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Zillow lost money because they weren't willing to lose money

stevenbuccini.com

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Re: Zillow lost money because they weren't willing to lose money

#81

Post by rswail »

throwawayboise wrote: post #44
skohan wrote: post #29

Earlier quoted context omitted.

Which regulations would you relax? Surely there is some unnecessary red tape, but it's not as if building regulations have been developed for fun, it's largely in response to safety issues and so on.

Cosmetic stuff, square footage requirements, height requirements, parking requirements. Basic structural engineering, fire safety, etc. requirements of course would stay but if local code is more stringent than national you might take a look at it (e.g. things like a local code requiring copper pipes when PVC is acceptable and much cheaper).

Unless there's a need to build to a higher standard with longer maintenance periods, so that housing stock can have a longer life. Houses exist for decades, better to build for that without needing maintenance but perhaps costing more initially.

Developers will always attempt to skimp on quality to save/make more money. Even people building their own home will sometimes try to avoid compliance. That's why the regulations are there.

Re: Zillow lost money because they weren't willing to lose money

#82

Post by mgraczyk »

robbedpeter wrote: post #74
mgraczyk wrote: post #43

I really liked this quote, which is also true of machine learning organizations at large tech companies: The most valuable data is not social data, ... but your own data because every dataset that you’re looking at internally describes your own process, including your bugs, ... building models from your own data is the only way to build a really successful system. This is one thing that a lot of outsiders do not unde…

Yeah, I'm gonna say that romanticizing mass surveillance is a bit much. Cambridge Analytica, the five eyes countries, Clearview - all these are using Facebook and Google's data to great effect. Facebook and Google's data are not their own. That data is comprised of private lives, stripped bare pixel by pixel, bit by bit, and it's offensive to frame it as if they're doing something alchemical and special with it. Goog…

I'm not going to engage in a flame war over this, but suffice it to say that this is pretty much exactly the misunderstanding I was referring to with that quote.

Most data Facebook collects is of the form (user saw this post, user clicked/did not click this post). That data's value is tightly coupled to the process Facebook used to decide whether or not to cause the user to see that post. The data only has value in the context of iterating on that process.

Re: Zillow lost money because they weren't willing to lose money

#83

Post by indymike »

ctvo wrote: post #37
lotsofpulp wrote: post #31

Earlier quoted context omitted.

> why couldn't you serve as a market-maker for homes at a large scale, especially with the unique insights Zillow could have based on their datasets. Why would Zillow have unique insights? With the exception of Texas, I thought real estate sales information is public information in the US.

Can you not imagine how useful it is to know user data e.g. what neighborhoods receive the most clicks, what type of homes generate the most favorites, how long people view one listing vs. another, … that is unrelated to public MLS data?

> Can you not imagine how useful it is to know user data e.g. what neighborhoods receive the most clicks, what type of homes generate the most favorites, how long people view one listing vs. another, … that is unrelated to public MLS data?

Click data is much less valuable that the recent sale price data available in MLS. Using 90s style dwell time and click counts would likely yeild a lot of very noisy data. False positives from people's browser reopening with 15 tabs looking at different houses. False positives from social and paid advertising boosting a particular home or neighborhood's numbers. False positives from enterprising real estate entrepreneurs doing everything they can to get the clicks up in areas they own property to drive up prices. Meanwhile, the recent sale prices tell you much more, with certainty and are very expensive to manipulate.

Re: Zillow lost money because they weren't willing to lose money

#84

Post by mgraczyk »

ctvo wrote: post #37
lotsofpulp wrote: post #31

Earlier quoted context omitted.

> why couldn't you serve as a market-maker for homes at a large scale, especially with the unique insights Zillow could have based on their datasets. Why would Zillow have unique insights? With the exception of Texas, I thought real estate sales information is public information in the US.

Can you not imagine how useful it is to know user data e.g. what neighborhoods receive the most clicks, what type of homes generate the most favorites, how long people view one listing vs. another, … that is unrelated to public MLS data?

Evidently not as useful as Zillow expected!

Re: Zillow lost money because they weren't willing to lose money

#85

Post by martincmartin »

skohan wrote: post #28

> They thought they needed to build a machine learning model when they really needed to build an entirely new organization, one that possessed the technical and cultural mindset necessary to succeed in this space. I totally agree. It's not impossible to imagine their model working: why couldn't you serve as a market-maker for homes at a large scale, especially with the unique insights Zillow could have based on their…

[W]hy couldn't you serve as a market-maker for homes at a large scale, especially with the unique insights Zillow could have based on their datasets.

Indeed, I believe this is what OpenDoor does. From The Economist article [1],

"They [OpenDoor] charge a fee for the services they provide: buying and selling homes immediately, with zero fuss. The quick in-and-out makes them more like marketmakers than property investors, who buy to hold.

...

