So maybe not true diversification but some measures to mitigate the risk. 

Thinking that "you can easily make more than the best players on this forum" by being in the market is naive, at best.As for me, I like diversification, investing in both the market and real estate.

This is not a very large pro as the diversification of 2-3 is enough to cover downside risk of placing all in one, of course, it all depends on how well you are able to buy which is key.

I understand the diversification argument however in the OP case, they already own a rental in Vegas so they would be diversifying by buying a rental around their home.

It can be viewed as diversification.  

Some +/- arguments:+ diversification over cash flowing and appreciating assets+ building sweat equity in my next primary in San Diego+ tax advantages on a larger primary+ taking advantage of the cool market, that’s selling low and buying low (please comment on this)+ having fewer properties to manage (yeah managing duplexes is not my favorite)- high interest rates - high price to rent ratio in San Diego - giving up cash flowing assets - unnecessary transactions costsOther arguments are welcome.

Maybe diversification is key or is it the strategy?

Diversification helps to spread out your risk.

Plus there is some diversification of employment sources and we are seeing newer and larger developments coming to the city than before as well. 

I want to practice evaluating deals and when I'm ready, will take some baby steps this year by making offers that make sense, but in the meantime I am investing in REIT's with some of my real estate funds.I love the hands-off nature of REIT's, instant diversification across geographies and tenants, liquidity and the opportunity to reinvest the dividends in additional shares.