5/8/2007

Bill Gates needs an Economics Lesson - Zillow

Filed under: — menk @ 5:24 pm

When he was asked about whether he personally had used ‘Zillow.com’ a real estate site that estimates housing prices and values, he replied that in fact he had used the site. Zillow leverages Microsoft maps and some AI to estimate the price a house might fetch based on it’s location and features.

Gates then went on to demonstrate that as a monopolist he has no concept of fair market value in an open market economy. Gates said “Their (Zillow’s) algorithms for figuring out prices don’t scale very well to the low end or the very high end, I can tell you that. They’re great for the part that counts. But if you bid that number on my house, I won’t sell it to you.”

Bill; the value Zillow is assigning to properties in their application is intended to be the price that a reasonable buyer might be willing to pay for a property or that which a reasonable seller might accept in the same market. It is not trying to predict what an unreasonable seller might want to displace them from a home in which they currently reside. Since you are accustomed to being in a monopoly position the concept of value is foreign to you so I will give you a pass this time. You should realize that the monopoly you have on Operating Systems for Personal Computers appears to be dissolving as fast as a puddle in the desert so you should grab some economics books and give micro-economics a quick read.

Alternatively, Mr. Gates you could take a look at the Form 10K for Microsoft and observe the enormous loss that Microsoft is taking manufacturing and selling the Xbox and Zune. This also will provide you a sense that sales price is a product of value not the wishful thinking of the supplier.

Gates: Don’t bother bidding my Zestimate

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