Oil Prices, Inflation And The Fed

This is the “extra late edition” of the “Macro Monday” column published Monday afternoon on Margin of Safety Investing.


Inflation is always and everywhere a monetary phenomenon.

– Milton Friedman

There are multiple factors and scenarios that could play out in the short term regarding the economy and markets. The intersection of oil, inflation, trade and Fed policy is set to determine the direction both go.

Ultimately, I believe that the tipping factor will be what the Fed decides to do in coming quarters. Too firm a policy will likely tilt the economy into recession and cause a bear market in stocks.

The two places to be overweight with our money is in cash and in certain energy investments that have firming fundamentals.

Inflation In America

By definition, inflation occurs when money is added to the money supply above the demand for money and generally when it causes an increase in the amount of money per capita. At least that’s my exam answer definition.

Consider that if money is “printed” into an economy, if the population is increasing, then there is some natural demand for more money. So, there is a natural amount of additional money supply needed from year to year.

If the money supply grows more than the demand from the population requires, then we will generally get inflation in prices.

M2 Population

In the past decade though, inflation in the prices of goods and services, and especially wages, has remained subdued in America despite massive amounts of Quantitative Easing (QE). This is similar to the experience in Japan and Europe as well. Why?

There are certainly several reasons. And we should think about this in light of the fact that asset prices have increased substantially.

The first reason is that the population of the United States has aged. People in retirement spend less than those working and raising families. This has put a crimp in demand for goods and services. With that crimping came a reduction in the velocity of money.

Velocity M2 Aging

As we can see from this chart, the older age population is rising rapidly and there is a direct correlation to the velocity of money. Simply put, even though money supply increased, it’s not moving through the economy in a way that is driving prices of goods and services up.

Where we are seeing inflation, as I noted already, is in asset prices. Also, we are seeing inflation in healthcare, which makes some logical sense since not only is the population aging on the whole, but also the Millennial generation just started making babies.

Oil And The Trump Tax Cut

I have argued on several occasions that the main transitory factor suppressing inflation was the low price of oil the past few years. The oil price collapse acted as a defacto tax cut and enabled consumers to spend more than they otherwise would have.

Even with that “tax cut” inflation remained low. In my opinion, low oil prices prevented a shallow recession in the 2015-2016 time frame. Now that oil prices are rising, the impact on spending could put a dent in consumer spending.

To the rescue could be the Trump Tax Cut. The extra few dollars per week in employee wages from lower tax withholding should mostly offset the more expensive gasoline and diesel costs to the economy – if, in fact, I’m right about the “Oil Price’s Goldilocks” level getting to and staying around $80 per barrel.

The IMF studied the impact of oil on inflation in a report aptly titled: Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies. In it they observed that “a 10 percent increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage point on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a better conduct of monetary policy.”

I would argue that the aging demographics, global debt (which is now at a record high again) is a larger factor on keeping inflation from rising the full .4% with each 10% increase in oil price. I think the past few years demonstrates that as the price of oil has plunged and then rebounded as there has been barely a budge of inflation despite a tightening labor market.


What this all points to of course is that the “slow growth forever” scenario based upon demographics, debt and technology is very real. Read these pieces for the big picture on why economic growth will be subdued a very long time.

Understanding The ‘Slow Growth Forever’ Global Economy

Investing In The ‘Slow Growth Forever’ Global Economy

In addition to the above, let’s not forget the impact that a trade war could have on economic growth and inflation. That is a known “black swan” at this point. I believe things will work out on the trade front as I described in:

Expect Positive Surprises On President Trump’s Trade Policies

It is important to keep in mind that if imports increase in price by any significant amount, that would drive inflation up on goods and service, and likely take away from asset price inflation. So, there is a trade off if there are unintended consequences from trade policy.

Could The Fed Tip America Into Stagflation

The scenario I am most concerned about is that I believe The Fed Is Making 2 Huge Mistakes that could slow down the economy. As I covered, I believe the Fed should stop raising interest rates and freeze the level of bonds being retired from the Fed balance sheet month to month.

If oil and a trade war also cause inflation into a slowing economy, then we would get the nightmare of stagflation. Let me stop here and say, I don’t think stagflation is likely, however, it is a possibility that should not be taken lightly.

In order to avoid stagflation, the first thing we need to ensure is that growth continues for the next few years. There’s no sure thing no matter what, but tightening up liquidity into “slow growth forever” factors is dicey at this point in the very mature economic expansion.

The Fed is seeking a soft landing, however, I do not believe based upon Chairman Powell’s testimony and first Fed statement that he fully grasps the “slow growth forever” reality.

Neel Kashkari, Minneapolis Fed President, whom I cited several times in the “2 Huge Mistakes” article has given several statements in the past week that the flattening yield curve is a “sign of caution.” In response, he said the bond market has “a yellow light flashing.

The flattening yield curve is a bit surprising given the rolling off of the Fed balance sheet, suggested Kashkari. That would mean that the neutral interest rate is likely upon us or very nearly there.

I would suggest that the markets simply don’t care about the Fed balance sheet anymore than I do, which is very little. To me, when the next normal-ish recession comes, normal-ish policy, particularly fiscal policy will help smooth that out. I also believe that when, not if, the next crisis comes, helicopter money will become necessary (more on that soon).

