We’re now a few weeks into the new year. And the air is full of good hope, along with a sadly dour outlook. Because this year will be tough, if not tumultuous.

We have a bitter, vicious election cycle looming here at home; wars abroad; monetary, energy and trade mischief everywhere; and we should expect one surprise after another.

Looking ahead, we must stay nimble to preserve and grow wealth. More on that in a moment.

First, though, let’s discuss the newsworthy tale of that Alaska Airlines flight out of Portland earlier this month.

It Took a Lickin’

You probably saw the story about a brand-new aircraft, a Boeing 737-9 MAX delivered in November 2023, from which something called a plug ripped out of the fuselage.

The airplane was climbing to cruise altitude and a piece of the hull blew out at about 16,000 feet. Normally, an airliner cabin is pressurized to 8,000 feet. So in this case, per the laws of physics, the internal air rushed out.

Fortunately, the seats next to the blowout were unoccupied, and all passengers and aircrew were still strapped in and not walking about the cabin. Otherwise? Well, it’s a gruesome thought.

Still, a number of items were caught in the airflow and pulled out of the cabin, among them an iPhone that tumbled over three miles to the ground and was recovered a couple of days later.

It turns out that the iPhone was intact. The battery was half-charged. In fact, the device was logged into the Alaska Airlines baggage check app.

Recovered iPhone. Image courtesy of Sean Bates, the guy who found the device.

This was quite the drop test, eh? And to borrow from the old television tagline for the Timex wristwatch company, “It took a lickin’ and it’s still tickin’.”

No doubt, it helped that the iPhone landed in moist soil, which cushioned the impact. I suspect the result would be different if it had landed on a rock or a concrete road surface.

Then again, as one of my Paradigm colleagues noted in our internal comms network, it looks like iPhones are better made than Boeing 737s. Yes, and it makes you say, “Hmm…”

All kidding aside, nobody yet really knows what happened with the aircraft. Sure, a panel blew out, but it’s not for anyone on the outside to speculate until the investigators and engineers issue a detailed report.

Right now, the incident is under investigation by a long list of interested parties: the Federal Aviation Administration, National Transportation Safety Board, Boeing, Alaska Airlines, and a host of other players who manufacture parts and components of this particular airplane.

Absolutely, though, this event brings up a major issue that affects our economy and society. Because obviously, something went very wrong with that Boeing airplane. Chunks of fuselage are just not supposed to come loose and fall off.

The Growing Skills Deficit

With this, let’s segue into a broader issue, namely the decline in overall skills across society, let alone the collective understanding of what makes things work. It’s a growing problem that’s becoming more serious, and it can cost everyone a lot of money.

Look at it this way: we live in a complex world, a system of systems. And for most people, most of the time, in most circumstances, these systems are (to be charitable) not well understood.

For example, and to stick with the aviation theme, most people just go to the airport, pass through TSA, board their flight, go from here to there, land, and head off to the next destination. Aside from the annoying hustle and bustle of airports, you don’t think much about it, right?

But do you ever ponder how airports are designed and built? Or the TSA screening system? Or the airplanes and engines? Or the fuel that goes into them? Or the pilot training system? Or the air traffic control system? You get the idea.

No, not really. Most people just want to travel from point A to point B and not have the airline lose their bags. But when you take even a small look inside the big machine of airline travel, there’s an immensely complex system of systems behind everyday airline operations.

And every one of those systems, at every step along the way, requires all manner of unique skills by people who are part of the process.

Let’s bring this closer to home, literally. For example, where does electricity come from? Yeah, sure; it comes from the light switch, right?

Seriously, though, do most people know how a light switch works? Pretty much everyone touches a light switch every day. But who can take one out of the wall, tear it down and rebuild it?

Or to get more complicated, how about the wires from the light switch to the circuit panel in the basement? Same challenge: can you hook up a new line to your washing machine, let alone to that new electric vehicle you just bought? (Warning: unless you know what you’re doing with electricity, do not try this.)

Now, take this knowledge (or lack thereof) about electricity outside to the curb. How many people can explain how utility wires work? How about those transformers up on the poles? Trace it all back to the step-down substations, and thence to high-tension lines that go back to the power plant. And c’mon, who really knows how a power plant works?

I could list innumerable other examples, but you see what I mean, yes? And when you consider what you know versus what you don’t really know, it’s all rather humbling. There’s just so much out there, and a big whack of it makes up key parts of your life.

Still, don’t feel bad about not knowing everything about everything. Nobody is that smart. In this respect, we’re all in the same boat. 

