What Happened
Zillow's AI algorithm (Zillow Offers) was supposed to predict home prices and buy houses to flip. Instead, it consistently overpaid for homes, accumulating 7,000+ properties it couldn't sell profitably.
Impact
Zillow shut down entire division, laid off 2,000+ employees (25% of workforce), took $881 million write-down. Stock dropped 25% in days.
Cost: $881 million loss, 2,000+ jobs lost
How to Prevent This
- Test algorithms in controlled environments before scaling
- Human oversight for high-stakes financial decisions
- Regular model performance audits in changing markets
- Clear kill-switches when model accuracy degrades