If lotto tickets told the truth
Scathing and right-on visual commentary on the lotto from Cracked.com -- it's not just a tax on innumeracy, it's a finely tuned psychological weapon used to exploit cognitive blind-spots and profit from human misery.
If Lottery Tickets Told the Truth (via JWZ)
The recession has seen a rise in lotto sales as people streamline their financial idiocy from "paying for money they don't have" to "paying for money they'll never have." Even the Wikipedia article says that "buying a lottery ticket reduces the buyer's expected net worth..."
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I buy a ticket about once a month if I end up in that line at the grocery store. In two years I haven't gotten even one single number. Improbable probability is a two-edged sword.
It isn't a tax on the stupid.
It's a simple way to buy an evenings worth of hope.
"It's a simple way to buy an evening's worth of hope." Which means it's a tax on the hopeless. State lotteries are a way to shift the tax burden from the well-off to the poor.
Actually, I kind of wish I could get excited about lottery tickets or other forms of gambling. Maybe I'm missing out on something? An evening's worth of hope sounds pretty nice.
Alas, I have too much statistician in my brain to actually buy a ticket. I'd view any lottery purchase the same way I'd view any monetary investment, except lottery tickets generally have a predetermined and published rate of return (and it's always lower than 1:1). I'd feel too much like a retard, even if I won. So I never buy them.
If it was a tax you would be required to pay it. This isn't a tax. It's a service provided by the government on a 'user pays' basis.
People who would like 'an evening's worth of hope' or 'a (small) chance at a lot of money' can pay a few dollars for it. People who would prefer to keep a few dollars can do so.
Presumably many people would prefer to buy 'a lifetime of luxury' or 'a high likelihood of a lot of money', however no one is willing to provide that at as widely affordable a price as lottery tickets, so you take what you can get.
odds of winning 6/49 in canada (where lottery winnings aren't taxed and you get a full lump sum): 1 in 14 million. If you don't buy a ticket: 0 in 14 million.
For $2, I'll take my (obviously slim) chances, TYVM.
I play the lottery every once in a blue moon. Why not ? I spend *maybe* $10 a year on them and sometimes I win a little. I know people who won $50,000 just by being bored and purchasing one for fun.
Its just gambling with very very poor odds, but chance of very large return.
Then again, I have wasted 10 times that on a few iPhone games that I played once and hated *shrug*
I'm with #2. Compared to movie tickets, lottery tickets are a rather good bargain: 2 hours of escapism for $8.50, vs. 2 days for $1.
I have bought lottery tickets, once a week, for years. Yes, there are people who can't afford to part with the money they spend on them, and they buy them way too much, but for me it's well worth the price of entertainment and possibility, however remote. I'd buy that for a dollar! And I do, once a week.
Scratch-off cards are another matter. I stay away from those. They tend to be far more expensive and it makes me really, really sad when I see people who obviously shouldn't be wasting money on them buying up five at a time for $5-$20 a pop.
I usually buy a ticket for a drawing when the pot gets over $300M.
$1 is worth the leap from no chance at all to 1 in 175,000,000, for me at least.
Like they say, you can't win at all if you don't play.
I don't buy lottery tickets, but I don't really think of them as a bet you're going to lose... I think of them as a great way to fund a lot of worthwhile stuff (watershed restoration projects, education projects, etc).
Since it is a tax on cockeyed optimists with more hope than math skills and there's plenty of that available to tax, why not just crank out "new and better" lottery systems that give you a better* chance of winning more** money***? More people "play" and there's more "I can't believe it's not Taxes!" cash for various and sundry things such as roads, cops, public services, etc. and everyone's happy because "we have the best system in the world! Hardly any taxes, all the normal public services**** and the universe's biggest lottery!"
I don't know why this isn't already in place. It's not like people in government aren't cynical or crafty enough to do this today. It's not like math skills are generally getting better. Is it because poor people don't have enough money? Someone could always do a "rich people only" lottery for those with Amex Black cards.
* New odds: 1:999,999 will win! Old odds: 1:1,000,000.
