Wednesday, January 22, 2014

Warren Buffett Makes Huge Billion Dollar Bet on March Madness Basketball

Quicken Loans, the nation's fourth largest mortgage lender is offering a chance at a $1 billion prize for completing the perfect bracket in this March's men's college basketball championship tournament.

Warren Buffett's firm Berkshire Hathaway is backing the challenge.

Any qualified entrant who correctly enters the contest and predicts the winners of every game in the tournament will share the total $1 billion prize paid in 40 annual installments of $25 million. Alternatively, the winner(s) may elect to receive an immediate $500 million lump sum payment or share in that lump sum payment if there is more than one perfect bracket submitted.

To be eligible for the $1 billion grand prize, entrants must be 21 years of age, a U.S. citizen and one of the first 10 million to register for the contest. At its sole discretion, Quicken Loans reserves the right and option to expand the entry pool to a larger number of entrants. Submissions will be limited to a total of one per household. All qualified entrants are eligible for the 20 1st prize awards of $100,000 for selecting the competition's top 20 most accurate "imperfect" brackets.

“It’s going to be fun,” Buffett told NYT. “If there’s one left at the end, I plan to go to the game with him or her. I’ll take a check along in my pocket." 

While the news focus has been on the payout, it is important to note that this really is a billion dollar bet by Buffett. Quicken Loans is surely paying him a significat fee to back the bet, though no news accounts report what the payment amount is.

There are very, very long odds that anyone will actually pick the entire correct brackett (see below), but Buffett loses big if there is a winner. If there is no winner, Buffett just pockets the fee Quicken has paid him.

Note well the long odds of a winne,r described below, if everyone in the US filled out a bracket. So it is curious that Quicken is limiting entries to 10 million, which moves the odds in favor of the sly fox Buffett by an even greater degree.


  1. I have to assume you are familiar with "hole-in-one" insurance policies and reinsurance. Buffett owns an insurance company. There is no way he would actually make the payout. If there is a winner, the prize will be covered by a multitude of insurance companies.

  2. Think of the quants that will create "likely" scenarios and enlist friends and family in the next few days, hedging each by eliminating "easy" plays and working the way down. All the data is available- if I knew fuck-all about sports, I would certainly try!

  3. It's a good thing Buffett bought all those local tv stations and newspapers during the aftermath of the 2007/08 collapse. Free press, indeed.

  4. The 10 million entries limit is probably more of a limit on managing the entries than a way to control risk. Server cost, computing time, programmers, etc... They are controlling the cost of running the contest.

    1. Assuming some lower tier schools can be eliminated from the "Sweet 16" and even more from the "Elite 8" then the math makes it likely someone will win. The 10M limit seems to be a block.