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Buffett’s $1B March Madness bet

By Jay MacDonald ·
Friday, February 7, 2014
Posted: 6 am ET

Ah, March Madness! The festive season of office-pool meltdowns, embarrassing displays of alumni colors and, occasionally, a wager so outrageous that it prompts the question, "Been to Colorado lately? Or Washington state?"

And while I seriously doubt that a level-headed dude like Warren Buffett has turned marijuana tourist, news that his Berkshire Hathaway will back the $1 billion -- with a "B"! -- prize offered by Quicken Loans to contest entrants who correctly pick every winner in this year's NCAA men's basketball tournament certainly sounds Rocky-Mountain-high.

Billion, schmillion

Buffett, of course, is no newcomer to unusual, high-stakes insurance gambles. His well-diversified Omaha, Neb.-based company, which owns everything from Geico auto insurance to Dairy Queen and Fruit of the Loom, previously prospered by taking premiums in exchange for protection of the 2010 World Cup soccer finale in South Africa. Nor does the B-word frighten Buffett, who previously backed a $1 billion prize offered in a Pepsico-sponsored contest.

If you can't wait to lock in your brackets, here are the details: The 68-team, single-elimination NCAA tournament begins in March. Submissions to the Quicken Loans contest will be limited to one per household and capped at 10 million entrants. The winner will be paid in annual installments of $25 million for 40 years. Multiple winners will split the billion bucks.

What are your odds of joining Buffett in the billionaire's club? Jeff Bergen, a math professor at DePaul University in Chicago, crunched the numbers and puts the odds at less than 1 in 9 quintillion -- that's a 9 with 18 zeroes nudging it forward.

"If you're just guessing, you basically have no chance," Bergen says in a video about the contest.

The fattest of chances

Even a knowledgeable bracket fanatic like President Barack Obama has only a 1 in 128 billion chance of winning, in Bergen's estimation. Oh well, back to the old day job.

Nor is history on your side. Last year, not one of the 8.15 million brackets submitted to ESPN ran the table. Even after the field was cut in half, the best anyone could do was 30 and 2.

Even if a long shot were to come in, a billion-dollar loss would barely warrant a text message for the world's fourth-wealthiest individual, whose company insures against far more likely and costly natural catastrophes on a daily basis. As Buffett reassured stockholders regarding this March Madness bet, Berkshire Hathaway, with stock and bond assets of $170 billion, could withstand a $250 billion loss, or roughly triple the worst natural disaster in history, and still post a "significant profit" for the year.

While Quicken Loans refused to say how much they're paying for Berkshire Hathaway's just-in-case coverage, odds are that the Oracle of Omaha will emerge the only victor in this high-stakes March Madness wager.

Follow me on Twitter: @omnisaurus.

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February 17, 2014 at 2:58 pm

William, think about what you said.....they do every day

February 17, 2014 at 1:09 pm

Buffett fully knows the ridiculousness of his high stakes wager... but if anyone should win his 'against all odds' wager i think he really could care less. After all its only a drop out of his proverbial bucket. However the optimist... i would love to see someone run the brackets!! Million... Billion... Schmillion... indeed!!

February 17, 2014 at 12:49 pm

Just a suggestion if Mr Buffet wants to disperse part of his wealth. He could give every registered voter in the United States $100,000 to $250,000 and save himself lots of cash. Put money back into the economy, help those who can't find work and ideally help those who can't even feed their children on very sad wages they make.....How's that for an Idea Mr. Buffet?

February 17, 2014 at 11:38 am

before the law went into affect on raising credit card interest rates the company raised the rates. I am a senior who works and would like Mr. Buffet to loan his money at a reasonable rate so one could get their cards paid off. I don't want a hand out just don't want a rip-off!

February 15, 2014 at 12:25 pm

Amen Howie, how do I enter, my church needs that kind of money!

February 15, 2014 at 4:06 am

to all who have made comments suggesting or telling Mr. Buffett how he should spend his hard earned money,or chiding him for this so called contest; I would be interested to hear how you would respond to anyone who would be so bold (or foolish) enough to tell you how you should spend your personal income.

February 13, 2014 at 5:51 pm

How can I enter into this so called contest. Our church could do a lot of good with that kind of MONEY.

February 13, 2014 at 4:21 pm

The only reason I am entering this contest is to maybe get lucky so we can get a double wide mobile trailer on our property so we won"t have to spend another cold winter.At our age ,72-74,we can"t take the cold like when we were young.God Bless.

February 13, 2014 at 11:36 am

If Mr. Buffet has money to waste tell him to send it to those who are jobless, homeless, and hungry. My state, North Carolina, has been hit hard for several years with all of our major industries sent overseas. If I had the money Mr. Buffet has, there would no one without their needs! Shame on you Mr. Buffet---remember those who are way less fortunate than you!

February 12, 2014 at 9:39 pm

Mr.Buffet would love to have a house.