** More money: $10,000 is what you win now (used to be a paltry $9,800!)
*** PS: the taxes on lottery earnings have risen from 40% to 60%, but it's ok cause you win more (see **) now!!!
**** Still no decent health care system, but don't be so lazy! Play the lottery, win a bunch of cash and pay for a nice room at the Mayo Clinic!
Like several other commenters - I buy *one* ticket, and typically only when the prize fund is up to insane sums of cash!
If I lose (which has been the case on every purchased ticket since the lottery started here in the UK) then I've spent £1 on a ticket every other month or so... but, if I win, I'll come back and be sure to let you all know :-)
In New Zealand money on lotto and gaming machines goes to charities. We have a lotteries commission that distributes the proceedings to charitable groups who apply every year. So the money goes from the poor (generally) over to different poor people through charities. Including charities to aid problem gamblers.
I didn't fail math class (or maths class as we say here), but I didn't fully understand probability until learning about it specifically as part of my psychology stats training. Now I have enough knowledge to design some awesome gambling machines with variable ratio award payouts. Awesome.
Erk. There need be absolutely nothing irrational about playing the lottery.
It depends on how the subject values the cost of the ticket vs the amount won (newsflash: a subject may value $1000 as not exactly 100 times more valuable to her than $10, and so on).
There's also the non-tangibles - buying hope (or even buying a day-dream).
Anyone who calls a lottery a tax on people who don't understand probability/maths doesn't properly understand the implications of Game Theory.
As the flip side of "you can't win if you don't play", consider that from a statistical point of view (out to 'N' sigmas), your chances of winning are the same whether you play or not.
'Buying hope' - buying FALSE hope.
In all probability.
people love to bash lotto players. "it's a tax on people who can't do math," but so is buying drinks at a bar
You know what else also reduces the buyer's expected net worth? Insurance. Maybe looking at the expected payoff isn't the ultimate criterion of reasonable behaviour.
If I get a dollar's worth of entertainment out of a ticket, the probability of winning is irrelevant. I've spent $10 to see a bad movie in the theater and lost not just the money but two hours of my time, is that a tax on people who read bad reviews?
I always win at the lottery... 'cause I never play ;)
Some people spend a dollar on lottery tickets, others buy sugary sodas, fart apps, unicorn t-shirts, or comic-book figurines.
One man's waste etc.
When you talk to people who are into these things, one thing becomes readily apparent. They always remember the wins, but not the losses. If you get to quizzing them over this (and do it very stealthily so you can really get the background) you find that they talk about the $100.00 win when they got lucky, but not the $500.00 spent to get 1/5 back. Blind Optimism at its best!
My dad won a raffle for 300 Iowa lottery tickets when I was a kid. My family had a blast scratching them all off, but at the end, we had won about $45.
It really was a lesson to me at a young age about how little chance you actually have to win any money.
I still like to buy them as stocking stuffers for Christmas.
I usually like Cracked's articles, but this is condescending and kind of stupid in its own way. Example:
And the odds of becoming Tom Cruise are... what? That's right, exactly zero. (Never mind asking why I'd want to be a deeply closeted, marginally sane actor in the grip of the worst cult ever.) I'm perfectly aware of the odds, and I don't spend a major portion of my income on tickets--in fact, I buy Lotto tickets maybe twice a year, laying down less money than I'd pay for a big Starbucks drink or a pint of good beer. Of course, it would make more sense to invest that tiny sum in our rock-solid, utterly dependable financial system... oh, wait.
The real winner in the Cracked piece is:
The lottery is for suckers, but I have to thank those suckers for supporting the parks and recreation areas that I enjoy.
@14
I would like to be Tom Cruise because I would be:
1.) Good looking
2.) Rich
3.) Shtupping Joey from Dawson's Creek
I have my numbers for the Tom Cruise lottery clutched in my sweaty little hand. Enjoy your silly "Mega Millions"!
Why so UpTiGhT, (most) everyone?
While the studies people look at indicate that there is a regressive component to the way in which the lotteries are played, there's still no doubt at all that the majority of lotto purchases come from the middle class.
How come no-one's crying for the great blighted swath of suburbia ruined by those state lotteries?
Beyond that, no-one that I could see anyway suggests that any demographic on average, including the poor, spends as much as 2% of their total income on lottery. Which means your average person who makes let's say 20,000 a year spends about $35.00 a month on lottery.