So, the takeaway I have is that the Fed ought to slow down and let the economy play out a bit. If there is no trade war, oil finds Goldilocks and global growth continues around 3.9% as projected by the IMF, then the Fed can resume a bit of tightening. Until then, they ought to stand pat.

Where To Invest

I stand by the idea that investors ought to be overweight in two areas, cash holdings and energy-related investments, both in the 15-25% range for asset allocation.

Extra cash of course gives investors two things. First, more safety. Right now, with high valuations in general and the discussed uncertainties, this is the ideal time to increase cash holdings as discussed in The Intelligent Investor by Ben Graham – Warren Buffett’s mentor.

Second, extra cash gives an investor optionality to buy cheap assets as opportunities happen. This is the basic be prepared to “strike when the iron is hot” idea. I have already suggested that Millennials have an opportunity to save cash in preparation for a great investment opportunity in coming years – they should be hoping the next recession and stock market crash holds off for another year or two or three so they can save more cash.

That is not market timing. It is a realization that much of the stock market is overvalued and not worth owning right now, especially given uncertainties in oil, trade and at the Fed.

I have on several occasions, including way back last July in XLE And XOP: Comparing 2 Popular SPDR Oil Stock ETFs, recommended buying the SPDR S&P Oil and Gas Exploration and Production ETF (XOP).

Just this week at the Sohn Investment Conference, none other than Jeffrey Gundlach of Doubleline revealed he is long the fund. The falling oil inventories, firm economy he cited and value prices in U.S. oil producers must have caught his attention too.

Disclosure: I am/we are long XOP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own a registered investment advisory but publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.

Data Sheet—AI Expert Andrew Ng Wants to Improve Manufacturing

Unlockable. Amazon has a “top secret” plan to build robots for home use, unnamed sources tell Bloomberg. Gregg Zehr, the head of Amazon’s Lab126 hardware R&D facility, is overseeing the project, which is codenamed “Vesta,” after the Roman goddess of the hearth. On a more confirmable note, the company announced that it is partnering with automakers Chevrolet, Buick, GMC, Cadillac, and Volvo to extend its Key home delivery program and allow packages to be left in locked cars.

Unlockable, part II. Researchers have found a security flaw in the Nvidia chip powering the popular Nintendo Switch gaming device could allow hackers to gain control and access data, Ars Technica reports. Because the flaw is in a secured portion of the chip, it can’t be corrected with a software patch, the researchers claim. No response yet from Nintendo or Nvidia.

Retaining. Scientists in Europe want to establish a new research center called the European Lab for Learning and Intelligent Systems, or Ellis, in a bid to keep top AI talent from relocating to the United States or China. “This is of such importance to Europe it would be a terrible mistake not to do something major,” Zoubin Ghahramani, Cambridge University professor and chief scientist at Uber, tells The Guardian.

Reviving. HTC is pivoting from early efforts to sell expensive virtual reality gear to consumers. With its new, upgraded gear announced on Monday, HTC is aiming for the corporate market (rival Facebook Oculus has signed up Farmers Insurance to use VR gear for training claims adjusters). The new Vive Pro 2.0 Kit, with a Vive Pro HMD VR headset, two revamped base stations for tracking movements, and two controllers, costs $1400, 17% more than HTC’s original business bundle.

Inflating. Shareholders of Netflix did better than the CEO. After the stock climbed 55% last year, CEO Reed Hastings saw his 2017 total compensation rise only 5% to $24.4 million. Top content officer Ted Sarandos, who oversees the company’s $8 billion and growing annual content budget, did a little better, getting a 19% raise to $22.4 million. The median worker pay was $183,304, meaning the boss made 133 times more.

Reporting. Elsewhere in the land of public companies, Google parent Alphabet said first quarter revenue jumped 26% to $31.1 billion. Net income rose 73% to $9.4 billion, or $13.33 per share. That was fueled in part by an accounting change that requires the company to include certain changes in the value of private company stakes it owns (cough, Uber, cough) in its quarterly results. Google shares lost 1% in premarket trading on Tuesday. Verizon, one of the biggest beneficiaries of corporate tax reform, said its first quarter revenue rose 7% to $31.8 billion and net income increased 31% to $4.7 billion, or $1.11 per share. Verizon shares rose 3%.

Corals Are in Serious Trouble. This Lab Could Help Save Them

Nestled among giant fish tanks at the California Academy of Sciences, there’s a black box—just big enough to hold six aquariums and maybe five humans. What it lacks in size, though, it makes up for in preciousness: Running here is a experiment that could help save corals from annihilation.

The corals in these tanks are reproducing sexually. Which is weird, because even out in the wild, coral spawning is a fragile process, easily disrupted by changes in temperature and acidity. Reproduction has to be precisely timed with the phases of the moon, and it occurs just once a year, as corals release great clouds of sperm and eggs that mix together, fertilize, and descend once more to the seafloor.

Corals are animals, not plants; each organism is made up of lots and lots of polyps. Some species can reproduce asexually, essentially producing clones of themselves. But not the ones in this black box, which are somehow spawning away thanks to some fancy technology and a team of doting humans.

Researchers have brought gravid corals back to the lab before, where they immediately got down to business. But the Academy of Sciences is on the verge of establishing a more permanent population that could reproduce year after year, allowing researchers to perform crucial long-term studies. That’d make this only the second lab to do so, after London’s Horniman Museum. If it works, these scientists could turn corals in model organisms, like fruit flies and mice. They’d have a reliable population to study in detail over multiple generations.

