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Buffett backs $1 billion NCAA bracket contest


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Bloomberg's take is a fun read:




My Bloomberg View colleague Kavitha Davidson says that the odds of picking a perfect bracket are about 1 in 9 quintillion. That's just the odds of a random bracket winning, though, and would only be the true odds if the NCAA tournament were decided by a series of unbiased coin flips, which would make for very boring television. (I would watch!) More reasonable guesses -- cutting out brackets that have 16 seeds winning or whatever -- range from 1 in 772 billion to 1 in 128 billion. Odds of 1 in 128 billion imply a fair price for Buffett's billion-dollar policy of just under a penny.


But you can improve on that a bit further. Here is a claim that "favorites historically win about 72% of the time, which would yield a probability of perfection of one in 970 million," which sounds like the odds of a perfect all-favorites bracket but whatever. Or consider that last year's winners of the ESPN Tournament Challenge had 9 and 12 errors. One quick way to put an upper bound on the price is to imagine a contest made up only of people who were that "good"' at predicting the tournament, and asking what their odds of being perfect are. The odds of a bracket with no more than 12 errors being perfect are about 1 in 4,000. That implies a fair price of around $250,000.


So we get a fair price bounded by (nothing, $250,000). Which, compared to a billion dollars, is a pretty tiny range: Let's just call the fair price $250,000. On top of that fair price you need to add some profit, and that profit probably needs to be pretty hefty, for obvious reasons. Nobody likes to sell teenies: A trade with a tiny profit and a large but improbable potential loss will just look like a squicky situation, at its fair price, so you gotta charge more for it. This is mostly a matter of risk aversion: Losing a billion dollars is more than a thousand times as bad as making an extra million dollars is good, even if you're as big as Berkshire Hathaway. It raises uncomfortable questions on earnings calls and so forth.

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  • 2 months later...

Apparently there's one left.


"Brad Binder's Breathtaking Bracket" ...................cheesy.



He's got Stephen Austin over UCLA which is the upset which will be his downfall.  ;D


Interesting, he has an all Michigan final.  As an Irish fan, I cannot support the Wolverines in a championship game of any kind.

May the curse of Chris Webber continue this year.  8)

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