I suppose that there is a portion of this demographic that doesn't quite understand what one-in-thirteen-million means, and I suppose that you could then make the argument that these people (despite the fact that K - 12 math education is free in this country) are being taken advantage of for a double sawbuck per fortnight.
But if you're looking at regressive burdens upon the poor, the strain placed on the poor by the lottery seems no worse than that placed on them by the McDonald's hamburger chain . . . .
I myself spend 1/2 - 1% of my monthly income on lotto (usually the pick 5, actually) and am glad to do so. I have a good time playing, and enjoy dreaming of any hypothetical win. Whatever infinitessimal 1/13,000,000 actually produces, even the innumerate among us understand that it is, in fact, > 0.
@#13/Anonymous, except that all the things you mentioned still have value on a secondary market somewhere. Spent lotto tix depreciate precipitously.
I had a relative who won $10k from a lottery in New Jersey in the 70s. So lightening can strike.
Do some damn math before you call all lottery players bad at math. scratch offs are in the long run a loosing proposition of course, less so if you assign a value to the entertainment you get out of playing. The lotto on the other hand is interestng the odds of winning are always the same for a particular game; but the payout changes, and can be known before buying a ticket. For instance with odds of 175 million to one and a payout of 35 million you would be paying 5 dollars for every dollar won, on average. But when the jackpot gets to 350 million, the odds are still 175 to one. With a payout of 2 dollars for every dollar spent, you would be an idiot not to play.
HalloweenJack,
Here was me thinking Cracked was about humour!
#6 is correct; if you've got a progressive jackpot, it becomes a good bet when you stand to win more than the odds against you say you should.
That's "good," mind you, not "smart". But if you're a gambler, it's the kind of bet you would be more than happy to take, because the odds are now in your favor.
Just make retailers post the odds in large print right above the machine....
Why not inform the public?
The profits ought to go to the State. And the State alone. As should all gambling proceeds! Why let the mob have a cut?
To be fair, the analysis isn't as simple as the post suggests, because the utility of money is not linear.
That's why it's rational to buy insurance and that's why (depending on your net worth) it may be rational to buy lottery tickets.
I don't have the utility curve handy, but from memory it would be rational (a) when in debt, and (b) for a jackpot of no more than a couple of times the size of the debt. It'd depend on the details (size of the rake), but in that situation the dollar you pay for it has less worth to you than the dollars you might win.
It's the mirror image of the decreasing marginal utility of money. As you get richer and richer, each additional dollar is less useful to you. A similar thing happens as you get further and further into debt.
Of course, if (as Wikipedia claims) the rake is typically 50-80%, it'd take quite some curve to outweigh that. Better to play some other game.
@20 There are so many things that depreciate as fast as Lotto Tickets after their purchase that people have no problem spending money on. A beer at the local bar is a perfect example.
No one should be spending money on the lottery as a financial plan, but there's absolutely nothing wrong with spending a couple of bucks on the impossible dream if it provides entertainment to the consumer.
The logical, statistical part of my brain understands lotteries are a losing proposition. The fact that I've personally known two major winners, though, really overrides the logic.
So, I buy when the jackpot is huge and no more than a buck or two. I did find myself lecturing a woman who told her companion that buying $2 worth of tickets doubled one's chances. I don't think she cared.
@#23 A memorable way to look at it.
People buying lottery tickets are not in general just stupid. Yes, there are the feckless but in many cases these people are just poor with no other chance, however remote, of getting money.
If lotteries are a tax on anything, they are a tax on desperation. That makes it one of the most cunning, cynical and exploitative things a government can enact.
@cinemajay Sugary sodas and fart apps have a secondary market? I had no idea. And as for the t-shirt and statue, I would venture to say that 80% of people who buy those don't do so with any intention of reselling or as any sort of investment.
I could just as easily resell a lotto ticket for the same $1 I bought it for, as long as it was before the drawing. No different then a ticket to any timed event.
When things are going really badly for me, I'll buy some lottery tickets, say $5 in quick-picks. I wait until I feel extremely unlucky so that if any luck exists at all, it will be contained in those tickets.
