Buffett's $1 Billion Safe Bet on NCAA
Warren Buffett’s company has made a $1 billion bet on something most of us already assume to be true: It’s impossible to pick the perfect bracket for the NCAA men's basketball tournament.
Berkshire Hathaway has insured a $1 billion prize by Quicken Loans Inc. that would pay the winner $25 million a year over the next 40 years, or one lump sum of $500 million. It’s by far the largest payout offered for predicting the National Collegiate Athletic Association's tournament -- Fox Sports recently put up $1 million for the same feat, and Yahoo’s contest would have paid $5 million.
With the odds of filling out a flawless, 64-team bracket about 1 in 9 quintillion, Buffett’s money appears to be safe. For reference, you’d have a better chance at hitting four straight holes-in-one or winning three consecutive Powerball lotteries. Last year, no entries in ESPN’s Tournament Challenge remained perfect heading into the round of 32; the two brackets that finished tied atop the leader board incorrectly predicted nine and 12 matchups.
In fact, the odds of filling out a perfect bracket are so low that other companies have been willing to bet on its impossibility. In 2012, when Fox Sports announced its contest, HCC Insurance Holdings Inc. signed on to underwrite the $1 million prize. This year’s contest, like those that came before, is just the stunt marketing designed to use big numbers to garner headlines around March Madness.
Both companies involved have longstanding ties to the sports world. Quicken founder Dan Gilbert owns the National Basketball Association's Cleveland Cavaliers, the American Hockey League’s Lake Erie Monsters and the Arena Football League's Cleveland Gladiators, which all play in the Quicken Loans Arena. In addition, Berkshire Hathaway has underwritten sporting events and contests in the past, insuring the 2002 World Cup against cancellation amid fears of a terrorist attack and betting in the 2010 soccer tournament against France, which was eliminated by South Africa in the group stage.
(Kavitha A. Davidson is a Bloomberg View columnist who writes about sports. Follow her on Twitter at @kavithadavidson.)