"A former Zillow employee told Business Insider that management had been hellbent on catching up with Opendoor, the front-runner. In order to compete, the employee alleged, the company pushed to offer generous deals to potential clients. It called this “Project Ketchup”. Now it has its own fake blood on its hands."

[1] https://www.economist.com/finance-and-economics/2021/11/13/a...

Re: Zillow lost money because they weren't willing to lose money

#86

Post by rswail »

loeg wrote: post #41
skohan wrote: post #29

Earlier quoted context omitted.

Which regulations would you relax? Surely there is some unnecessary red tape, but it's not as if building regulations have been developed for fun, it's largely in response to safety issues and so on.

Quite a lot of regulations have nothing to do with safety. Minimum set-backs, minimum parking requirements, maximum building heights, etc. All of these add cost and reduce density. Single-family zoning is another local government policy that is absolutely intended to constrain development, not improve safety.

It's not about safety, it's also about amenity and suitability and sustainability. In some areas, density is important given the population, in others its not.

Parking requirements are about local traffic management as well. Set backs are about ensuring natural light. Some local regulation is about NIMBYism or HOAism, that sort of thing is where reform might be better addressed.

Re: Zillow lost money because they weren't willing to lose money

#87

Post by indymike »

seoaeu wrote: post #53
throwhauser wrote: post #26

Earlier quoted context omitted.

I think the tone is appropriate, because the issue is a bit more subtle than that. Zillow was afraid to plan for the large losses necessary to gather the only data that counts, i.e. the data that is the outcome of their own processes. Planning to lose money takes nerve. Zillow tried to avoid avoid the pain, and ended up abandoning what might be a profitable enterprise (for someone else) in the future.

Zillow is passing on an infinite number of potentially profitable enterprises. The reason they attempted this one is because they thought they already had good enough models to avoid taking large losses . If you read their statements, it is clear the reason Zillow is abandoning the this effort is because of inaccuracies in their models not just because they were spooked by losing money. They were also spooked last qu…

> The reason they attempted this one is because they thought they already had good enough models to avoid taking large losses.

Risk aversion and launching a new business strategy do not work well together.

Re: Zillow lost money because they weren't willing to lose money

#88

Post by evan_ »

nova22033 wrote: post #75
JKCalhoun wrote: post #9

> At a high level, the story of Zillow Offers is a story of our industry at its best. Not in my book. All I see is the price of real estate being driven up by corporate greed and the individual home-buyer being shut out of the market. Is it wrong of me to hate "flippers" (be they corporate or private)? Pure capitalists will tell me that every property sold went to the highest bidder — in the case of a flipper winning…

All I see is the price of real estate being driven up Who is doing the selling? "Wall St Fat cat Co" or the average Joe who saw his house value go up by a LOT?

When Conglomocorp sells one of their houses, they just get the cash and can realize profits.

When average homeowner Joe sells their house they still have to live somewhere. They must immediately use that money for another house, which is also inflated. The higher sale price doesn’t matter.

Average non-homeowner Joe trying to buy a first house is SOL.

Re: Zillow lost money because they weren't willing to lose money

#89

Post by rswail »

encoderer wrote: post #27
JKCalhoun wrote: post #14

Earlier quoted context omitted.

You'll have to educate me then: is more liquid better for the buyers or sellers?

Here’s a thought experiment: if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior? I think you’ve bought into the tik tok narrative that somehow it’s zillows fault that houses are expensive.

I'm buying housing for myself. It would be a potential relevant thing to take into account between choices, but I still need a house.

I'm buying a long term asset, so the liquidity of the housing market is not relevant to me, unless I'm actually buying for a specific short term, like a planned work period.

Liquidity of the housing market is only important to the agents and the loan originators because they make money on the flow.

Re: Zillow lost money because they weren't willing to lose money

#90

Post by mattcwilson »

spywaregorilla wrote: post #66
javajosh wrote: post #62

Earlier quoted context omitted.

This is a statement I would have agreed with wholeheartedly 20 years ago, and that I disagree with wholeheartedly now.

I'd be curious to learn why. I've seen the pain of companies tricked into thinking robotic process automation to do their horrendous excel workflows is a good idea. I've seen the benefit of a decent python data engineer with a small AWS budget. The techier folks definitely have a different set of problems but the speed at which hings get done is night and day. Companies with old school work patterns (which, in my per…

I think you’re both right.

Taking some hopelessly byzantine, spreadsheet-driven process and “automating” it by building a Rube Goldberg scripting framework around it is the kind of totally stupid automation that doesn’t work.

Actually getting down to surface level and understanding fundamentally what each of those humans is accomplishing via those spreadsheets, extracting that all the way back out to a domain model and process flow diagram, and then selectively replacing process steps, whole cloth, with tech designed to be an actual subservice with SLA targets, is the right way to do it.

Throwing the spreadsheets and/or humans out altogether and starting “from scratch” is so exceedingly and needlessly risky from an information loss and hubris point that, well, good luck, but you’re nearly certain to fail.

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