March Madness Madness

There are two ways in which I am handicapped in my analysis of today’s numerical fiction candidate.

First, I don’t like basketball. I’m not sure why. I’ve been accused of being off  the deep end about baseball and I’ll catch the occasional football and hockey game, but basketball does nothing for me. I never liked playing it as a kid, even during that brief window when I was taller than my friends.Obama NCAA Bracket

Second, I do not have a job.

So I lack much in the way of personal experience to help me understand what is apparently a GDP-threatening scourge, the annual NCAA Men’s Basketball Tournament. It seems that employed basketball fans, who make up a surprisingly large proportion of the population, will waste enough work time to cost their employers $1.8 billion in "unproductive wages" in the tournament’s first week alone. Add in the money lost gambling on the games and the hit to e-commerce from the slowdown in internet speeds caused by people watching the games, and you’ve got a serious menace to the economy.

Or so I am told.

Then again, could this possibly be numerical fiction? These numbers certainly qualify on the three warning signs: they reinforce previously held beliefs, they are remarkable but not unbelievably extreme, and there is no organized group that would object to them.

Perhaps I can use my ignorance of this subject to my advantage. Since I know nothing about it, I can approach it with a open mind and more than my usual level of scientific purity. I will be like an anthropologist discovering a new tribe deep in the jungle.

This particular tribe exhibits peculiar behavior for only a few weeks a year. During this time, they participate in ritualized betting pools with their work colleagues and then use their employer provided computers and internet connections to watch the NCAA games that they have bet on during work hours. Last year, CBSSports.com’s free webcasts of the games logged 8.6 million hours of viewing. That’s a lot of productivity busting broadband usage.

Wait a second. No it’s not.

According to Nielsen, Americans admitted to spending an average of 3 hours a month watching internet video in the first quarter of 2009. That works out to about 915 million hours. So March Madness was a nice blip for CBS, but it was less than one percent of the overall internet video viewing going on during the tournament. And it is hard for me to believe that college hoops was more likely to have been watched on company time than the other 906 million monthly internet video hours.

So maybe the 8.6M number doesn’t support the economic menace story very well. But there’s still that $1.8 billion in wages paid to workers wasting time on basketball.  That’s real money, ain’t it?

The $1.8B figure comes from John Challenger, CEO of of Challenger, Gray & Christmas, a Chicago-based firm that describes itself as a "global outplacement consultancy." I will leave to the reader to ponder why a company that works with people who have just been let go might feel it was an expert on the productivity effects of the NCAA tournament. Apparently, estimating the workplace impact of March Madness is an annual ritual there.

Challenger’s calculation, helpfully laid out in the link above, runs off the rails into implausibility almost immediately. "A 2009 Microsoft/MSN survey found that 45 percent of Americans planned to enter at least one college basketball pool."

I am quite fond of MSN. Posts from this blog regularly appear on MSN Money’s Smart Spending and I know a fair number of you found Bad Money Advice that way. But the 45% number, which comes from an on-line survey, seems a tad high to me. Again, I am outside my field of expertise, but Gallup did find, via an old-fashioned phone survey, that only 4% of Americans bet on college sports of any kind in 2007. To put 45% into further perspective, consider that the same Gallup survey found that 46% of Americans bought a lottery ticket in 2007.

Challenger takes the 45% and multiplies it by the 130M US non-farm workforce (I guess farmers either don’t like basketball or object to gambling) to arrive at a figure of 58.3 million NCAA office pool participants. Then, based on the $748 average weekly wage number from the Bureau of Labor Statistics, he finds that the average worker is paid $18.70 an hour or $6.23 for a 20 minute period.

So, among the 58.3 million office pool participants, every 20 minutes of unproductive work time costs employers roughly $363.2 million (58.2 million X $6.23). It is conceivable that workers participating in pools could waste an average of at least 20 minutes per day the week between Selection Sunday (March 14) and the end of the first round (March 19), when March Madness-related activity is at its height as people research teams, put together their brackets and watch games online during work hours.

“By the end of that first week, employers across the country may pay unproductive workers a total of $1.8 billion,” said Challenger, multiplying the $363.2 million by five.

I will be the first to concede that 20 minutes a day wasted on March Madness is conceivable. But then so are a lot of things. Not knowing much about this, I will accept Challenger’s 20 minute number. And his wage number is a reasonable a shot in the dark as any I can come up with. But, just for fun, I’m going to plug in some different numbers at the start of the calculation.

I will use 4% instead of 45% overall participation. Based on the Gallup results, which were for college sports betting of any kind, that’s a generous estimate. Then I am going to cut the workforce number in half. Office dwellers may predominate in the blog-reading audience, but they are not, in fact, the entire non-farm workforce. And although I would be willing to believe that the folks at McDonald’s and Wal-Mart are just as likely to enter an NCAA pool as cube dwellers, they are much less able to spend company time on it. So I get 2.6 million office pool entrants.

2.6M times $6.23 times five days is about $81 million, somewhat less than $1.8 billion. And even $81M is probably orders of magnitude too high. Virtually all office workers that could be wasting time on March Madness are not paid by the hour. They are paid to accomplish what their boss considers to be an appropriate amount of work in a day. If they fritter away too much time on-line they will sooner or later have to make it up if they want to stay employed. Their bosses know that they do not work constantly all day long and they don’t care. That’s not the deal. So the basic premise that 20 minutes spent on a non-work activity is 20 minutes lost to the company doesn’t really make sense.

Verdict: numerical fiction.

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