The good news is that, in a big country with a large population, everybody knows something; enough to live, have a job, earn an income. And many people are highly skilled in their labors, whether it’s the power company workers who maintain the electric lines, or the plumber or brain surgeon, the tailor or the hairdresser, the airline pilot or the people who build Boeing jets.

The bad news, though, is that there seems to be a general lowering of collective knowledge and skill levels across society. You can see it in just the difficulty of finding a good electrician, plumber, carpenter or bricklayer in the trades. Or you see it in the difficulty of finding a good mechanic to fix your car.

When you go out and about, no doubt you see “Help Wanted” signs pretty much everywhere, from fast food places and clothing stores, to garages and manufacturing sites, you name it. The economy has jobs, but where are the workers?

If you dig into the trade press forums, you’ll see worker and skill shortages almost everywhere. It seems that everyone is looking for people at every level.

On my end, I’ve encountered people/skills shortages across the fields of geology, petroleum and mining engineering, mineral processing, metallurgy and more. I’ve spoken with corporate execs and university professors who lament the skinny pipelines of trained people coming out of schools and graduate programs into these areas.

For another example, not long ago I met with a group of currently serving U.S. Navy submarine officers who described critical labor and skills shortages in vital shipyards, both private and public. That is, the Navy has submarines that can’t sail due to lack of maintenance or repairs. The overall Navy and shipbuilding industrial complex simply lacks enough people to do the work at the super-high spec required.

It’s much the same thing in the booming tech industry. If you follow the sector, Microsoft to Nvidia, Tesla to Intel, you’ll read about frustrating shortages of people and skills, ranging from basic coders to ultra-specialized engineers who can build and operate plants that make integrated circuits, aka computer chips.

The point here is that business success is built upon a foundation of people, people and more people. And the distressing fact is that our economy lacks sufficient people — the ones with specific, necessary skills — at almost every level. (Hint: it begins with failures within the basic education system, another discussion entirely.)

Investing in People

The investment takeaway from this is clear. You should go out of your way to become aware of the technical capabilities within any company when you decide to take the plunge and buy shares.

Sure, you may have read a glowing report about Company A, a great writeup that makes you want to stand up and cheer. Or perhaps the numbers look great on the stock charts. And maybe the company even pays a good dividend. That, and many other lures might entice you.

But another key factor in reviewing any company for investment potential is the workforce. What does the company do, and who does the work? To use a sports analogy, who are the best players and how deep is the bench?

This is one reason why you can feel safe with certain basic ideas in, say, the energy sector, like Chevron (CVX) or ExxonMobil (XOM). These iconic firms have been around for over a century. They have many talented employees, with a robust recruiting program out of universities, and with “laterals” who they hire from other companies.

In short, these two energy companies have all manner of technical expertise, plus the deep pockets to fund programs through expensive design/buildouts and into production, operations and profitability.

At the same time, I routinely review smaller companies, definitely as compared with giants like Chevron and ExxonMobil.

For example, I’ve recently been tracking a company that works in the tight oil business (meaning they frack rocks for oil), in which the chief engineer has drilled over 1,200 wells over the past 18 years. In other words, this guy knows what he’s doing. I’m awaiting a couple of developments on the permitting side, but when that happens this is going to be a great play.

On the mining side, this leads to why large gold miners like, say Barrick Gold (GOLD) and Newmont Mining (NEM)are strong plays. They’re big, and they have extensive operations with a large number of talented employees.

Of course, many smaller companies are out there as well. They range across the spectrum, from exploration plays to development efforts and junior and intermediate producers. Always, when I look at these companies, my evaluation begins with key technical staff, the geologists and engineers who are putting it all together.

From a different angle, you can evaluate management on its ability to attract, hire and retain the best levels of competent people. When you combine a solid management team with superb technical staff, you’re already much of the way to finding a winner.

Look for the Best You Can Find

All of the above brings us back to that Alaska Airlines story. It illustrates how just a relative few people in the world know how to design and build either a smartphone or an airliner, which is why companies like Apple and Boeing have been successful.

The fact that an iPhone fell 16,000 feet and still works is quite a glowing testament to Apple. On the other hand, the fact that the fuselage failed on a newly-built Boeing is troubling.

Meanwhile, don’t neglect to offer high praise to the pilots and flight crew on that Alaska Airlines bird, and the air traffic controllers who helped bring the damaged airplane down to a safe landing.

Wherever you are and whatever your circumstances, always look for companies with the best technical bench; the team with the best players, so to speak. That alone bends the odds in your favor. And that’s one of the keys to protecting your wealth, and growing it in the next year, and well beyond.

Thank you for subscribing and reading.

Best wishes,