What is the physical reason for a 401(k) plan or investments to always increase in the long term?

They don't always, but certainly no-one would invest in them if they didn't expect them to go up.

Generally, the economy is always expanding due to relentless increases in efficiency and inflation. Investments tend to follow, but not always, and the economy can retract for extended periods of time.

In the long run, we're all dead. It makes more sense to focus on specific objectives over specific time periods.

401K plans and investments do not always increase in the long term. Some go up, and some go down.

Compounding investment. For example, if you invest $100 today for a year at 4%, in a year you'll have $104. Next year, if you put that $104 in again at 4%, you'll end up with $108.16. In year 3 you'll have $112.49.

If you don't take compounding into account, you would only make $4 per year.

It doesn't have too, but inflation makes prices look cheaper and DRIPs can reduce the amount of stocks in the system for years.

A stock priced at $18 in 1960 might look expensive, but in 2003 that stock would look cheap. People outside the 401K would be tempted to by that stock till it hit $30 to adjust for current prices.

A DRIP is where you take the dividend money to buy more shares. Since these shares are stuck in the 401K for sometimes decades, the fewer shares in the system means a greater chance that buyers outside the 401k will have to pay more if they want those shares (a case of supply and demand).

Pure statistics. Large-cap stocks return 12% on average with a 20% standard deviaiton.