almost the same;
After the AI large model is trained, the marginal cost of each call is negligible, but it can continuously generate cash flow.
Coupled with the network effect, the more users there are, the higher the value of the product, attracting more users and forming a positive cycle.
The end result is: Leading enterprises can use limited capital to leverage the global market and obtain near-monopoly excess profits. This is the underlying logic why the market value of a company can surpass the GDP of a country.
The essence of the capital market is to discount the cash flow of enterprises for the next few decades to the present. When the growth of enterprises changes from linear to exponential, the appreciation of capital naturally breaks through all the boundaries of traditional cognition.
For ordinary people, this means one thing: you don't need to start your own business, you don't need to become a technical expert. As long as you become a shareholder of these leading enterprises through equity investment, you can share the dividends of exponential growth.
Although this is inevitably accompanied by the risk of asset loss, it is the only non-linear channel left by the modern economy for ordinary people to cross social classes.
The core reason for those who reject investment is "high volatility and high risk". But this is the most common misunderstanding of risk - equating volatility with risk.
In the field of professional investment, risk is defined as "permanent loss", that is, the principal can never be recovered; while the fluctuation of price up and down is called "volatility", which is not a risk, but the consideration that must be paid to obtain excess returns.
There is a basic law in the financial field called "Equity Risk Premium":
In the long run, why is the rate of return of stocks higher than that of bonds and cash? Because stocks are volatile, and investors bear the uncertainty of volatility, so the market will give you extra returns as compensation. The higher the volatility, the higher the long-term potential return.
Many people only see that Nvidia has risen 237 times in 10 years, but ignore that it has experienced 8 retracements of more than 30% in these 10 years, and the maximum drop has exceeded 60%;
Many people envy that Apple has risen 60 times, but they don't know that its stock price was cut in half during the 2008 financial crisis, and it retraced nearly 40% during the 2018 trade war.
Without these fluctuations, there would be no long-term excess returns.
To put it bluntly, volatility is a filter that screens investors, blocking those who are impatient, and allowing those who stay to share the dividends of the times.
What is more interesting is the "time diversification effect", that is, as the holding time lengthens, the probability of loss of stocks drops sharply. Data from the US stock market over the past 100 years shows:
Holding for 1 year, the probability of loss is about 30%;
Holding for 5 years, the probability of loss drops to 10%;
Holding for 10 years, the probability of loss is less than 2%;
Holding for 20 years, there has never been a loss.
On the contrary, cash, which most people consider "safe", has the greatest risk in the long run. Because it has no volatility, the purchasing power will depreciate continuously and steadily, which is a definite and irreversible loss.
Many people choose to take the risk of long-term purchasing power shrinkage in order to avoid the risk of short-term volatility, which is putting the cart before the horse.
04
If the past technological revolutions only improved the efficiency of labor, the AI revolution is reconstructing the weight of factors of production - it is directly replacing labor with capital (computing power, algorithms, data).
There is a concept in economics called "skill-biased technological progress": Technological progress will increase the rate of return of high-skilled labor, and at the same time lower the remuneration of low-skilled labor.
The special feature of AI is that it not only replaces low-skilled labor, but also gradually replaces medium-skilled and even some high-skilled standardized jobs.
McKinsey's forecast shows that by 2030, about 14%-30% of jobs worldwide will be automatically replaced by AI, among which the replacement rate of basic programming, financial accounting, content review, customer service and other positions will exceed 50%.
This means that more and more ordinary workers will lose the ability to negotiate with capital.
On the other side, the marginal output of capital is further improved.
In the past, it was "capital + labor" that created value, and now it is "capital + AI + a small amount of high-end manpower" that creates value.
The lower the proportion of labor in production, the weaker the right to speak in distribution, and the more increments capital takes away.
We are witnessing a historical node: The dependence of wealth creation on labor has dropped to the lowest point in history, and the appreciation rate of capital has reached the highest point in history.
In the past, people said "work until you die", but now the more severe reality is: many people may find their labor has lost market value before reaching retirement age.
So how can ordinary people break the situation?
After talking so much, I don't want you to quit your job to trade stocks, let alone advocate getting rich by speculation.
The real awakening is to jump out of the identity of "single labor supplier" and become an owner of both "labor + capital" factors.
For ordinary people, the most realistic path is not to go all in the stock market, but to complete the transformation of cognition and identity step by step:
1. Accumulate the first bucket of gold through labor: Working hard is not useless, it is the most reliable way for you to get initial capital. But you need to clearly know that labor income is "cash flow", not "wealth", and its function is to accumulate investable principal for you.
2. Establish a capital cognitive framework: Don't indulge in short-term chasing ups and downs, learn the basic logic of macroeconomics, the underlying laws of industry development, and the basic methods of enterprise valuation. The capital market makes money from cognition, not luck.
3. Anchor the main line of the times to allocate assets: Every wealth wave has a core track, the past was real estate, and now it is AI, computing power, and new energy. Allocate funds to high-quality assets representing the future, let the trend of the times help you make money, not rely on your own physical strength.
4. Accept volatility and use time to exchange for compound interest: Don't pursue buying at the lowest point and selling at the highest point, accept that short-term retracement is part of investment. The core of compound interest is not how high the rate of return is, but how long the time lasts.
05
Conclusion
The real maturity of a person is to understand that the wealth distribution of this world is never based on labor intensity, but on the scarcity of factors of production.
In an era when labor is becoming less and less scarce, owning capital and assets that can generate cash flow is the core confidence to fight against depreciation and cross social classes.
You can still stick to the obsession of "hard work makes you rich", keep your salary and savings, and sink slowly in inflation and technological substitution; or you can choose to break the cognitive shackles, use part of your income and energy to build your own capital income channel.
Letting money work for you is essentially turning yourself from a "person who sells time" into a "person who owns factors of production".