Category: Uncategorized

The WordPress Way

I’m writing down the core values for our business and team. Here is one of our 5 core values:

We are committed to open source and “the WordPress way”.

Stranger Studios, LLC Core Values

What does that even mean? How does this value specifically show up in our actions? Why is this important to us?

What does “open source” mean?

In our case, open source means following the GNU General Public License. I wrote about the GPL and why our code is GPL before, but there are basically 2 reasons we embrace the GPL:

  1. We think using the GPL license will result in the best code.
  2. WordPress uses the GPL license, and Matt Mullenweg and the other WP leaders encourage and expect plugins to be GPL.

Some companies respond mostly to #2 there, and begrudgingly apply the GPL license to their code. For us, reason #1 is more important, and so we have embraced the GPL and try to not only live up to the law of the license but the spirit of it as well.

What does “the WordPress way” mean?

This one is more difficult because what is considered “the WordPress way” is an ever-evolving set of standards and conventions that will change over time, but basically what we mean is that our code, UI, and UX should be familiar to other WordPress developers and users interacting with our software.

What does all of this mean more specifically?

Doing things the WordPress way means making all of our software free and open source, just like the core WordPress software.

It means the plugins we write to integrate with other plugins and third parties are hosted in the WordPress.org repository because that will incentivize both parties to maintain the plugin.

It means our code will continue to work as expected if your paid license expires.

It means providing simple one-line code solutions to disable our upsells or extra gateway fees.

It means using the WordPress coding standards so our code is more readable to developers used to reading WordPress-based code.

It means finding the right hooks and filters to modify the behavior of a site instead of fully replacing existing functionality of WordPress and other plugins.

It means adding hooks and filters into our own code to make it easier for others to modify the behavior of our plugins.

It means striving to have documentation on par with the WordPress Codex.

Why is this important to us?

We believe that embracing open source and the WordPress way is going to result in the best software, and having the best software as our foundation will be a competitive advantage for our business. That’s it.

For sure, it’s not bad business to focus on paying customers, or charge for software, or make decisions to maximize profits. But I also feel that’s not the WordPress way.

WordPress is software designed for everyone, emphasizing accessibility, performance, security, and ease of use. We believe great software should work with minimum set up, so you can focus on sharing your story, product, or services freely. The basic WordPress software is simple and predictable so you can easily get started. It also offers powerful features for growth and success.

We believe in democratizing publishing and the freedoms that come with open source. Supporting this idea is a large community of people collaborating on and contributing to this project. The WordPress community is welcoming and inclusive. Our contributors’ passion drives the success of WordPress which, in turn, helps you reach your goals.

The WordPress Mission Statement

We believe in making money. We’re the “get paid” folks and understand the good that steady income means to individuals and organizations. But we believe that making software that is aligned with our values and the WordPress mission statement is more important than making money.

If a decision comes down to something that will make the software better and something that will make us more money, we choose the option that makes the software better.

For us that means embracing open source and the WordPress way, making our software available for free to get the most users and contributors, and building a business on top of the software we are making by adding value instead of artificially limiting our software and selling the cure.

Tesla Update. Two Key Lessons.

I took some profits in my Tesla ($TSLA) position yesterday for the first time in 7 years. Technically, this was my second time taking profits, but the last I rolled my profit into Solar City ($SCTY), which was acquired by Tesla a year later.

Tesla Model Y in Red

Tesla’s share price was up over 50% on the week and up over 100% since the beginning of the year. This after a decent 30%+ gain in 2019. To me, the last week of action was an obvious “short squeeze” situation, making it a good time to take profits.

Another thing on my mind was the fact that Tesla stock is now about 10% of our net worth (minus the value of our business) and about 20% of my stock holdings across all of my retirement and brokerage accounts. I’m not too too worried about this. As Warren Buffet once said “If you have LeBron James on your team, don’t take him out of the game just to make room for someone else. … It’s crazy to put money into your 20th choice rather than your first choice.” Tesla is the Lebron James of my investment accounts.

