It’s never a great idea to be on the other side of a wager with Warren Buffett. But the free prospect of a billion dollar payday is probably enough to make you rethink that. Buffett’s company is insuring the ultimate March Madness bracket. The competition is for anyone who submits a perfect bracket for the 2014 March Madness Tournament, a prize of either $25 million a year for 40 years, or $500 million lump sum is up for grabs. Sure, with inflation neither of those is a actually billion in today’s money, but as always, that’s what happens when you read the small print.
How Likely Is a Perfect Bracket?
Not likely. A perfect bracket means predicting the winner of every game correctly. Since there are 63 games, it’s a little better than tossing a coin 63 times in succession and calling the correct outcome every single time. The odds are slightly better than a coin toss since Florida are likely to be more successful in the tournament than Weber State, so the outcome of most games isn’t completely 50/50, the sides with the better records and teams do have an edge. About two thirds of the time in the current format, a number 1 seed has won the whole competition.
Nonetheless, there are over 9,000,000,000,000,000,000 bracket options. That’s 9 quintillion in case you were wondering. Plus, to make a payout even less likely the competition is capped at 15 million separate individual entries, so the chances of anyone of those 15 million entries winning is about one in 600 billion. Even though Warren’s payout looks big, the expected value of his payout is less than 2 tenths of one cent. This is because it’s so unlikely to happen. Good odds for Warren, but not for you.
You Are Much More Likely To Be Eaten By A Shark Than Have A Perfect Bracket
These are extremely small numbers, but to put things in perspective you are about 1 million times more likely to be attacked by a shark than achieve a perfect bracket according to the shark attack database at the Florida Museum of Natural History. And, despite what watching Jaws might lead you to believe, shark attacks are extremely rare.
How Warren Buffett Thinks About The World
This bet where the odds are stacked in Buffett’s favor, is just another example of how he thinks about the investing. He favors predictable growth in companies that are good value, and bets that few people are able make which are extremely unlikely to payout. That plan has worked out pretty well for him, even if he did pay out a billion personally, he’d still have over $40 billion left. We follow much of Buffett’s thinking at FutureAdvisor including a bias towards value stocks, and favoring slow and steady returns over big bets that are unlikely to pay off. Nonetheless, if you’re feeling lucky, you have until late on March 19th to get your bracket in here.
Photo – mvongrue