There's something really funny about white collar office worker businessmen talking about how it takes balls of steel to do what they do. Ok bro, sure. Trackballs of steel maybe
Zillow lost money because they weren't willing to lose money
221–230 of 386 posts
Re: Zillow lost money because they weren't willing to lose money
#222> 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…
Would investors pour their money if they were more conservative and said something along the lines of "look, this is a very complex subject driven by and for humans, we should hire a bunch of non-technical people with relevant industry experience and try to make some bucks of profit before going full scale engineering and AI"?
Theoretically investors should reward a realistic and well-reasoned business plan, and punish hand-wavy science fiction. The fact that this is largely not the case (cough metaverse cough) is probably an indicator about how frothy the market currently is.
Re: Zillow lost money because they weren't willing to lose money
#223> 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…
I don’t think it’s just that they had a poor model, but the combination of that and adverse selection. If you pledge to purchase at the Zestimate then people who reasonably think they can get more than the Zestimate on the open market don’t have an incentive to sell their house to Zillow (besides convenience). But people who think the Zestimate is an over estimate will of course sell to Zillow. So instead of a normal…
>adverse selection
According to Matt Levine's recent column, while you might think that, it wasn't what sunk them in practice. Bidding low in fact worked; it just was inherently limited in scale, which is why they switched to bidding higher. Unfortunately, being wrong in the other direction is very bad.
"I know, I know, the traders are saying: “No, this is stupid, your algorithms will not be 100% precise, some of your ‘lowball’ bids will in fact be too high, and those will be the ones that sellers accept. You’ll get adverse selection and end up losing money.” But that was not Zillow’s actual experience in the first quarter! The actual experience is presumably that some people accidentally got too-high bids, realized they were good and accepted them, but mostly Zillow sent too-low bids to everyone, and some people, for whatever irrational reason — market ignorance or financial necessity or laziness or whatever — accepted the too-low bids. The general point is that there is no reason at all to think that the people on the other side of these trades from Zillow are generally better informed than Zillow is. Sure they know more about their houses than Zillow does, but Zillow knows more about the market, and has more money"
"If you systematically bid too low, you will not do many trades, but you will make a lot of money on each trade. If you systematically bid too high, you will lose money on each trade, and also you will do a whole ton of trades. This is much worse!"
Re: Zillow lost money because they weren't willing to lose money
#224> 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…
Orrr maybe someone in the org could've practiced some basic morality and compassion and refrained from further contributing to the housing shortage. Just because you can make money being a sociopath doesn't mean you should...
Re: Zillow lost money because they weren't willing to lose money
#225Earlier quoted context omitted.
You could sue your seller for failure to disclose.
Apart from that of course you can sue anybody for anything (with more or less success); why would that be the case here? I mean isnt if neighbours are annoying a subjective thing? Do you know of any court ruling which implies one has to disclose the state of the neighbours?
Yes, and even if something is super annoying, it might be legal. For example they listened to music until 2-3 in the morning a lot of cases. Thumping reggaeton. And while it for sure wasn't over legal limit by decibel, the bass made my bed shake.
Re: Zillow lost money because they weren't willing to lose money
#226Earlier quoted context omitted.
My wife did some work for the Census last year. Our extremely rural neighborhood has lots of unused housing, some for a decade+. That work got her out to see some of the places not visible from the roads, and increased our awareness of the scale of the problem. At a guess, in our county, 20%+ of the housing is idle, owned by out-of-state companies, some of whom pay property taxes and some dont. The county isn't aucti…
Vacant housing is a problem, but across the US less than 2% of single family homes are vacant
Vacant housing is only a problem in constrained areas. The vast majority of the U.S. is not constrained. Your summer cabin in Montana isn't depriving anyone of a home, because it isn't driving up prices. Your unoccupied condo in Manhattan is depriving someone of a home, but I suspect that there are not so many of these.
Re: Zillow lost money because they weren't willing to lose money
#227The article offers no new or inside information, just more armchair quarterbacking. I'm surprised that it is getting traction on HN. I think it says more about the zeitgeist than it does about the (lack of) insightful-ness of the content.
Yeah, it just repeats the Narrative in a giant post hoc. "Zillow uses ML models in some way; Zillow failed; QED, ML models are dangerous." Except the reporting by Bloomberg and insiders is that Zillow failed because they overrode the models predicting lower prices and bought like drunken sailors, and it's just a story of yet another marketmaker being run over by the market. So sad, too bad, largely irrelevant to the tech world, yet, it looks like it's entering the mythology of ML up there with Cambridge Analytica or the tank story - unkillable by mere facts or tardy reporting.
Re: Zillow lost money because they weren't willing to lose money
#228> 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…
Isn't is also true that the original pricing algorithm was built for a very different purpose? It was useful for getting a ball park estimate of value, but it was hardly accurate in the underwriting sense (for the reasons you point out). The hubris of assuming that those prices were so accurate that Zillow was willing to buy at them sight unseen is mind blowing, particularly when one takes into account the adverse se…
Makes me wonder if Zillow wasn't planning to "tune" the models, surely they wouldn't want to publicly publish what they think things are worth and then offer 5% less. I wonder whether accurate estimates or making money from flipping would have dictated their decision-making...
Re: Zillow lost money because they weren't willing to lose money
#229Earlier quoted context omitted.
Apart from that of course you can sue anybody for anything (with more or less success); why would that be the case here? I mean isnt if neighbours are annoying a subjective thing? Do you know of any court ruling which implies one has to disclose the state of the neighbours?
Yes, and even if something is super annoying, it might be legal. For example they listened to music until 2-3 in the morning a lot of cases. Thumping reggaeton. And while it for sure wasn't over legal limit by decibel, the bass made my bed shake.
It all depends. But in general you have a common law right to peaceful enjoyment of your property.
Re: Zillow lost money because they weren't willing to lose money
#230Earlier quoted context omitted.
You could sue your seller for failure to disclose.
"i never really noticed"
Yes, you'd have to be prepare to counter that with e.g. testimony from neighbors, or friends who heard the previous owners complain. It's not a slam-dunk, but it is an actionable tort.