Like most (if not all) of you, I've entered the bracket. And like my occasional attempts to play the lottery, I'm well aware that I won't win. As I've said before, the entertainment value inherent in thinking about what I'd do with lottery winnings makes the $5 investment well worth it. In the case of the Billion Dollar Bracket, it doesn't even cost anything. Why wouldn't I give it a (long, long, long) shot?
No, I'm not going to win. Neither are you. But I'm intrigued by a thought experiment that the Quicken/Yahoo bracket contest has provoked. I first saw it on Andy Glockner's Twitter feed (@andyglockner), but it's seen broad play since. As Glockner contemplated it:
As the mathematically inclined in our midst would tell us, a 60% chance at the $1B yields an expected value of $600 million. Rationally, we know that $600m > $25m, which suggests that we should choose to roll the dice.
I'm here to tell you that 90% of Americans would take the bird in hand. I'm one of them. $25 million is life-changing, I'm-never-working-another-day-at-something-I-don't-love, set-my-family-up-for-generations money. (Even if it's actually only $13 million post-tax, you could put blow $3m on hookers and booze and still sock $10m away to earn $500k a year in interest with relative ease.) Different people obviously have different thresholds - I've got simple tastes, as you know.
Choosing to take the risk on on the big payday (even assuming a $1m consolation prize) yields a 40% chance of spending the rest of your life wondering what might have been. The psychological impact of that seems a heavy burden. But so does the regret that would follow if your team won the final game, which would mean you essentially made a $575m mistake.
I guess for me, at some point, enough is enough. Call it a $575m stress-reduction premium. And give me my money.
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