$1 billion Madness contest not just chance: Buffett

“I should be institutionalized,” Warren Buffett joked on CNBC on Friday—talking about how he’s feeling about Berkshire Hathaway’s part in insuring a contest by Quicken Loans to offer a billion dollars for the perfect March Madness bracket.

Buffett said in a “Squawk Box” interview that the odds of winning are much better than just a coin-flip on each game—which would yield a 1 in 9 quintillion chance winning.

(Read moreBuffett: I’d be ‘surprised’ if stock prices drop 50% )

Appearing with Buffett, Quicken Loans founder Dan Gilbert said, “When I heard ‘quintillion,’ I was going to say, ‘Warren … do we need insurance here?” But of course the answer was yes, Gilbert added.

The odds of winning increase when you look at some of the historical results in the tournament, Buffett added. “The No. 1 seed team has beaten the No. 16 team over 100 times in a row. The No. 2 seed has almost always beats the No. 15 seed.”

Quicken Loans—whose founder owns the NBA’s Cleveland Cavaliers—is offering the giant jackpot for the perfect bracket in the NCAA men’s college basketball tournament. The grand prize would be shared by any qualified contest participant who predicts the winners of every game.

After the first 32 games, an estimate that several hundred people could be left in he contest is a good guess, Buffett said.

Gilbert said Buffett pitched him the idea for the contest after they toured Detroit, looking the progress being made in the bankrupt city where Quicken is based.

The billion dollars would be paid in 40 annual installments of $25 million each. The winner (or winners) may also choose to get a lump sum payment of $500 million (or share in that amount).

Yahoo Sports designed the online bracket experience, and it’s hosting the destination for the challenge.

The first 15 million qualified entrants to complete the registration process will be eligible to win the billion dollars. The window to enter closes at 1 a.m. EDT on Thursday, March 20.

In addition to the potential grand prize, Quicken said it will award $100,000 for each of the 20 most accurate “imperfect” brackets in the contest to use toward buying, refinancing or remodeling a home.

Quicken will also be directly donating $1 million to nonprofit education organizations in Detroit and Cleveland.

By CNBC’s Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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