“We built this whole dark room, but that’s only the first part of it,” says Rich Ross, aquarium biologist at the Academy. “What really comes into play is controlling the light—the moonlight, the temperature, and the intensity of all that light. The coral spawn is triggered by all of those factors.”

What used to be a human turning knobs at all hours is now a computer-controlled system. LED lights throw out a range of wavelengths to mimic not just the intensity of sunlight and moonlight as it changes throughout the day, but range of colors you get with, say, sunrise and sunset. This is meant to match the conditions in Palau, where scientists collected the corals.

The system can calculate these light conditions—water temperature too—as they change over the course of a day or a season. Academy researchers inputted information into what’s called a season table. “So we put in for each month the moonrise, the moon set, when the full moon is, when the sunrise and sunset is, and the maximum and minimum temperatures,” says Ross. The computer handles the rest to create a sort of Palau-in-a-tank.

To say the ruse has to be realistic would be an understatement. A temperature bump of just a few degrees can send the corals haywire. In response to the stress, they release the photosynthetic algae that provide them energy, which bleaches the coral.

While corals don’t have eyes like we would understand them, they ain’t blind. “They do have pretty sophisticated photo sensory systems so it’s all linked into their circadian rhythm,” says coral reef biologist Rebecca Albright, who’s overseeing the project. “There are photoreceptors all over the animal.”

When it comes to spawning, the corals need to somehow know when to release eggs and sperm simultaneously. Otherwise, you’re just wasting your gametes. So certain species agree on certain conditions. Some go a few nights after a full moon, others like to go after sunset.

And some species time this with astounding accuracy. “There are certain populations around the world that have been very heavily monitored, that we know down to within the minute sometimes when these corals are going to spawn,” Albright adds. Sperm and eggs mix and ideally fertilize, drifting on currents and settling once more to start new corals.

After a month of carefully timed lighting, the Academy’s corals spawned together on April 15 in total darkness, and they did so at the expected hour—9 pm in Palau time. But they lagged behind their wild counterparts by a week. That may have to do with the stress of flying across the Pacific Ocean and adjusting to a new home.

But spawn the corals did, which means they aren’t altogether unhappy in their custom-built darkroom. Which means the Academy may be able to keep the population breeding. And if they can keep the population breeding, they could be on their way to making these corals model organisms.

The downside is that even a model coral could only spawn once a year, which doesn’t afford researchers as much science time as they’d like. “Ideally, we would like to do is multiply the system and stagger them, and maybe even have different locations around the world so that we can induce spawning every couple of months,” says Albright.

If you’ve only got one shot a year, and something goes awry, you have to wait around and think about how to modify your techniques. But the corals of Earth don’t have that kind of time. Since 2016, half of the Great Barrier Reef has perished. That’d be one billion out of two billion corals, gone. Waters are getting warmer, and corals can’t handle it.

Saving them means better understanding them. With your typical model organism, you can recreate the whole life cycle and keep multiple generations. “We’ve never been able to do that with corals,” says Albright. “And so this would be an opportunity to try to complete that lifecycle and ask some really sophisticated questions.”

How do increasingly acidic waters affect coral fertilization, for instance? And how do the corals’ symbiotic algae play into all of this? Might researchers be able to inoculate baby corals with heat-tolerant algae to try to create reefs that would resist bleaching events? To find out, work at the California Academy of Sciences will continue deliberately and delicately.

More coral science

  • Bet you’ve never seen coral like this before.

  • The California Academy of Sciences is also pioneering the study of so-called deep reefs, which are very weird and very intriguing.

  • Coral reefs can be truly massive ecosystems, so NASA’s helping map them from space.

Fitbit Versa Review: Fit and Finish

A few weeks ago, Wednesday afternoon was winding down. I changed into a pair of shorts, put on a pair of smart running shoes, and smugly informed my co-workers that I was going on a run.

But one thing led to another. I had to write photo captions; I answered a couple emails. By the time I had resolved these very pressing issues, I had been sitting at my desk for 45 minutes in running clothes, with only fifteen minutes of paid childcare left on the clock.

It wasn’t enough time to run, but it was enough time for me to kick off my shoes, unroll a yoga mat, and fire up the Coach app on the Fitbit Versa for quick 7-minute workout.

That’s what Fitbit is all about—making your life healthier, one tiny, incremental change at a time. After a few weeks of using the Relax app to do two-minute deep breathing exercises while my children acted like a pair of human whoopee cushions in the backseat of my car, I can definitely say that the Versa is an easy, accessible way to do just that.

Twin Win

At $200, the Versa is relatively affordable—certainly much more affordable than its close competitor, the Apple Watch Series 3, which it very closely resembles. Several people actually asked me if it was the new Apple Watch. I just shrugged.


It’s one of the most unobtrusive fitness watches that I’ve tried. I opted for a standard black watch with the rubber classic band, although, this being Fitbit, both the unit and the band came in a considerable number of colors and materials.

It does have a not insignificant bezel, which reduces the usable screen size, but it was small enough to lie flat on my wrist. But in the black version, it’s hard to see the bezel anyway, and I also changed the clock face to Fitbit’s proprietary “Simple” face, which is mostly blank. With daily workouts, it took three to four days for me to wear the battery down to 21 or 25 percent, and around 1.5 hours to charge it back up again.