What does Taleb call gambling? "Paying to be delighted by randomness" I think it was?
I buy the occasional lotto ticket once on a blue moon. I know fully well that the chances of winning are so absurdly small and that the value of a ticket, statistically speaking, is well under the dollar or two that I pay for it. I buy a ticket anyways because a dollar or two is a trivial cost to me, while winning a few tens of millions of dollars would be pretty awesome. The consequence of losing is so small as to be ignore, while the consequence of winning would be, well, not something I would ignore.
It is paying a dollar or two to be delighted by the idea that I might be a multimillionaire. That isn't "a hopelessness tax". I am a very happy and hopeful guy who is perfectly content with his life. That still doesn't mean that I would object to being handed a few million dollars, nor that I don't get some amusement at the IDEA of being handed a few million.
There are people with gambling problems to be sure, but banning the lotto isn't going to fix them any more than banning drugs eliminates drug addiction. It just means that these people descend into the black market where an addiction goes from being an inconvenience to your life, to life threatening. It is far better for people to sate their addiction above ground, rather than in a black market.
Lemme see here - one side says:
"An extremely slim chance of becoming an overnight millionaire is better than no chance at all, and that's worth a buck to me; and if I lose, part of that money goes to a worthwhile cause."
...while the other side says:
"You're just throwing your money away - you're never, ever going to win."
Now, which of these two groups would you say "doesn't understand the math"?
The one that knows that "some, however small, is still more than none", or the one that thinks that "very very small" is equal to zero?
Oh, and an aside to the occasional big-jackpot players:
In most Lotto systems, substantial but still medium-sized jackpots produce better payouts than the really, really big jackpots.
The odds of winning remain the same, but the bigger jackpot attracts more players, which greatly increases the chance of the jackpot being split among multiple winners, reducing individual payouts.
The precise tipping point varies with both the overall odds and payout scheme, and the enthusiasm of big-jackpot bettors in your particular market - but the really big jackpots that make the news almost always pay smaller amounts to individual winners than the more routine medium-size jackpots.
Many of us who do understand probability, do indeed buy lottery tickets, just as people who choose to smoke know about all the ill health effects involved. What rationalists don't understand is that many of us are exercising our god given right to piss away our savings, our health and our lives. Long live liberty!
Mr Blank: How's about a third proposition: "odds so close to zero as to make no practical difference"? Approaching the limit, so to speak... It's not black & white, it's a question of the odds....and the apparent lack of easy ways for people to bank 'a buck at a time'.
The rise of lottos seems me to be contemporaneous to the rise of "popular" religion in American public life and society in the last thirty to forty years. Not a co-incidence of unrelated things, if you ask me ( yeah I know nobody asked).
"a finely tuned psychological weapon used to exploit cognitive blind-spots and profit from human misery"
Isn't this pretty much everything in modern life? I mean, we're pretty much the poster child for species doing themselves in by exploiting their own defects.
Oh wait! Quote from article:
"it's a finely tuned psychological weapon used to exploit cognitive blind-spots and profit from human misery."
I guess the link to "popular" religion was there for all to see, all along.
Of course, "real" religion is unpopular for good reasons (at least reasons good enough for me and my conscience - oh I hope that's not an 'un-American' viewpoint).
Ugly Canuck @43:
How's about a third proposition: "odds so close to zero as to make no practical difference"? Approaching the limit, so to speak... It's not black & white, it's a question of the odds.
No, that's still wrong.
There is a practical difference: a very small number of people do win.
I think what you (and all the other "small chance is the same as no chance" commenters) may be missing is that the results of buying a Lotto ticket are determined by single-instance actuality, not by billions-of-iterations average odds.
In other words, no, it's not "a question of the odds."
And yes, it is "black and white."
You either win or you don't. If you win, the fact that the odds against it were very great is entirely irrelevant.
If you win, the long odds against winning don't reduce your winnings to insignificance.
You don't have to play a 1-in-10-million lottery 10 million times in order to have a chance to win.
And even if you did, the results still won't necessarily conform to the odds.
10 million iterations of a 1-in-10-million random game will NOT reliably produce exactly one single win every time.
Some 10-million-iteration sets will have no wins at all; most will have one; some will have two; a very few will have three, and so on.
