By now people should know not to bet against Warren Buffett. The worlds fourth-richest man has shown time and again that despite his aw-shucks image he is one of the most opportunistic and shrewd investors around. Still, when the Berkshire Hathaway CEO announced in January that he was teaming up with Quicken Loans to offer $1 billion to anyone who could correctly pick all 63 games in this years NCAA mens basketball tournament, dreamers from Main Street to Wall Street started thinking about how theyd spend the money and whether it made more sense to take a lump sum of $500 million or receive $25 million payments spread out over 40 years. I planned to go with the lump sum.
Come tournament time, it didnt take long for reality to set in. Like many of the 15 million or so who signed up for the billion-dollar challenge, I saw my bracket get busted in the very first game, when the Dayton Flyers knocked off Ohio State on a last-second layup, beating the No. 6 seed 60-59. By the end of the first day, an estimated 95 percent of those who had taken Buffetts bet had seen their hopes shattered. When Duke, a No. 3 seed, lost in the first game the following afternoon, the number of remaining perfect brackets was fast approaching zero, which it reached within a few hours.
Of course, Buffett was never personally on the hook for the $1 billion (though with an estimated net worth of $58 billion, he surely could afford it). Berkshires National Indemnity Co. wrote the insurance policy to cover the Quicken Loans payout in the unlikely scenario that someone won.
In a very different kind of wager, Buffett has been spending billions of dollars on wind turbines and solar farms for Berkshires MidAmerican Energy Holdings Co. utility business. In January 2012 the companys MidAmerican Renewables subsidiary purchased a $2 billion solar farm in San Luis Obispo, California. That same month it bought a 49 percent stake in a $1.8 billion Yuma County, Arizona, solar project from Princeton, New Jerseybased independent power producer NRG Energy. A year later MidAmerican resumed its shopping spree, acquiring projects in Californias Kern and Los Angeles counties.
MidAmerican Energy has been buying and installing wind turbines since 2004 and has the capability to generate more electricity from wind than any other regulated utility in the U.S. Its 1,267 wind turbines account for nearly 30 percent of the companys power-generation capacity. MidAmericans current expansion will add 448 turbines and 9 percentage points of generation capacity when it is completed in 2015.
Despite Buffetts big bet on renewable energy, the Oracle of Omahas views on climate change are anything but clear. In August 2009 he wrote in an op-ed piece for the New York Times that the world properly worries about greenhouse emissions and that doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Environmental activists may have been too quick to applaud those words. The column was about greenback emissions in Buffetts memorable phrase and the potentially catastrophic impact of the U.S.s growing deficit; it had little to do with climate change.
The Berkshire CEOs comments on CNBC in March may be a truer reflection of his views on what has become a divisive issue, especially among Americans. When asked how the rise of extreme weather events in recent years has changed the way Berkshires reinsurance business calculates risk, he responded: I think the public has the impression that, because theres been so much talk about climate, that events of the last ten years from an insurance standpoint in climate have been unusual. The answer is, they havent. Buffett went on to say that the effects of climate change, if any, have not affected ... the insurance market.
Regardless of his views on climate change, Buffett is positioning MidAmerican Energy to be a leader in renewable energy, which will play an important role as the world transitions to a lower-carbon economy. As for the NCAA tournament, future billionaires (including me) will have to wait until next year.
Follow Michael Peltz on Twitter at @mppeltz.