Some of the features that the app can display include your step counter, a sleep tracker, a heart rate monitor, and an exercise log. The sleep tracker was more accurate than the sleep sensing pad that I have under my bed. My ten-month-old son still wakes up several times a night. The Versa detected each time he roused me, even as the sleep sensing pad only detected the times I shifted my weight.

The heart rate monitor did show some crazy spikes on my outdoor runs—there’s just no way that I can possibly go from a resting heart rate of 70 beats per minute to 195 in just a few minutes, without collapsing on the floor—but it seemed fairly accurate on the treadmill and while swimming. And while the watch itself does not have GPS, it does have connected GPS and can map routes and graph your pace per mile, mooching location data from your phone. I was surprised by the quality of the data that the Versa collected on the runs using this tracking method, even if it means you need to carry your phone with you.

It’s safe to assume that if you are looking at a Fitbit and are doing things like parking at the back of the parking lot to sneak in a few more steps on your pedometer, you’re not paragliding or ducking out of work early for a quick snowboarding sesh. I did find the default activities to be pretty limited—no rock climbing, no skiing—and the automatic activity tracker was a little wonky. I have been racking my brain trying to figure out what I was doing last week, but I definitely wasn’t on a bike. And a half-hour of skateboarding has to have been worth more than the recorded 63 steps.

One of the new features that I was most excited to try was Fitbit’s new female health app, which will help women track their ovulation and menstrual cycles. While there are some very great female health apps already available for both iOS and Android, there’s nothing worse than having your period sneak up on you unawares. I would love to be able to quickly log data, get reminders, and correlate data points between my menstrual cycle, sleep cycle, and other pieces of health-related data. However, that feature won’t be available until May. Whomp whomp.

Fitbit also provided me with a trial subscription of the Coach app, which, to my surprise, I ended up liking a lot. I didn’t strictly adhere to my coach’s suggestions, but whenever I had a string of busy days, it was nice to sneak in a quick workout in twenty or thirty minutes of downtime. And I liked how easy it was to follow the instructions of the tiny person jumping and squatting on the Versa’s screen.

Extra, Extra

The Versa has a lot of features that I didn’t end up using. I know a lot of people find support in online workout communities. But personally, I always set my account settings to private. I can’t see that anything good has ever come from being quite that vulnerable on social media.

I don’t have a Starbucks card and don’t plan on getting one, so that partnership and app were useless to me. You can add music to the Versa from your computer, but there’s no Spotify app and to use Pandora, you have to pay for an upgraded account. They do have a partnership with another streaming service, Deezer, but I just…no. No more subscriptions!

Those weren’t the only shortcomings, either. There’s no medical alert if your heart rate goes bonkers, like the Apple Watch. And the notifications are kind of a doozy. While quick replies to messages will be available for Android users in May, iOS users are stuck with unable to respond to tantalizingly obtuse half-texts, complete with maddening ellipses. The worst one came while I was walking my dogs, and a friend texted, “Breaking news!…” What is it, Mark? Mark! What is it?

Still, the Versa is so simple and easy to use that as the weeks passed, I found myself relying on it more and more. With two swipes, I started using the timer to bake. I have a tendency to wander away from the kitchen timer, so it was helpful to have a buzzer strapped to my wrist.

I started using the weather app to quickly check the forecast while dressing my toddler. I started using the Relax app to get my head on straight when my worlds of work, kids, dogs, and friends all converged at the most inconvenient times.

And finally, I started using Fitbit’s original feature. At ten minutes to the hour, every hour, my wrist buzzed to remind me to get up and move around. Yes, it’s disorienting and annoying to be jolted out of whatever you were doing. But it’s also necessary. No one is so busy and important that they can’t get up and walk around their kitchen table a couple times every now and again.

Sure, you could disparage this product as being a fitness tracker that also feeds you the occasional notification. But what if that’s all you want from a watch? If you don’t expect your watch to replace your phone entirely, and you just want an affordable, convenient device that also makes your life a little easier, the Fitbit Versa hits the sweet spot.

Why So Many People Make Their Password 'Dragon'

Each year since 2011, the security firm SplashData has released a list of the most commonly used passwords, based on caches of leaked account credentials. The annual list, intended as a reminder of humanity’s poor password practices, always includes predictable entries like “abc123,” “123456,” and “letmein.” But one entry, finishing in the top 20 every year, has stood out since the beginning: “dragon.”

But why? Is it because of the popularity of the television adaption of Game of Thrones, which first premiered the same year as the popular passwords list? Is it because so many Dungeons & Dragons fans got their accounts pwned? Well, maybe, in part. But the most convincing explanation is simpler than you might think.

Chasing the Dragon

The “dragon” phenomenon does not appear to be a quirk of SplashData’s password analysis methodology. The creature took the 10th spot last year on another top passwords list, this time created by WordPress platform WP Engine, using data compiled by security consultant Mark Burnett. Dragon doesn’t show up on a 2016 list created by Keeper Security, but that one took into consideration accounts likely created by bots. And the top 100 passwords have stayed relatively stable through the years, largely ruling out a Game of Thrones spike.

“I believe in my book I even listed hundreds of passwords that contain the word ‘dragon,'” says Burnett, whose Perfect Passwords came out in 2005. “People often base their passwords on something that’s important to them; apparently dragons fall into that category. And between D&D, Skyrim, and Game of Thrones, dragons have played a big part in our culture.”

