Gandalf explains his motivations in The Quest of Erebor, however this is just Tolkien's attempt to tie together The Hobbit with The LotR. In reality it is my opinion that The Hobbit was written for children, and a character like Bilbo would appeal to children. He is sorta "goofy and bumbling" and adds comic relief to a story that, to a child's eyes, has some pretty frightening creatures. When he wrote the LotR, Tolkien incorporated the tale of the Hobbit and he had to give a reasonable explanation why he would choose someone like Bilbo to accompy Thorin & Co. on a very serious quest.
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