Is "K-shaped differentiation" the destiny of the "technological revolution"?

```

Debate is intensifying over whether the current AI boom is a “long-term dividend” or a “speculative bubble”. On June 25, the macro team led by Li Chao, Chief Analyst at Zheshang Securities, released an in-depth report, reviewing five complete technological waves over the past two centuries in an attempt to answer a fundamental question: Is K-shaped divergence the “destiny” of technological revolutions?

Zheshang Securities, using the theoretical framework from Carlota Perez’s “Technological Revolutions and Financial Capital,” divides the industrial revolutions since 1771 into five technological cycles: Spinning Jenny (1771), Steam and Railways (1829), Steel and Electricity (1875), Petroleum and Automobiles (1908), Information and Internet (1971). Each cycle lasts roughly 50 years and can be segmented into Installation Period (explosion and frenzy), Turning Point (bubble burst), and Deployment Period (synergistic golden age).

Research finds that in the installation period of every technological revolution, K-shaped divergence inevitably appears—industries, capital markets, and household incomes split simultaneously, and will not converge before purging the bubble.

The dividend of technology is always first intercepted by capital

The first spinning jenny revolution (from 1771) provides the clearest example.

During the outbreak of the revolution (1770—1790), the construction, pig iron, and coal industries had the fastest compound growth rates: 3.33%, 2.98%, and 2.38%, while traditional food processing was just 0.59% and traditional wool textiles only 0.77%. By 1821, metal and mineral industrial output had surged to over 8 times that of 1771, while "other industries" (traditional handicrafts) almost stagnated.

The divergence in income distribution was even more striking. According to the “Revised Table of English Social Stratification”, from 1759 to 1846, the emerging bourgeoisie saw their average income grow from 14.74 times the survival income to 32.43 times; while the actual income of workers slightly declined from 4.39 times in 1798 to 4.37 times by 1846.

While average wealth in society grew, the absolute income of bottom-tier workers remained flat. The wealth created by technological progress was almost fully intercepted by capital.

Zheshang Securities defines this phenomenon as “Engel’s total stagnation”—a typical feature of the installation period of technological revolutions. The data supports this: in the decade before the explosion, workers’ real income purchasing power grew just 0.48% annually, and remained below 1% for the next 50 years.

The labor-capital distribution structure reversed at the same time. In the late 18th century, labor compensation accounted for about 60% of national income; by the mid-19th century, this proportion had fallen to nearly 50%, while the share of capital profits doubled from about 20% to over 40%.

Each bubble cycle features a divergence in new and old industry stock prices

The K-shaped split in capital markets is replayed throughout the five technological cycles, with similar patterns: during the installation period, emerging industry stocks dramatically outperform, and after the bubble burst, the divergence narrows or even reverses.

Railway era (1829—1873): From 1843 to 1845, Britain’s railway stock and non-rail stock indices (standardized to 1000 in 1843) quickly diverged. By the speculative peak in August 1845, the railway stock index reached 1985, non-rail only 1152. When the 1845 Irish potato famine sparked inflation expectations, the Bank of England raised rates from 2.5% to 3.5%, financing costs shot up, and railway stocks collapsed. By the end of 1850, railway stocks closed at 857, while non-rail stocks rose to 1042—the K-shaped trend completely reversed.

Steel/Electricity era (1875—1918): Using Cowles Economic Research data, Zheshang Securities noted that after 1895, US stock sectors clearly diverged. Mining, electric, and utilities saw top gains; steel-related industries saw installation-period increases mostly over 100%, far above the market average.

Automobile/Petroleum era (1920s): From 1919 to 1929, the S&P composite index rose about 217%, but electrical appliances shot up 540%, autos/trucks 177%; while traditional textiles gained only 26%, public transportation even dropped 21%.

Internet era (1995—2000): The Nasdaq surged from 744 in early 1995 to 5049 at its 2000 peak, a cumulative rise of 629%; the Dow only gained 285% over the same period. Zheshang Securities points out that the Nasdaq represents new-paradigm tech, the Dow the traditional blue chips: “Capital was continuously siphoned to Internet tracks, with low enthusiasm for traditional allocation”—a classic “rising and stagnating” K-shaped divergence.

When inequality peaks, social conflict inevitably erupts

K-shaped divergence does not just appear in the data; it repeatedly has intensified social conflicts in history.

In the spinng jenny era, bottom-tier workers at first used legal means to defend their rights: in 1778 they filed petitions to Parliament calling for a minimum wage; in 1807, 130,000 signed to restrict machine use. After Parliament rejected the bill in 1808, legal channels were blocked. Then, as the Napoleonic Wars cut textile exports, factory owners laid off workers en masse, and poor harvests in 1810-1811 caused famine, bottom workers faced unemployment, inflation, and technological displacement all at once, culminating in the large-scale, organized Luddite movement in 1811.

In the steam/railway era, Oxford economic history research (Allen 2005) records: “From 1800 to 1840 British per capita GDP grew 37%, but real wages stagnated, profit rates doubled, the profit portion of national income expanded, the shares for labor and land decreased.” This period is known as the Hungry Forties. In 1844 Marx began writing Das Kapital, systematically critiquing the relative impoverishment of the working class under capital accumulation—defined by Zheshang Securities as “the earliest theoretical response to K-shaped divergence.”

In the automobile/oil era, wealth inequality reached historic highs on the eve of the 1929 Great Depression. Zheshang Securities cites WID data: In 1920, America’s top 1% held 37% of national net wealth; by 1929, that rose to 48.7%—nearly half the nation’s net wealth in the hands of the richest 1%. At the same time, the middle 40% share fell from 20.3% to 12.6%, unionization fell from 17.5% to 10.1%, and bargaining power for the lower levels was severely weakened. This structural imbalance was not resolved until after WWII in 1949.

The same occurred in the Internet era. Zheshang Securities cites Fed data: from 1990 to 2000, the wealth share of the richest 1% of American households rose from 22.8% to 26.8%; the bottom 50% share fell from 3.6% to 3.2%, with net wealth actually declining. The ratio of the top 1% to the bottom 50% rose from 6.5 times to 8.4 times.

When does divergence narrow? Wait for the bubble to burst and the system to be rebuilt

A review of five historic waves shows that closing the K-shaped gap has one common prerequisite: after the bubble clears and the “turning point” arrives, the system is restructured, production capital replaces financial capital as the dominant force, and technology then truly enters the inclusive “deployment period.”

Taking the internet as an example, after the 2000 Nasdaq crash, the “turning point” arrived: scores of unprofitable “.com” companies went under, WorldCom entered bankruptcy restructuring, and Cisco stock dropped 80%. But this was the necessary path for the technological paradigm to shift from financial capital-driven frenzy to production capital-led sustainable growth.

Zheshang Securities’ logic is clear: In the installation period of a technological revolution, financial capital dominates, the scissors between new and old industries widens, wealth is concentrated at the capital end, bottom incomes stagnate or fall, and social tensions accumulate; only after the bubble bursts and the system is restructured does the divergence gradually narrow, and the benefits of technology begin to spread to a wider group.

This pattern has repeated five times in over two centuries, without exception.

Risk Warning and DisclaimerThe market has risks, investment needs to be cautious. This article does not constitute personal investment advice, nor does it take into account an individual user's specific investment objectives, financial situation, or needs. Users should consider whether any opinion, view, or conclusion expressed in this article is suitable to their particular situation. Those who invest accordingly assume their own risk. ```