nevermind
Fran was wrong, and you’re wrong above. To prove your point, show us the math.
I’ll show my math. If odds are 1/N, the cost is $1, and the payout is greater than (N + taxes and fees), then the expectation is greater than 1.
Sorry, I don’t know what N is.
That said, I don’t think I ever bought a lottery ticket. Instead I buy stocks, which I’m about as good at picking as lottery numbers. Oh well.
Expected payout is not odds. Odds of winning relate to how likely the string of numbers you pick will match the string of numbers the lottery selects.
Expected payout is a way to evaluate if it is a good bet, but it doesn’t measure a change in your likelihood of winning.
The pot going from $1M to $2M people means that more people are likely to play. The larger the payout, the more play. But in most lotteries, that does not change the likelihood of the string of numbers being selected. What it can change is the number of people who pick the same string of numbers, so even if you win, you don’t win the whole pot.
This is different from a drawing where each ticket is a separate entry, and the number of tickets defines the pool from which selections are made. More entries means lower odds for each ticket.
Fran Leibowitz is technically incorrect, but not trying to be technically correct. Her point is that the odds of winning are astronomically low. Depending on how you round, they are effectively zero.
If your odds of winning are 1/10,000,000,000, then it doesn’t matter that the payout is the total GDP of the planet for 5 years. The expected value might be good, but the odds are still effectively tiny.
Read the post I quoted. You’ve got 500 times the odds of winning 1/500th of $1B, which is $2M.
Which is the point I frequently refute (as above). They’re not ‘effectively’ zero. They may be minute, but the are definitely NON-ZERO.
And the reason I constantly refute it, as with my co-worker, is because it is incorrect and yet it gets repeated by (usually angry*) people as a fact. “No one ever wins the powerball!” (fact: more than a dozen have won it in the last year)
- Honestly, the anger in these people is often palpable and somewhat mystifying to me. Why are they angry about the lottery? Why do they use bullshit arguments to enable and justify that anger? Did they personally spend thousands of dollars and get into trouble because of it and become a convert? Did or does a family member spend their paycheck on scratch-offs?
:smack: I totally misread that and missed the B vs M. You are correct.
Yes, they are non-zero, but how small do the odds have to be before you decide there are better ways to spend that lottery money? Understanding how minute the odds are is where a lot of people fall down. Ultimately, that’s gotta be a personal decision, but maybe put them in context against falling in the bathtub and dying, or getting hit by lightning, or some other rare occurrence, just to get perspective.
And that is a fallacy, because clearly people do win the powerball. Not every week, but yes, people have been winning. You are correct, they seem to be displacing their personal animus for losing.
To me it is entertainment. A chance to dream a bit, and well worth the small amount of money I put out on it on a regular basis.
I’ve told this story on the dope a few times;
I was in the local convenience store and the guy in front of me bought two large energy drinks, cigarettes and some snus. The manager rang it up without comment. Then I walked up and asked for a lottery ticket or two. He made an unwelcome comment about me ‘wasting’ my money. I responded “The guy in front of me spent $20 on a chance at death. I spent $2 on a chance at winning money. Which of us was wasting his money?”
However, on the other end of the scale;
Christmas time, 1998-ish. A friend of a friend blew his $800 paycheck on pull tabs. He showed up on the doorstep of some mutual friends, three days before she was to give birth, and asked if he could borrow the $800 so he didn’t have to tell his girlfriend. Of course, they said no. They were preparing for a baby, let alone having Christmas obligations.
Two weeks later, he showed up on their doorstep because he’d done it again.
They still said no.
Not to turn this into that kind of thread, but the idea that the chance is so close to zero so I won’t bother may turn a fair number away, but it isn’t so valid a point as to bring into question why anyone would bother and try to make them justify it.
Here’s how I play the lottery:
I carefully pick out 20 combination of numbers making sure to hit lucky numbers, numbers that are due, and hot numbers. Then, I don’t buy any tickets.
When they announce the lottery numbers, and none of my 20 combinations have been picked, I feel like I won $20.
Okay, it’s not going to pay for my retirement, but I’ve won a lot more than most people.
There is a certain sense in that. Professional poker players and card counters in Blackjack play odds. In a certain situation, the odds maybe in their favor, but it doesn’t mean they’re going to win. However, they will still take the bet because they play enough that they will see the situation again and again. If the odds are in their favor, they are likely to win in the long run.
However, there’s a tiny problem with your theory: You don’t get the entire winnings. Instead, the winnings are split among all the winning tickets.
Let’s say the pot is $400,000,000. In Powerball, I believe the odds of a combination being picked is around 182,000,000:1. Powerball tickets are $2 a piece, so in theory, the odds favorable compared to the outcome at first glance. However, what is the possibility that at least one other person also bought a ticket matching the same number? If one other person bought a winning ticket, you only get $91,000,000, and since tickets are $2 a piece, your winnings no longer cover the odds.
To really figure it out, you not only have to figure out the actual odds of a particular ticket winning, but the odds of someone else picking your ticket combination. That depends upon the number of possible combinations (about 182 million) and the number of tickets actually sold. If you calculate your odds with both of these things taken into consideration, you will probably find that the lottery, even with a gigantic pot that seems to defy the odds is still a bad bet.
