# 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...

Thanks to the boys of Mercer College, there are only 16 brackets left intact. (I don't know how many official brackets were submitted)

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Pretty sure it's down to zero now.

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Apparently there's one left.

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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The way I read the standings is that his bracket is not in the billion dollar challenge.  It is in the Yahoo tournament thus shows in overall leaders.

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Apparently there was an opt-in for him that he declined so he could have been in both contests.

He tweeted to WEB asking if there would be something for him anyway.

Yeah, cuz that's how these things work.  ;D

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He just missed the Dayton/Syracuse game.

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Buffett, Gilbert and Yahoo! win  ;D

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