Addison: There's an old rule on the internet, and it applies to aircraft valuations just as much as it applies to social media. If the product is free, you are not the customer. You are the product. Today I want to talk about a claim making the rounds in our industry, and that the way aircraft values have been calculated for decades is broken math. And I want to walk you through what that claim actually measured, because the details are the entire job. I'm Jason Zilberbrand, I'm president of VREF, and this is the truth about the market. This episode is powered by VREF the standard in aircraft valuation. If you're buying, selling, financing, or just trying to understand what your aircraft is really worth, Vref it. Go to VREF.com and VREF it before you make the call. So here's what happened. Recently, a blog post from one of the new AI evaluation tools went out claiming that quote, unquote, legacy evaluation guides. Price engine time with a straight line, a fixed dollar amount per hour from fresh overhaul to run out, and that the market doesn't actually behave that way. And then they fit a bunch of curves to listings across 285 piston and turboprop models. They declared that only 8% of the fleet depreciates in a straight line, and then concluded that the old math, by guys like me, and by implication the people behind it, well, we should all just retire. Well Now I'll give credit where credit's due. It's a well-written marketing piece. Whoever wrote it has a real talent for marketing, but well-written and correct are two very different things. And I want to take you through three problems with this analysis. And then I want to tell you the part of the story that nobody's talking about, which is how these free tools actually make their money. So here's problem number one. And it's the foundation that everything sits on. Their entire analysis was performed on listing prices. Asking prices. Think about it. Not one bona fide transaction. Not one closed deal. Just asking prices. Now, everybody listening who has ever bought or sold anything in their life, tell me, what is the relationship between an asking price and what actually gets wired into escrow to close? Sometimes it's close, maybe it's a few percentage points. Often it's not even in the same zip code. An asking price measures the seller's hope. Remember? Talk about this all the time. It measures the broker's strategy. It measures the mood of the market, but it does not measure what a buyer actually paid. So when you fit a curve to thousands of asking prices, you have not discovered the market. You have built a very pretty map of seller psychology. That's it. There's no real valuation work. There's nothing grounded in transactions. There's nothing about what actually closed. And that distinction is not a technicality. It is the difference between what people wish and what people paid. Here's the second problem. The headline of this study was a twenty-six thousand dollar average gap between flat engine hour math by yours truly and quote the market. But go look at what that gap was measured against. It was measured against their own fitted curve. They built a model, declared their model to be the truth, and then scored the old method against their model. Folks, this is not an error rate. This is the distance between two opinions. And one of those opinions was also the referee. The honest test of any valuation model, theirs, ours, anybody's, is out of sample prediction. Predict the sale price before the deal closes. Then check yourself against reality. That test appears nowhere in their post. And here's my favorite part. Buried in their own numbers is an average signed error of the straight line method about $2,500. On aircraft worth hundreds of thousands of dollars by their own arithmetic, the method they are retiring is almost perfectly unbiased. And one more thing for the statistics crowd. Their winning curve got to search through a whole menu of shapes and a tunable exponent, while the straight line competed with one parameter on small samples and noisy asking prices, give one contestant six shapes and a dial, and it wins that contest every time. This is not a discovery about the aircraft market. This is a property of curve fitting. See, here's problem number three. And this is the one that matters most to anyone who actually transacts. Nobody competent applies flat dollars per hour blindly from overhaul to run out. Nobody. Not v ref's methodology and not any accredited appraiser working today. Let me repeat that. Not v ref's methodology and not any accredited appraiser working today. Why? The fresh overhaul premium is real. The runout discount is real. The midtime plateau is real. Appraisers have been pricing that curve for decades, along with everything a scraped listing will never tell you. Logbook quality, damage history, corrosion, engine programs. See, the difference between an overhaul done by a reputable shop and an overhaul done by a signature, there's a big difference. The dollars per hour and evaluation guide is a reference point inside a methodology. It is the beginning of an adjustment process, not the end. So discovering that the market is nonlinear and announcing it is breaking news, that's like discovering airplanes need fuel. Every professional in this industry already prices that curve. It's why appraisals exist. So let's talk about the part nobody talks about. How does a free instant valuation make money? Well, go read all the owner forums, guys. It's all there out there on the internet. The type clubs, the pilot communities, it's all there. Two observations keep coming up about these instant AI values. First, the numbers tend to come in flattering, way higher than the owners themselves expected. And second, every report seems to end with the same question. Who would you like to be connected to? A broker? An insurance agent? See, think about the business model for a second. Evaluation that flatters you is a wonderful customer experience. You feel great, you share the report, the flywheel spins, the referrals flow. But a flattering number is not a defensible number, and there is no faster way to lose money in this industry than pricing an aircraft on a number that was built to make you feel good. Come on, people. So here are the three questions I want you to ask. Any valuation, and I mean any valuation, including ours. One, what data is underneath it? Show me the transactions or show me the scraped asking prices, right? Two, who signs it? Who's signing this free value? An accredited appraiser? Whose work has to survive a credit committee, an insurance dispute, an IRS audit, a judge in a courtroom, or an algorithm with a disclaimer at the bottom? And three, what does the publisher earn from your number? See, a subscription fee is a clean incentive, or if referral commission is not. So, here's the standard that actually matters. When a lender takes an aircraft as collateral, when an insurer writes the whole policy, When an estate gets settled or a partnership dissolves, that valuation gets stress tested by people with real money at risk, and lawyers with a retainer. This is the standard VREF has been held to for more than 30 years. Transaction grounded data, accredited methodology, values we sign our name to and defend in court. And let me say this clearly, because I mean it. Innovation and valuation is welcome. Genuinely. More data and better tools make this entire market healthier, and competition keeps everybody sharp, including VREF. But innovation starts with measuring the right thing. And the right thing has never been the asking price. So next time somebody hands you a free number that makes you feel wonderful about your airplane, ask who the hell paid for it. This podcast exists for one reason. To analyze aircraft as capital assets without brokerage spin and without the manufacturer narrative. And remember, when you need accurate, defensible, and data-driven aircraft values, there's only one name in the news in the industry to trust, and that's VREF. Visit VREF.com to get started today. The market is moving. It's just not moving where they're looking. I'm Jason Zilberbrand, and this is the truth about the market. Until next time, fly safe. And stay smart.