Industry Growth not Necessarily Industry Profits

In a Farewell to Alms, Gregory Clark's fascinating new account of the Industrial Revolution in England, he notes that profitability does not necessarily follow productivity.

Productivity growth in cotton textiles in England from 1770 to 1870, for example, far exceeded that in any other industry. But the competitive nature of the industry, and the inability of the patent system to protect most technological advances, kept profits low....New entrants abounded. By 1900 Britain had about two thousand firms in the industry. Firms learned improved techniques from innovative competitors by hiring away their skilled workers.
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The greatest of the Industrial Revolution cotton magnates, Richard Arkwright, is estimated to have left 0.5 million pounds when he died in 1792...This is less wealth than Josiah Wedgwood, who left 0.6 million pounds in 1795, even though Wedgewood operated in a sector, pottery, which had seen far less technological progress and was still largely dependent on manual labor even in the late nineteenth century

That the most productive industry, in the most productive country, could not reap the profits to the owners, highlights the merely predicting the success of an industry is different than predicting the stock returns in that sector.

While the book is truly fascinating and profound, it is kind of depressing. He argues that England became superproductive because the rich were outbreeding the poor and so after several centuries, the downward mobility of the rich pushed their genes and/or ethics across the country, and so productivity grew out of the masses of bourgeois virtues endemic to the British 'middle class', which is not a description of someone with a job (today's definition), but rather a description of a person's actions and morals. "Thrift, prudence, negotiation and hard work [became] values for communities that... [had been] spendthrift, impulsive, violent and leisure loving." (p.166) In contrast, today, the poor out breed the rich, music glorifies thugs, and popular culture does not exactly encourage thrift, prudence, and hard work. In a couple of centuries, Americans might be looking at our skyscrapers the way Egyptians looked at the pyramids in classical times.