The way researchers examine password data in the first place may also contribute to dragon’s popularity. While tens of thousands of people likely really use it, the kind of password data that researchers have access to comes with some inherent biases. Academics can’t call up a company and ask it to hand over customer passwords, so they instead largely rely on credentials that get hacked and leaked to the public.

That often means sites that have poor overall security—and weak password requirements. “The sites that have the most complicated password policies don’t get leaked as often,” says Lorrie Faith Cranor, a computer scientist at Carnegie Mellon University who has studied password creation in her lab for over eight years. “Dragon” might be disproportionately popular because hacked sites are less likely to require users to include, say, a number or special character in their password.

The type of site a password data set comes from can also skew results. WP Engine examined 5 million passwords believed to be associated with Gmail accounts, for example. The company looked at the associated email addresses and tried to estimate the gender and age of the people who created them. For example, “[email protected]” would be assumed to be a male born in 1984. Using this method, the researchers found that the dataset skewed both male, and toward people born in the 1980s. That’s likely because many of the credentials came from eHarmony and an adult content site.

You can imagine how, in a dataset like this, “dragon” theoretically might appear more often, given how relatively popular The Lord of the Rings, Dungeons & Dragons, and *Game of Thrones are among men in their early-to-mid-30s.

Other kinds of password data bias can be more obvious. In 2014 for example, Burnett helped SplashData compile its annual common passwords list. When he first ran the numbers, he noticed that “lonen0” appeared incredibly high on the list, taking the seventh spot. That happened not because tens of thousands of people suddenly thought of the phrase, but because it was the default password for a Belgian company called EASYPAY GROUP, which had suffered a hack. Ten percent of users had simply failed to change the default password.

Cracking Up

Another reason that “dragon” appears so popular, along with other passwords like “123456,” is that they’re both incredibly easy to unmask. Companies often “hash” the credentials that they store, so that in the event a hacker does access them, they’re harder to access than they would be if they were just sitting out in plaintext. Hashed data is mathematically obscured to look like random strings of characters that humans can’t parse. Some hashing schemes have weaknesses that allow hackers to crack them, but even if hackers can’t expose every password, they can still run scripts to figure out the hashes for the most common passwords. “They are using computer programs that are using the most popular passwords first,” says Cranor.

Despite potential biases, careful researchers like Cranor and Burnett take time to construct their databases as carefully as possible. At this point, so many websites have been breached that they also have very robust datasets to analyze. Still, Burnett says, figuring out the “most commonly used” passwords across the web probably cannot be called a genuine science, due to biases and lack of controls.

Cranor’s research has shown that people choose passwords like “dragon” for the same reason they use common names, like Michael and Jennifer, or beloved activities, like baseball. “One of the things we’ve seen is that people tend to create passwords about stuff they like,” says Cranor. “‘iloveyou’ is one of the most common passwords, in every language.”

In her research, Cranor also wondered why so many people gravitate specifically toward animals and mythical creatures in creating passwords—particularly “monkey,” which like dragon, always ranks highly. During one study she conducted, Cranor actually asked participants who chose the primate to explain why they picked it.

“Basically people said they like monkeys, monkeys are cute,” says Cranor. “Some people said they had a pet named monkey, they had a friend whose nickname was monkey, it was all very positive.”

It turns out many people have chosen dragon for similar reasons. “I started with ‘dragon’ back in the early 90s, and it morphed over time,” one person who uses that password explained to WIRED. “The inspiration for it was a mixture of having played Dungeons & Dragons for 10 years at the time and having just installed Legend of the Red Dragon.” (They have been granted anonymity for obvious, password-related reasons.)

“Passwords, I was told, were supposed to make it hard for other people to get into your accounts, and dragons are big and scary and less common in real life than, like, bears,” another “dragon” user said. “Admittedly I was mostly using very nerdy forums and games and stuff.”

Sometimes, though, the reason you choose “dragon” as your password is just because you’re young, and dragons are, well, really cool. As one “dragon”-user put it: “I was 13 at the time.”

Password Party

After Uber's Fatal Crash, Self-Driving Cars Should Aim Lower

More than a month after a self-driving Uber struck and killed a pedestrian crossing the street in Arizona, it’s still not clear what sort of failure might explain the crash—or how to prevent it happening again. While the National Transportation Safety Board investigates, Uber’s engineers are sitting on their hands, their cars are parked.

The crash and its inconclusive aftermath reflect poorly on a newborn industry predicated on the idea that letting computers take the wheel can save lives, ease congestion, and make travel more pleasant. An industry dashing toward adulthood—Google sister company Waymo plans to launch a robo-taxi service this year, General Motors is aiming for 2019—and now, suddenly, on the verge of being rejected by a public that hasn’t even experienced it yet.

In other words, AV makers are clearing the technological hurdles and tripping over the psychological ones. And it’s important to recognize there are lots of stakeholders here. If these vehicles are to proliferate and change the world for the better, they’ll need support: from the public, politicians, and from regulators.

In defending their technology, the self-driving promoters always resort to the same set of facts. Every year, 40,000 people die on American roads. Worldwide, it’s about 1.25 million. Millions more are left with serious injuries. Robot drivers, who don’t get tired, distracted, or drunk, could stop the bleeding.