The problem is that money is fungible. That is a dollar from one source is the same as a dollar from another source. That dollar coming from the lottery to education may simply replace another dollar that your legislature would have sent to education but is now going to the highways. And that dollar which was going to the highways but was replaced by that dollar taken from education will be moved over to a fund for a new memorial on the capital grounds to honor legislators who died while in the line of service. (Well, they may have been just sleeping).
An easy way to answer this question is to look at the education budget the year before the lottery existed, and compare it to the budget the year after the lottery existed, then see if it increased by the revenue the lottery brought in.
Gambling losses are deductible up to the amount of your winnings. Which seems kinda backwards, but there you go.
Powers &8^]
Backwards how? In general, you can’t deduct more than you earn, except by doing stuff like capital loss carryforward (spreading the loss over a number of years).
Otherwise, I’d deduct my musical instruments. I make about $100 a year gigging (yup, I’m overpaid) but spend maybe 10 times that. It sure would be nice to deduct it all! (Yeah, it’s not that simple because instruments are capital assets and would need to be depreciated, but you get the point.)
Not backwards at all for a recreational gambler.
If you go to Las Vegas and drop a few hundred thousand on Roulette, you can’t deduct that from your income, if you’re a recreational gambler. Gambling losses are gamboling losses.
However, gambling winnings are income, thus you need to declare them as income. If you win a cool million on the lottery, you have to pay what you owe your Uncle Sam.
What the rules actually do is allow you to offset gambling losses against your winnings. Imagine someone winning $1,000,000 on the lottery, but spent $400,000 in buying tickets. (Actually, all gambling loses can be taken together, so maybe it’s $200,000 in tickets, $100,000 in blackjack, and another $100,000 betting that fly wouldn’t land on that pancake.) They can deduct that $400,000 against their $1,000,000 win and only pay taxes on $600,000 dollars.
The rules for professional gamblers are different. Professionals may take their losses off as any other business expense, and forward their losses to other tax years.
How do you graduate from mere recreational gambling to be a professional? You have to make money at it in most years, and it must be a significant source of your income.
Well, I did say “seems”. =)
The reason, though, is because at first glance, it would “seem” to make more sense to be able to deduct losses only over the amount you won. Example:
You spent $500 on lottery tickets and won $10 once. Your “actual” gambling losses are $490, so you should be able to deduct $490 from your income for the year.
Obviously, that’s not how it works, but a naive understanding of the rules might lead one to think it is. That’s what I meant by “it seems backwards”. It does make much more sense to view the deduction as coming off of your gambling winnings – reducing the amount of winnings that are taxable. I’ll have to start explaining it that way.
Powers &8^]
No, he’s just talking about the odds.
Let’s flip a coin. You call it in air. We’ll bet a dollar. That is, you pay a dollar to play, and if you win you get two. If we play this game a million times, you should have the same amount of money you started with.
Let’s change the rules.
You pay a dollar to play, and if you win you get your dollar back. If we play that game a million times, I’ll have half a million of your dollars. If you play at all, you are a sucker.
You pay a dollar to play, and if you win you get three dollars. If we play that game a million times, you’ll be holding a million of my dollars. I am a sucker.
If the odds of winning are one in 72 million and you’ll get less than 72 million times your bet if you win, you are a sucker to bet. If the payout gets over the odds, … well, that’s better than you’ll get in any casino.
HOWEVER,
If you are doing this for entertainment, which is how you should be thinking of it, then feel free to take sucker bets. The best way I heard it put was this: if setting fire to a one dollar bill gets you a dollar’s worth of entertainment, go for it.
Well, there are several different kinds of lotteries, which is part of what’s confusing folks.
Here in Virginia, we have the MegaMillions and Powerball, both of which are multi-state games with fixed odds of winning but variable payout, both because if the jackpot is unwon it is added to the jackpot for the following drawing, and because the size of the jackpot is determined by the number of tickets sold.
But they run another type of game too. Pick 3 is drawn twice a day, every day. It is pretty straightforward: choose three numbers from zero to nine. If your numbers match, you win.
If you played “exact”, then only an exact match of the same numbers in the same order will win. The payout is $500. Your odds of winning are 1 in 1000. If you buy every possible combination, the house keeps 500 of your dollars and gives the other 500 back to you (minus taxes). This is stacked obscenely in the house’s favor.
There are other ways to play besides “exact”, but in all cases the payout is half the odds.
They also have a Pick 4 which plays the same, but with 4 numbers.
I should also note they have a “liability limit”, which means they will only sell a fixed number of each combination of numbers for a given drawing. On Pick 4, combinations where all four numbers are the same, like “5555”, are very popular, and hours before the drawing the machine will stop letting people play them, to limit the amount the Lottery will have to pay out should that number win.
They also have a couple of twice-weekly games with no rollover. One offers $1000 per week “for life”, and the other offers a fixed weekly payout for a few decades.
And let’s not forget scratchers.
It is illegal to play poker for money in this state because a judge felt it was a game of “chance” rather than “skill”, but the government gets to run a casino in every gas station and grocery store.
Well, I can’t speak to the second half of the story, but I remember the first part.
Some simple google-fu turned up this article at Forbes that mentions it: http://www.forbes.com/sites/joshbarro/2012/03/30/can-you-ever-guarantee-a-mega-millions-win/
So the first half of the story definitely happened.
That’s because in poker, you have a chance at winning!
I think the organizations that run the lottery should allow an easy way to buy all combinations - in effect a winning ticket. The buyer would still face a risk that more than one person also bought all combinations or that someone bought a single ticket that happened to win.