The final thing I was thinking about was numbers from my Simple Tesla Model. A few years ago, I put together a simple spreadsheet to calculate the potential revenue, earnings, and share price of Tesla stock based on the production estimates Elon Musk was putting out. This is the first lesson I wanted to reiterate in light of the action in Tesla stock this week.

Lesson 1: Don’t forget Main Street. Build Real World Models of How The Businesses Behind Your Stocks Make Money.

It’s easy to get caught up in the numbers and calculations of Wall Street. What’s a good PE ratio for a certain sector? This company has grown sales at 50% per year and could continue growing 50% per year for the next 5 years. This kind of math is useful for comparisons and valuations, but you want to make sure you take a step back and think about what that company looks like in the real world (Main Street) after growing revenues 50% for 5 years. Is that REALLY possible?

At the time I built my simple model spreadsheet for Tesla, there were many people talking about how a valuation in the tens of billions of dollars didn’t make sense for a company like Tesla. Traders who were short the stock talked about how Tesla could never make enough money to justify their share price. But when I put my spreadsheet together, I found that if Tesla could sell 500k cars, they’d likely make $28B in revenue, which would justify a stock price as high as $517. If Tesla only got halfway there, they’d be worth much more than the $200 or so they were trading at in 2016.

To calculate in the risk of bankruptcy or larger failure, you would want to discount the price targets of the model to account for this, but we were already assuming Tesla would only hit 50% of their target, never grow past that, and never make money off their other business lines.

I’ve updated this model a couple times, most recently today. The current tab indicates a future share price of $494 if Tesla can hit about 392k cars sold this year. This is BELOW the current price of $734. And so I am much more comfortable selling Tesla stock when it’s trading above the values my models are spitting out.

Again, while I’ve updated the model to account for energy sales and service revenue, it assumes no growth in car manufacturing or those other business lines. If you plug in different numbers for where you expect Tesla to be 5 years out, you’ll get different targets.

I was also reminded of another important investing lesson:

Lesson 2: Stock Prices Go Up Even When Companies are Not Yet Profitable

Many investors have shied away from investing in Tesla because they feared the company would never turn a profit and thus eventually run into cashflow problems. Not even eventually, Tesla’s investments into the Giga Factory and in general have required them to raise money through special stock sales a few times in the past. Each time this happens, the value of your Tesla stock is diluted.

If you wait for a high flying companies to turn a profit before investing, you might be waiting a long time and miss out on huge returns. Another big winner in my portfolios has been Amazon, who famously hit almost exactly $0 profit each year for most of its existence. Only recently have they been showing a profit, and I would guess Bezos and Amazon would invest more to avoid that profit if they had things to invest in. (Or I don’t know, maybe they think they need the cash now.)

In any case, if you waited for Amazon to turn a profit, you missed a large gain from a well run company that is changing the world. The same can be said for Tesla. So how do you invest with confidence in a company that makes no profit? Here’s what I do.

First, I focus on revenues. As long as revenue is growing or likely to grow from current investments, I feel the companies stock is likely to grow in value as well. I lean toward valuation calculations based on revenue.

Second, I think about whether the company will be able to switch their focus from revenue to profits when they want to later. Will Amazon or Netflix be able to raise their prices? Will Tesla be able to lower their production costs? I tend to give these companies the benefit of the doubt unless there are very obvious concerns about this. You can choose to focus on the negatives, like when Tesla was forced to build cars in tents in the parking lot. Or you can focus on the positives that will drive higher production speed and higher sales margins. Things like removing purchase options that slow down production and figuring out the right mix of automated and human-powered labor will improve Tesla’s bottom line.

With more and more people switching to electric cars, Tesla continuing to own the electric car market, Tesla ramping up production in its existing factories and planning on building even more factories, the Model Y coming out soon, and so much potential in their other products… Tesla is set to potentially become a very large company making a lot of money. Tesla stock has generated a lot of returns for its investors and has a grand enough vision to continue doing that. That said, while the stock is temporarily inflated from a short squeeze, I booked some profits. Tesla is still a large percentage of my investment accounts, and I will continue to try to add to my position if and when the stock’s price falls below my fair value calculations.