Buffett’s $1 billion bracket participants had no chance


Only a few days into March Madness, the NCAA College Basketball Championship is still up for grabs. As is done every year, millions of fans turn their attention toward bracketology, in which fans vie to accurately predict the results of all 63 games of the tournament in order to win several thousand dollars in gift cards and bragging rights. The odds of accurately predicting the winners of the 63 games of the championship are, of course, astronomical. But with billions of dollars on the line, one best believe that fans would turn out in record numbers — or so hoped business magnate Warren Buffett.

On Jan. 21, Warren Buffett and president of promotions company SCA Promotions Bob Hamman, in cooperation with Quicken Loans, announced that they would present a cash prize totaling one billion dollars to anyone with a perfect bracket, according to the Wall Street Journal. By Friday, however, it was announced that none of the entrants remain in the running to win the $1 billion NCAA basketball challenge, according to ABC News. This wasn’t a matter of bad luck. With multiple low-ranking teams pulling out upsets in the first games of the championship, Buffett’s billion dollars were always safe and sound.

SCA Promotions assists companies in organizing promotional events from sponsorships to prizes on TV shows and has a business model centered on giving away products and money to consumers — of which the predicted incentives are enticing to companies. Brand recognition and long-term increases in sales are just two of the possible outcomes of a well-executed promotion.

It is fairly clear how operations such as My Coke Rewards can rack up free gifts from companies as diverse as Spotify and Delta Airlines when the cost of 30 days of Spotify Premium and a flight to Maui is generally low. One billion dollars, however, is a different story. Comprising more than 10 percent of Buffett’s net wealth, it is easily one of the largest sums SCA Promotions has promoted.

Even more interesting is what Buffett stood to gain from giving away that billion. Though Buffett himself is not a company, he serves as the face of his Fortune 500 company, Berkshire Hathaway, which nearly suffered during his decision with Hamman, according to the Wall Street Journal. On Jan. 30, BRK.B finally struck a low it had not seen since the first quarter of 2013.

Buffett’s billion-dollar bracket challenge wasn’t about charity or the competition. In all likelihood, the billion-dollar bracket challenge served as nothing more than a publicity stunt. Buffett seemed to be trying to save face and ensure stockholders that he was and continues to be unphased by the plunge of his stock.

And it worked. A little more than a week after Buffett announced his March Madness prize, Berkshire Hathaway stock began a steady climb that hasn’t ceased. Buffett stands as the third-richest person in the world with $63.7 billion dollars, according to Forbes. Eleven million brackets were entered into ESPN’s tournament — many more than the 8 million entered last year.

Buffett could afford to put a billion dollars on the line, especially since the odds were in his favor. What were the chances of winning this incredible prize? Little to none.

What has to be one of the more comforting things to Buffett and Hamman is that no one has ever won before. Out of millions of brackets from every year of ESPN’s bracket challenge, not one has ever been able to predict all 63 games. In fact, the chances of filling out that perfect bracket are approximately 1 in 9.2 quintillion, according to Business Insider. Written out that’s 1 in 9,223,372,036,854,775,808.

So, it’s no surprise that only a few days into this year’s March Madness, not a single bracket is left sound in Buffett’s challenge. Once again, Buffett instigated a brilliant business move as carefully calculated as any of the companies that Berkshire Hathaway has bought and sold. This time, however, he disguised it as a fun and “free” game. This is not necessarily a bad thing, just a bit more sneaky than we’re used to seeing from our second-wealthiest American — heads up ,Bill Gates.

 

Drew Klopfer is a junior majoring in  critical studies and English

  • Tony Pow

    It is all about marketing. How much it would cost for this publicity.

    His average return for the last 3 years does not beat S&P500 or SPY that does not require his beautiful mind. The news his fund has a record year, so is EVERY BODY in a rising market again it does not beat SPY.

    The small cap of last year beats his fund’s performance by a HUGE margin. It will give back as it is very seldom the small cap (or similar fund such as bio) beats the market by such a huge margin two years in a row. Hence, I would say it is a better chance for the large cap to beat the small cap this year.

    I do have a chapter to debunk the myths of Buffett in my book Debunk the Myths in Investing (amazon).