NEW YORK (TheStreet) -- We've all seen how Tesla (TSLA) shares more than doubled in just a few daysor weeks. I'm probably not alone in having asked myself: "How did allof those shorts get it so spectacularly wrong?"I think I have figured it out. What the Tesla shorts seemto have in common are: 1. They're almost all New Yorkers. Aside from the fact that most of the big hedgies in general are in andaround New York City, why does this matter, you ask? In Tesla's case,it's actually important. Much of what I hear from that corner of the world is that they areskeptic of Tesla because they never see Tesla cars on the street. Youcan walk around Manhattan or tool around Stamford, Conn., for hours notseeing a single Tesla. Therefore, their argument goes, Tesla may not be selling as much asthe numbers seem to suggest. In any case, there is something suspecthere. This is very similar to the situation in July 2007 when it was theearliest days for the first iPhone. This product hit close to 5%market share quickly in Silicon Valley, but only much later in mostother cities, including New York. So why is that important? Well, customer adoption is not uniformacross geographies. "The tip of the spear" tells you today where therest of the world is going tomorrow. It's the canary in the coalmine.
In the case of the iPhone, as well as with Tesla, this canary residesin Silicon Valley -- not New York City. The point is this: If productX (iPhone or Tesla or whatever) can get to 5% or some relevantrespectable number in almost zero time in Silicon Valley, it is likelyto get there in the rest of the country -- and the rest of the world-- also, at some time a couple of years down the road. I have written multiple articles earlier this year about how Teslagathered 100% or close to 100% market share in the luxury sedan marketin Silicon Valley almost overnight. There is nary a brand newMercedes S class or BMW 7 series to be seen so far this year on thestreets of Silicon Valley. Everyone is buying a Tesla. Take a drivethrough some neighborhoods and you will see one in a large percentageof the driveways.
That theory totally misses the point, in my view. Most people I knowdon't buy a Tesla because they think it's environmentally friendly,whether that's even true or not. Most people buy Tesla -- and other electric cars -- because they drivebetter. They're quiet, have gobbles of instant torque and allow forthat unique feeling of one-pedal driving. It's like buying a PC withan SSD instead of a HDD. Fewer moving parts mean they don't requireservice -- you just drive them forever, just like an iPad. If you have not owned an electric car or driven it more than aroundthe block, you would never know. Therefore, as a short, you areaiming in the wrong direction, and so you miss. It's not relevant whether an electric car impacts upon the environment ornot. I personally don't think there is anything wrong with theenvironment -- other than the loud noises made by cars and trucks -- sothere is no problem in need of fixing except for noise pollution.Electric cars are awesome in the same way a Porsche 911 is more fun todrive than Toyota ( TM) Corolla. An electric car makes a Porsche 911 seemboring and unsophisticated.