It’s a compelling and worthy objective, but one that’s almost impossible for regular drivers to relate to. Road deaths are a problem for society, not for the vast majority of people who aren’t personally affected. Driving is such a quotidian and often necessary task, it’s easy to ignore the risk that comes with every moment behind the wheel. At the same time, crashes are so common, they become background noise—and they get tuned out. Moreover, putting a serious dent in road death numbers would take decades, since robots could have to gradually replace more than a billion vehicles worldwide.

Knocked onto its heels by the Uber crash and the death of a Tesla driver using Autopilot a week later, the robo-car industry needs a win—and a new playbook.

“Trying to boil the oceans, and solve the complete problem all at once, has a high failure rate,” says Timothy Carone, a business professor at Notre Dame and author of Future Automation—Changes to Lives and Businesses. “One key reason that project leaders lose stakeholder support is because they don’t see the benefits clearly.”

Rather than promising to save millions, the developers in Silicon Valley, Detroit, and elsewhere should offer immediate, tangible proof of their value. And no, Waymo, launching a real-deal robo-taxi service doesn’t cut it. “All they’ve proven is that a car can drive itself around Phoenix,” says Carone. “So what? They haven’t demonstrated the value.”

Community Service

Even if Waymo’s service does make roads safer, the problem is that people are no good at recognizing the upsides of things that don’t happen. If it wants to win over a population rattled by Uber’s crash—which surely hurt the reputation of this technology as a whole—it should offer not just a high-tech taxi, but a solution to a discrete, noticeable problem. Take teenage drunk driving: Why not offer a free service for people aged 16 to 25, between 10 pm and 2 am? You’re giving parents peace of mind, knowing their kids have an easy, convenient, way to get home if they’ve been drinking. And maybe collecting some positive statistics in the process.

Here’s another idea for Waymo, Uber, Cruise, and everyone else working on computer driving: Start a shuttle service for people in suburban towns, taking them home from the local train station. It’s an easy to way to solve the last mile issue, especially for people who don’t have cars—and will make the people in neighboring towns eager to have the tech, too.

“If the goal is specific, targeted, and it resonates with your customers or important stakeholders, then they buy into it,” says Stephanos Zenios at Stanford’s Center for Entrepreneurial studies, who teaches successful launch techniques at a “Startup Garage” MBA course. “It has to solve a real problem that someone has, and which is a pain for them.”

The small, driverless, pod-like shuttles which companies like May Mobility are trialing are a sensible solution to mobility in downtown cores. They can pootle around at a safe 25 mph. But to a car driver, used to speed, and flexibility to choose a route, they’re hardly irresistable. What if they made their services more attractive by negotiating with cities to use bus and HOV lanes to save riders time? The results don’t have to be glorious—just tangible and relatable. If commuters save 20, even 10 minutes a day because they get to make part of their trip in an autonomous shuttle, they’re likely to think better of the tech—and vote for the politicians and regulators who support it.

Rocket Science

Carone cites the the SpaceX Falcon rocket program as an example of where this step-by-step tactic has worked to build support. Elon Musk’s company now has launched 53 Falcon rockets, with 51 full mission successes (including one Falcon 9 Heavy), one partial failure, and one total loss of spacecraft.

It has booked more than 100 future launches, signaling that confidence in its tech is strong. That’s because each launch slowly but surely demonstrated the benefits of the SpaceX approach to improve the cost and reliability of access to space. When failures did happen, there were previous successes to confirming the benefits of the approach.

Uber has also seen the benefits of a phased approach in its core business, ridesharing. The app started in 2009 as a way for people to book rides in fancy black cars. It evolved into a peer-to-peer service, a useful alternative to lacking public transit and expensive, hard-to-find taxis. Over the years, it added special features for large groups, kids, people with pets, and riders in wheelchairs. And so when London threatened to withdraw Uber’s licence to operate in the city, more than 850,000 people signed a petition to keep the company around. That’s the kind of support Uber could use now, for its autonomous driving program.

Same goes for Tesla, and other automakers offering semi-autonomous systems that take over the driving task, with human supervision. Last month, a Model X driver using Autopilot hit a highway barrier and died. In response, Tesla wrote a blog post that said, “If you are driving a Tesla equipped with Autopilot hardware, you are 3.7 times less likely to be involved in a fatal accident.” It added that there is one automotive fatality every 86 million miles across all vehicles. In cars with Autopilot, it claims, that plunges to one every 320 million miles.

Those are impressive numbers, sure, but they’re also hard to comprehend. Hardly anyone drives a million miles in their life, so the difference between 86 million and 320 million feels academic. But if Tesla could break down the stats, and told you hey, on this road you drive everyday, cars with Autopilot crashed, say, 20 percent less often than those without, the tech seems a lot more relevant—and more worth the extra $5,000.

Even if it won’t save your life, it could keep you out of a fender bender that makes you miss that meeting and sees your insurance premium skyrocket. “If you do that, it provides policy makers with information and data that says we’re going in the right direction and we’ve saved 50 or 100 lives this year,” Carone says.

Writing in the journal Nature Human Behavior, researchers from UC Irvine say “as with airplane crashes, the more disproportionate—and disproportionately sensational—the coverage that autonomous vehicle accidents receive, the more exaggerated people will perceive the risk and dangers of these cars in comparison to those of traditional human-driven ones.” You don’t win those people back with lofty promises of crash-free roads and millions of lives saved. You do it by making their lives better, one helpful ride at a time.

