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May 2022 Newsletter
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On behalf of the whole Peak 15 team, I want to thank you for your continued support.

The month of May is already turning out to be a busy one. John and Francisco are just getting back from the IMN conference in Atlanta where John moderated the “Shark Tank” style panel. IMN conferences have always been some of the highlights of our year. Speaking with so many industry insiders in a single event gives a unique opportunity to feel the pulse of the market.

We are also proud to announce that Peak 15 Capital will be sponsoring the Global Albanians Foundation's First Annual Golf Tournament up in Ipswich Massachusetts. The event is helping Albanian not-for-profit organizations all around the world and we couldn't be more excited to be a part of such a fantastic event.

One of the more fascinating economic trends in the past month is the population shift from some states, and to others. In 2021, states that grew in population significantly are places like Nevada, Idaho, Texas, and even the Carolinas. What these states all have in common is that they are states with good standards of living that have significantly reduced taxes from places like the Northeast and California. These trends are present this year and we have every reason to believe that they will continue into the future.

What controls a population?

I love it when humans are wrong, it means we have the opportunity to learn something new. Unfortunately, some humans are known almost exclusively for being wrong. One such human was Thomas Robert Malthus who published an essay in 1798 creatively called “An Essay on the Principle of Population”. In a lot of ways, Malthus was the opposite of his contemporary, David Ricardo since Malthus was entirely incorrect in his predictions, but people still stand by his principles. Ricardo, of course, correctly laid out the principles of comparative advantage and is widely misunderstood to this day. Malthus, in his essay, argued that the human population will grow faster than our food production and natural problems like famine and disease would cap humanity's upper population limit. So how wrong was Malthus? And how does population theory actually work?

We should start by saying that the population growth that Mathus was so worried about did not actually exist. Nevertheless, his argument is as follows: population growth is geometric, and food production growth is only arithmetic, therefore there will not be enough food to feed the future of humanity. Therefore, we should abolish welfare and let natural selection run its course.

So let’s dig into this, shall we? Technological improvements mean that we actually have less people making food now as a percentage of total population than ever before. One farmer can produce food for thousands for people which would have been a fantasy in the 1800s. Keep in mind that Malthus lived over a hundred years before the industrial revolution and key developments like the steel plow, crop rotation, pesticides, modern irrigation, and a whole lot more.

It is easy to make fun of Malthus and writers have done just that for over 200 years, but his conclusions are clearly products of his time. The world that Malthus was born into was shaped quite heavily by the Black Death. Since the Black Death killed so many peasants in Europe, lords had to compete with each other for labor beginning in the middle of the 1300s. Up until the Industrial Revolution, the economics of Europe were fairly predictable and it seemed like disease and scarcity would cap populations forever.

The reason that Malthus was so wrong is actually far more interesting than food production, mainly because it has absolutely nothing at all to do with food production. The reason Malthus is wrong is because it isn’t scarcity that controls populations anymore, it’s culture.

The birth rate in the United States is 1.7 because that is what Americans have become comfortable with, not because a birth rate of 2.0 would be untenable. Food production used to limit population, but it no longer does because technology has given us more agency.

The comfort of people is very important because it speaks to an underlying shift in what controls our behavior. Up until recently, survival was the thought most responsible for one’s decision to move. Today, the largest shift in population that we see is from states with high taxes, to states with low taxes.

In 2021, the states that lost the most people as a percentage of population have higher than average taxes like California, New York, and Washington DC. The big winners in this shift are places like Texas, Nevada, and, the biggest winner of them all, Idaho. Keep in mind that Idaho had the highest percentage of population change not because of any natural cause, but because of the decisions of human beings.

Peak 15 Capital takes a special interest in these movements from high to low tax areas because they go hand in hand with commercial real estate demand. Obviously, these new residents need a place to live and Multifamily is the clearest way to take advantage of this, but other real estate types like office and storage space will have to reposition as well.

The competition over population has shifted from one of natural resources to one of human decisions and culture. No matter the reason, our responsibility is always the same: to understand the world around us, and to add value to it.

Keep Climbing!

Contributed by: Peter Vermette