Such departures from 'average' are mathematically predictable, and can serve as a test of whether the random process is, indeed, truly random. (See Pearson's Chi-Square Test, for example.)
Truly random processes reliably produce non-average results for any less-than-infinite number of iterations, and the frequency of such non-average results is predicted by the Chi-Square distribution.
The smaller the number of iterations, the more common - and more radical - such departures from average become.
In terms of practical differences, consider:
If I buy one $1 Lotto ticket every week for the rest of my (optimistic) life expectancy, I will end up purchasing ~4000 Lotto tickets.
If the odds of winning the big jackpot are 1 in 20 million, then my possible results (ignoring smaller prizes) will fall into one of several buckets:
1) No wins at all - the most likely result, by a huge margin; and I'm out $4000.
...or...
2) A single big-jackpot win - not very likely, but still a small and very real possibility. I'll end up whatever the big jackpot is (minus taxes, etc), minus the $4000 I spent buying tickets (or less, if I stop at my first big win.)
...or...
3) Two big-jackpot wins - an extremely unlikely - but, still possible - outcome. I end up with 2 jackpots-after-taxes minus $4000.
...or...
4) Three big-jackpot wins - a vanishingly unlikely (but still real!) possibility.
...and so on.
The practical difference between Bucket 1 and Buckets 2-n is... well, an awful lot of money.
Which one of those buckets I land in will make a big practical difference - and even though the odds of landing anywhere besides Bucket 1 are very low, the possibility is still very real.
Just ask any of the people who've landed there.
That's the difference between odds and actualities. Lotto tickets don't pay off on odds; they pay off on actualities.
It's not a matter of odds; it's matter of luck.
Remember, if the odds of something happening to any particular person on Earth on any particular day are a million-to-one against, then the odds predict that it will happen, on average. to ~6700 people worldwide, every single day, day in and day out, week after week, year after year.
A very small chance is only the same as no chance at all if you're not one of the lucky winners.
And there are lucky winners. Happens all the time.
But you won't be one of them if you don't buy a ticket.
Understanding the very practical difference between odds and actualities is not "innumeracy."
And voluntarily spending money to open up the possibility of an unlikely but real actuality is not a "tax."
Like "Inconceivable!", those words don't mean what some people seem to think they mean. :-)
Hope & fear are two sides of a coin.
Which is not to say you shouldn't go for a ticket sometimes, if only for the... well, i don't really know what.
I just follow the winners around and use their tickets to launder my drug money.
@38, you got me on the fart apps, but soda cans are collectible, recyclable, and can be reused for other purposes--therefore they have value!
@50 Touché.
But I can use my ticket as a tissue (as I cry over my losses of course.)
The main point is people don't purchase those things as an investment, and they don't purchase lotto tickets for the investment either. To use it's investment value as an argument for or against is foolish.
I set up a spreadsheet a few weeks ago when the MegaMillions jackpot was getting high. I factored in the cost of the cash option(depends on Treasury bond rates for a basket making constant payments over 30 years - I assumed 3.7% yeld - lower gives a higher cash value), factored in a 25% federal and 6% state income tax on prizes above $5000 and the odds and payouts for all the pre-defined and jackpot prizes.
Bottom line: for a $1 ticket, the defined payouts are worth $0.15 and the jackpot is worth $0.25 for each $100 million. The after-tax cash value of the jackpot is less than 44% of the headline number. For me, it's worth playing if the jackpot is over $170 million, but the expectation cash value is less than a dollar unless the prize is over $340 million.
You'll have to judge for yourself how much the higher education funded from the state profits is worth to you, and how much the hope / entertainment value is worth.
doesn't it make it a charity - that's how I view any lottery purchased in my state, where the whole lotteries commision is government run, with 100% profits going back into the public kitty.
Of course, this is true of electronic poker machines that have been moved from casinos into every pub - alot of the funds end up going back into welfare, or roads, or education.
Sadly, though, all to often it is people essentially giving only a small part of their gambled money back to themselves. The people who need it most, and need most to not be gambling.
But of course, the system is set up to ensnare those who can least afford to be part of it. Bitter, horrid irony. Not the delicious kind at all.