Driving on My Own

Barbara Bush: These 17 Timeless Quotes by the Former First Lady Will Inspire You

Born in 1925, Barbara Bush — wife of George H. W. Bush, the 41st President of the United States, and mother of George W. Bush, the 43rd President of the United States — was one of the nation’s most beloved First Ladies. Sadly, she died this week in Houston, Texas at the home she shared with her husband after a series of hospitalizations. She will be laid to rest Saturday after a funeral service to be held adjacent to the George H. W. Bush Presidential Library on the campus of Texas A&M University.

Barbara Bush was well known for being outspoken, a quick wit, and an ardent supporter of literacy, education, AIDS awareness, and other important social causes. But she was also known for being a devoted wife and mother — always keeping her family at the center of her universe. Given the code name “Tranquility” by the Secret Service, Barbara Bush wrote a popular autobiography in 1994, and a children’s book about the White House adventures of her family’s Springer Spaniel.

While Barbara Bush is no longer with us, her words — which sometimes sparked controversy for the plainspoken, unvarnished way she presented them — will live forever. Here are 17 of her most memorable quotes.

1. “Never lose sight of the fact that the most important yardstick of your success will be how you treat other people — your family, friends, and coworkers, and even strangers you meet along the way.”

2. “When you come to a roadblock, take a detour.”

3. “I hate the fact that people think ‘compromise’ is a dirty word.”

4. “You don’t just luck into things as much as you would like to think you do. You build step by step, whether it’s friendships or opportunities.”

5. “Believe in something larger than yourself…get involved in the big ideas of your time.”

6. “Some people give time, some money, some their skills and connections, some literally give their life’s blood. But everyone has something to give.”

7. “If human beings are perceived as potentials rather than problems, as possessing strengths instead of weaknesses, as unlimited rather that dull and unresponsive, then they thrive and grow to their capabilities.”

8. “Whether you are talking about education, career, or service, you are talking about life. And life must really have joy. It’s supposed to be fun.”

9. “Cherish your human connections: your relationships with friends and family.”

10. “You have two choices in life; you can either like what you do or dislike what you do. I have chosen to like what I do.”

11. “Libraries have always seemed like the richest places in the world to me, and I’ve done some of my best learning and thinking thanks to them.”

12. “Giving frees us from the familiar territory of our own needs by opening our mind to the unexplained worlds occupied by the needs of others.”

13. “People who worry about their hair all the time, frankly, are boring.”

14. “Study hard, work hard, and play hard too.”

15. “Why be afraid of what people will say? Those who care about you will say, ‘Good luck!’ and those who care only about themselves will never say anything worth listening to anyway.”

16. “Don’t cry over things that were or things that aren’t. Enjoy what you have now to the fullest.” 

17. “At the end of your life, you will never regret not having passed one more test, not winning one more verdict or not closing one more deal. You will regret time not spent with a husband, a friend, a child, or a parent.”

Shadow-boxing tough guy should protect home-alone Japanese women

TOKYO (Reuters) – Behind the apartment’s curtain, a tough guy is boxing, throwing left and right hooks and jabs, and lunging forward, enough to make any passing criminal think twice before breaking in.

Leopalace 21 Corp employee, Mai Shibata, poses with her mobile phone during a demonstartion of the company’s security system ‘Man on the Curtain’ in her room in Tokyo, Japan, April 20, 2018. REUTERS/Kwiyeon Ha

The image is nothing more than a projected shadow but one that a Japanese apartment management company hopes will help protect and reassure women living by themselves.

Still in the prototype stage, “Man on the Curtain” uses a smartphone connected to a projector to throw a moving shadow of a man doing various energetic activities onto a curtain.

Leopalace 21 Corp employee, Mai Shibata, poses in front of a window, on which the company’s security system ‘Man on the Curtain’ projects a man’s shadow, in Tokyo, Japan, April 20, 2018. REUTERS/Kwiyeon Ha

Customers can choose from a dozen different scenarios that show their man boxing, doing karate and even swinging a baseball bat.

A man’s shadow is projected on the window by ‘Man on the Curtain’ security system developed by Leopalace 21 Corp, in Tokyo, Japan, April 20, 2018. REUTERS/Kwiyeon Ha

To mix things up a bit, the man can calm down and do more mundane things like get dressed, chill out with a guitar or even do some vacuuming around the flat.

The system was developed for security at buildings run by Leopalace21 Corp,, said Keiichi Nakamura, manager of the firm’s advertising department.

Queries from the public prompted the company to think bigger and consider offering it for sale. But some people have had doubts about how effective it might be, said Nakamura.

In particular, criminals might sooner or later work out that a “man behind the curtain” who spends his whole time shadow boxing, actually means a woman is alone inside.

“If projecting a shadow makes a woman an easy target by showing criminals there’s nobody home, that would put the cart before the horse,” he said.

“So we’d like to commercialize it once we add variety, such as releasing a new video every day.”

Reporting by Kwiyeon Ha; Writing by Elaine Lies; Editing by Robert Birsel

Indonesia's Go-Jek planning Philippine expansion: regulator

MANILA (Reuters) – Indonesian ride-hailing and online payment company Go-Jek is looking to expand into the Philippines, Manila’s transport regulator said on Friday, just days after Uber Technologies Inc [UBER.UL] shut down its local business as part of its exit from Southeast Asia.

