The Economy’s Scoreboard Is Tilting Toward Owners, Not Workers

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Think of the economy like a pie split between two claimants: labor (wages and benefits) and capital (profits and returns to owners). Over the last four decades, that split has shifted.

• Labor’s share has drifted down meaningfully from the early 1980s to today.

• Corporate profits’ share has climbed, and markets have put an even richer valuation on those profits.

• The result is an economy where wealth effects matter more, because stock gains can drive spending for the households that own most assets.

The IBM vs Nvidia comparison captures the mood perfectly. You can build something far more valuable and profitable with a fraction of the workforce. That is not a morality play. It is a business model evolution: software, algorithms, and networks scale fast, and automation keeps the payroll from scaling with it.

There are three reasons this matters for investors:

1) Wealth swings will matter more for the real economy.
When household stock wealth is huge relative to income, market pullbacks can hit spending faster than a mild labor slowdown would. Upside markets can also keep consumption alive even when hiring is sluggish.

2) The winners are the companies that monetize scale.
Businesses with high operating leverage can grow earnings faster than costs. AI can increase that leverage by lowering marginal labor needs for a lot of white-collar tasks.

3) The fight shifts from jobs to margins.
If labor’s share compresses, margins can stay structurally elevated in certain sectors. That pushes the market toward durable cash flows, pricing power, and companies that sit in the flow of capital allocation.

This is also why the disconnect in sentiment persists. A strong stock market is real economic fuel, but it mostly fuels the people who already have financial assets. Meanwhile, wage gains that merely keep pace with inflation do not feel like winning, even if the headline economy looks fine.

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Actionable Stuff

• Own the capital stack. If more GDP is flowing to profits and asset values, the cleanest exposure is through asset managers and capital markets platforms.

• Favor operating leverage. Businesses that can grow without adding people tend to win in this regime.

• Watch labor data through a different lens. The question is less about unemployment spiking and more about wage pressure, productivity, and margin durability.

• Avoid companies that need headcount growth to grow revenue. Those models get squeezed when automation improves and budgets tighten.

• Expect policy noise. As the labor share falls, politics gets louder. That can add volatility without changing the long-run trend.

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Bottom Line

The economy is increasingly rewarding scale, ownership, and operating leverage. That can leave workers feeling stuck even when markets look great, and it can make market swings matter more for spending than they used to. The investing angle is straightforward: lean into the platforms that compound capital, the market infrastructure that monetizes activity, and the productivity stack that helps businesses grow with fewer people.