The demise of Zillow Offers: it is not AI's fault!
Ernie Chan (noreply@blogger.com)
The story is now familiar: Zillow Group built a home price prediction system based on AI in order to become a market-maker in the housing industry. As a market maker, the goal is simply to buy low and sell high, quickly, and with minimal transaction cost. Backtests showed that its AI model's predictive accuracy was over 96% (Hat tip: Peter U., for that article). In reality, though, it lost half a billion dollars. This is a cautionary tale for anyone using AI to predict prices or returns, includ