Wizard
Joined: Oct 14, 2009
• Posts: 23328
January 22nd, 2014 at 3:03:05 PM permalink
An article in the Daily News says Warren Buffet is offer one billion dollars to anyone who can correctly predict all 63 games in the 2014 March Madness bracket. It claims that the probability of winning is 1 in 4,294,967,296. In case that number looks familiar (JB) it equals 2^32.

That isn't what I get. Let's assume one were to pick the higher ranked seed in every game. The following table shows the probability of winning each game, based on historical experience.

Game Count Wins Prob. Win Games Prob. All Wins
1 vs 16 116 116 1.000000 4 1.000000
8 vs 9 116 58 0.500000 4 0.062500
5 vs 12 116 75 0.646552 4 0.174748
4 vs 13 116 91 0.784483 4 0.378733
6 vs 11 116 78 0.672414 4 0.204431
3 vs 14 116 99 0.853448 4 0.530529
7 vs 10 116 70 0.603448 4 0.132605
2 vs 15 116 108 0.931034 4 0.751386
1 vs 8 60 49 0.816667 4 0.444815
4 vs 5 62 34 0.548387 4 0.090438
3 vs 6 64 36 0.562500 4 0.100113
2 vs 7 66 50 0.757576 4 0.329385
1 vs 4 52 36 0.692308 4 0.229719
2 vs 3 48 29 0.604167 4 0.133238
1 vs 2 56 31 0.553571 4 0.093906
1 vs 1 0.500000 3 0.125000

With the last three games all 1- vs. 1-seed I'm assuming a 50% chance of getting each one right.

That said, if you take the product of everything in the "Prob. All Wins" column the answer is 1 in 46,940,073,802. That looks pretty far off from the 1 in 4,294,967,296 quoted in the Daily News. If all 63 games had the same chance of being a winner, then my figure would suggest a probability of success of 67.7% per game, and 70.3% for the Daily News.

Does anyone see a flaw in my math? How about a logical argument for the 1 in 2^32 used by the Daily News? Granted that the higher ranked seed (lower number) is not always the favorite, but that can't be the only reason for this disparity. Thoughts?
It's not whether you win or lose; it's whether or not you had a good bet.
GWAE
Joined: Sep 20, 2013
• Posts: 9854
January 22nd, 2014 at 3:24:52 PM permalink
I assume he bought insurance for this. How much do you think he is paying for the insurance? It has to be astronomical.
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Wizard
Joined: Oct 14, 2009
• Posts: 23328
January 22nd, 2014 at 3:28:51 PM permalink
Quote: GWAE

I assume he bought insurance for this. How much do you think he is paying for the insurance? It has to be astronomical.

If anyone can scrape up a billion dollars it is Warren Buffet.
It's not whether you win or lose; it's whether or not you had a good bet.
AxiomOfChoice
Joined: Sep 12, 2012
• Posts: 5761
January 22nd, 2014 at 3:31:05 PM permalink
Buffet sells insurance, he doesn't buy it :)

If he is making this offer from his personal stash, he would be crazy to insure it.

If it's one of his companies (wasn't Quicken Loans involved somehow?) that might be different.
JimRockford
Joined: Apr 17, 2012
• Posts: 542
January 22nd, 2014 at 3:39:14 PM permalink
Quote: GWAE

I assume he bought insurance for this. How much do you think he is paying for the insurance? It has to be astronomical.

Buffet said that one of his own insurance companies is writing the policy so it is somewhat self insured. I guess other holders of Berkshire Hathaway are sharing the risk.
"Truth is ever to be found in the simplicity, and not in the multiplicity and confusion of things." - Isaac Newton
LarryS
Joined: Feb 26, 2011
• Posts: 1410
January 22nd, 2014 at 3:52:42 PM permalink
I though a company is offering this, and Buffet is underwrting it.

Like espn or whatever company is promoting it.....and they pay buffet x amount to insure it for 1 billion.

I mean what does buffet himself care if someone can pick the right brackets. He is a businessman. What does he make from this deal?

I guess if I understand this right...he makes the cost of the insurance policy. He limits it to 10 million entries.

am i understanding this wrong?
AxiomOfChoice
Joined: Sep 12, 2012
• Posts: 5761
January 22nd, 2014 at 4:03:42 PM permalink
Quote: LarryS

I though a company is offering this, and Buffet is underwrting it.

Like espn or whatever company is promoting it.....and they pay buffet x amount to insure it for 1 billion.

I mean what does buffet himself care if someone can pick the right brackets. He is a businessman. What does he make from this deal?

I guess if I understand this right...he makes the cost of the insurance policy. He limits it to 10 million entries.

am i understanding this wrong?

It sounds like quicken loans is getting a lot of advertising from this.
treetopbuddy
Joined: Jan 12, 2013
• Posts: 1739
January 22nd, 2014 at 4:13:59 PM permalink
What an odd proposition from The Orifice of Omaha.
Each day is better than the next
DRich
Joined: Jul 6, 2012