Peter Thiel on how the homeless problem in California enriches the elites 🏡📈

Adjust for this, you know, the cost of living in California is something like 40% higher than the rest of the country, the cost of real estate roughly double. And you basically have to replace the middle class in one way or another. The Carroll Quigley, the Georgetown historian from the 50s and 60s, Professor at Georgetown, had this line in 1960—I still think he's very active today—which is that the Republicans are the party of the middle class and the Democrats are the party of everybody else. So there's a way that the California economy says the only middle class people left are government workers, and then all the rest of the middle class we're sort of evicting to these other states over time. It is no wonder that you get a D+30 state that just follows naturally from these super distorted real estate and political dynamics. I think there's probably a lot more one can say about the real estate stuff. I keep thinking that it's obviously very dysfunctional to have mass homelessness, very dysfunctional to have no law and order, but if you think of it as an inefficient redistributionist strategy, there's a lot that has a certain perverse logic. I'll just describe this verbally: if you have a super negative supply curve with an elasticity of minus two, where if you add one percent supply to housing the prices go down two percent, or if you reduce supply by one percent the prices go up two percent, so the more housing you build, the less it is collectively worth; the less you have, the more it is collectively worth. If you get to something that inelastic, probably from the point of view of housing as a financial asset, all sorts of things that seem like social pathologies just become features. I think even something as crazy as the out-of-control homeless situation in San Francisco, where I lived for 15 years, for many years you could think of it as a controlled thing where the homeless people were in the lower parts of town and they didn't climb up the hills. Then if you had this sort of plague of homeless people messing up these neighborhoods, and you had this highly negative elasticity of real estate, the value of the houses on the hills went up way more than the value of the houses on the flat parts went down. So you have to think of the homeless people as a feature to increase the value of the higher-end real estate in the city. That's the cauldron you're stirring. There's probably some version like this with defund the police, no law and order. In theory, that's bad for San Francisco, but then it drives up house prices in Marin way more than it lowers them in San Francisco. So again, in a world where the housing is this dysfunctional, all these weird things become possible. There's a version in Palo Alto where you have this eyesore called East Palo Alto. You would think it should have been raised to the ground and redeveloped 20 or 30 years ago, but it has the effect of massively driving up the prices where the real estate is. It's basically a very inefficient and screwed-up way to redirect the Gold Rush profits from tech. Incredible misgovernance on every level. And then the way I would summarize the California framing is that it is not the worst oil country, not the best; roughly somewhere in between. It's not as good as Norway, we're not as bad as Equatorial Guinea, and you should think of it as basically roughly on par with Saudi Arabia.