Go-Jek executives have requested for a meeting with the regulator next week, Aileen Lizada, a board member at the transport regulator, told Reuters.

A Go-Jek spokesman declined to comment.

Reuters reported in March that Go-Jek, which counts Alphabet Inc (GOOGL.O), Singapore’s Temasek Holdings Ltd [TEM.UL] and China’s Tencent Holdings Ltd (0700.HK) as investors, was set to announce its first expansion to another country in Southeast Asia in the “next few weeks.”

The move comes weeks after Uber sold its loss-making Southeast Asia business to regional rival Grab, and just days into Uber’s exit from the Philippines, to the dismay of the riding public that has complained of higher fares, longer waiting time and picky drivers.

The Philippines’ transport regulator this week approved the accreditation of homegrown ride-hailing companies Hype Transport Systems Inc, HirNa Mobility Solutions Inc and Golag Inc to spur competition.

The country’s transportation agency caps the number of ride-sharing vehicles at 65,000 across all brands and reviews the figure every three months.

Reporting by Neil Jerome Morales; Editing by Biju Dwarakanath

Ex-CEO of Bankrupt Bitcoin Exchange Mt. Gox Has a New Job in Crypto

Mark Karpelès, the CEO who presided over Bitcoin exchange Mt. Gox until it went bankrupt in 2014, has had a hard time finding work for the last four years. After all, when he announced in February 2014 that he’d lost all of Mt. Gox’s 850,000 Bitcoins, he instantly became the biggest villain of the cryptocurrency world.

And while Karpelès ended up finding 200,000 of the Mt. Gox Bitcoins—and authorities believe the other 650,000 were stolen by outside hackers—he’s currently on criminal trial in Japan for charges of embezzlement, manipulation of electronic data, and breach of trust. Initially arrested in 2015, Karpelès was held in jail for almost a year on those charges.

“I have no way to be sure that I’ll still be able to work in one year, two years,” Karpelès told Fortune in an interview in Tokyo in March. “So I cannot really get a normal full-time job.” In other words, he acknowledges, he may be sent back to jail. (For the full tale of how the Mt. Gox hack mystery has unfolded, see my feature story “Mt. Gox and the Surprising Redemption of Bitcoin’s Biggest Villain” from the May issue of Fortune.)

But whether it’s what he considers “normal” or not, Karpelès recently did land a new job—and a major one, as a C-level executive at a U.S. corporation. He’s the new chief technology officer of London Trust Media, a Denver-based company that boasts the world’s largest paid virtual private network (VPN) service.

London Trust Media is also increasingly investing in cryptocurrency: It was an early investor in Zcash, a privacy-focused digital coin, and has also backed Purse, a startup allowing people to buy Amazon items with Bitcoin.

Karpelès, however, was not forthcoming about his latest career move in our initial meeting. Instead, he’d said he was juggling four to five different IT consulting jobs, working on projects related to online video games, network communications and IP (Internet protocol) services—all “unrelated to cryptocurrency.” He refused to name his employers at the time, saying that as a contractor, he was prohibited from discussing them.

It wasn’t until afterwards, when I stumbled across his LinkedIn profile, that Karpelès finally opened up about his new position. On LinkedIn, he lists himself as London Trust Media’s CTO since January of this year. “I’d say it’s currently my main job,” Karpelès wrote in a message to Fortune.

On the other hand, Karpelès’s new employer was more than happy to trumpet the news of his new hire. “Mark fought and fell. And although he fell, his skills, experience and know-how unarguably continue to exist,” says Andrew Lee, cofounder, chairman and chief of lab division at London Trust Media. “And so, bringing in a seasoned warrior makes perfect sense to me. I am more than willing to give a second chance to Mark in this fight’s critical hour.”

The fight Lee is referring to is what he calls the “crypto wars”—cryptocurrency’s battle against increasing government regulation and oversight, including moves by the New York attorney general this week.

Lee, who also once sold a company to Mt. Gox and was in charge of Mt. Gox’s North American operations for a short time, says Karpelès will be working on London Trust Media’s cryptocurrency ventures as well as its other products. Karpelès’s experience in the Bitcoin industry—despite ending in disaster—will prove valuable, Lee adds: “I wouldn’t dare say that the person who architected the Titanic should never again architect another ship.”

Karpelès, who has never been to the U.S., will work remotely from Japan, where he is currently required to stay while he is on trial. He says he was attracted mostly to London Trust Media’s commitment to protecting its customers’ privacy through its VPN services, citing recent outrage over Facebook’s sharing of user data with Cambridge Analytica. “Advertising-driven overreach on people’s privacy has been a matter I’ve been worried about for some time,” he says.

After all, Karpelès has lately been less than enthusiastic about Bitcoin and other cryptocurrencies, telling Fortune he’s had “enough of cryptocurrency” between all his problems at Mt. Gox, and has essentially washed his hands clean of it. “The main issue with Bitcoin itself is that the community around it right now is kind of too polarized,” Karpelès says, citing the split between Bitcoin and Bitcoin Cash over a disagreement in how best to scale the digital currency. (He’s not taking a side, in order to “stay neutral and not get involved in more trouble than I am already.”)

“Bitcoin right now is, I believe, doomed,” Karpelès adds. “Its original promise of being the future of currency is clearly out of reach.” Then again, that’s what some said about Karpelès’ career.