Why is Warren Buffett offering $1 billion dollars to one person (out of 10 million entries) for selecting, in advance, the perfect 63 team winners of the NCAA Basketball Tournament - the Sweet Sixteen or March Madness? Why is the man who has been espousing "sensible investment strategies" for most of his probably six decades of experience suddenly hosting the most cockamamie gambling proposition ever offered? Is it time to call in Charlie Munger and tell him to put Mr. Buffett on a tight allowance with close financial supervision? Or does Mr. Buffett have some other ulterior motive?
On the face of it, the gambit has little chance of producing a winner. At the opening bell, March 3, contestants have to submit a slate of 63 winners of the sixteen days of college basketball playoffs.
Oddsmakers report the chances of going the distance and selecting all winning teams is about 1 in 5 billion, but Mr. Buffett is hedging his bet by buying insurance that it won't happen. If a winner gets close, Mr. Buffett will simply meet with the lucky contestant and "offer him or her a deal too good to refuse." Who really believes it will be a "her"? Actually, don't bet against a "her" because it just might happen!
College basketball is supervised by the National College Athletic Association. The NCAA supposedly discourages gambling on college basketball games. Did anyone at the NCAA comment on Mr. Buffett's major incentive to break NCAA rules? Or are we "winking, winking" again?
Other than teaching America's youth that gambling on college basketball bracket winners is the best investment of their intellectual endeavors for the next month, what are the lessons Mr. Buffett could be offering?
By collaborating with Quicken Loans, Mr. Buffett is demonstrating the power of outlandish gambling escapades as a marketing ploy. Not only does Quicken's CEO Dan Gilbert share in Mr. Buffett's advertising limelight (PR by star-power association), but Quicken also gets the freebie email addresses of the potential 10 million entrants. Actually, they will get significantly more emails because many more will try to enter and never make it into the candidate pool - just suckered into the Quicken Loan email list pool.
In a recent op ed piece by billionaires Eli Broad and Richard Riordan (LA Times, December 27, 2013), we were told "it's not a sin to be rich." We were also told that society benefits when the rich create jobs, entrepreneurial ventures, and socially-beneficial nonprofits and charities. How is society benefitting in any way, shape, manner or form by Mr. Buffett's tossing out all of his sensible investing insight on a $1 billion marketing gamble?
Newly-appointed Maria Contreras-Sweet, prospective head of the SBA and founder of ProAmerica Bank, could have shown Mr. Buffett how even 10% of his NCAA gamble (how often have you seen those two words side by side?) invested in America's science, technology, engineering, or math business opportunities could make a significant difference in income and job prospects for our college students and graduates. But, no, Mr. Buffett is having a good time envisioning himself court-side, maybe with Spike Lee.
Wasn't Mr. Buffett the one who bemoaned the failure of our tax system to "level the playing field" between the tax burden faced by his low-income secretary/assistant and himself? Is it possible that Mr. Buffett is trying to demonstrate to us the true economic costs of income inequity and an unfair tax structure? Well, he's convinced me, but -- as evidenced by the drooling that has emerged among college basketball fanatics -- it would appear that his lesson might be way too subtle to have such a sensible desired impact.
Mr. Buffett certainly knows that huge financial incentives, like his wager, have an inevitable likelihood of diverting the attention of millions of young people away from meaningful and productive endeavors and toward the mad gambit that he has proposed. It adds no value to their education, creates no jobs, builds no infrastructure and provides essentially nothing of substance.
Mr. Buffett's own advice and wisdom henceforth will be painted and possibly even tainted by this inglorious venture into financial farce.