I bought three tickets to Wednesday’s powerball and I would argue that I’m very good at math and I’ve spent more time thinking through the mathematics of the lottery than most people.
First, on the whole, you’re wrong. Gambling is a NOT a “voluntary tax on the mathematically challenged” Effective gambling in +ev situations creates a long term net profit. For note: ev means expected value. +ev means that the odds of you winning are smaller than the total pool divided by your contribution. It’s why smart poker, blackjack, and sports gamblers can turn a profit.
Second, this powerball jackpot is a +ev situation. But then, I have a theory that says the concept of ev (+ or -) starts to break down when dealing with abnormally large pools or abnormally large bets. That’s just a tangent and not worth getting into right here. But suffice it to say Powerball is +ev right now.
Third, lotteries on a whole are NOT guaranteed to be money losers
If my estimation of the likelihood of splitting the jackpot is anywhere near correct (and I freely admit it might not be, though I’m sure the numbers are readily available on the intertubes), I’m not sure how you come to this conclusion. Any split puts the jackpot into a -ev situation.
What happened in the 17th century is just about as irrelevant as the first paragraph which describes Biblical accounts of lotteries and what Augustus Caesar allegedly did. Obviously I’m talking about modern 20th century lotteries after a long period of any such activity having being deemed illegal. In that respect, I stand corrected about the Montreal lottery being the first in North America (I did say “AFAIK” since I was going by recollections rather than a definitive history) but I wouldn’t say “not true by a long shot” as New Hampshire introduced theirs just 4 years earlier and New York just 2 years after that, and things only started to snowball well after the Montreal lottery in 1968.
Terrific! Well, since you’ve got a mathematically proven +ev going on there, let us know how it works out for you on Wednesday. If you throw me a million from that $1.3 billion you’ve now mathematically determined you’re going to win, I promise to say nice things about you for at least the next decade! I’ll be waiting expectantly!
But you know it’s not gonna happen, right? If you think that this is “why smart poker, blackjack, and sports gamblers can turn a profit” then you’re not nearly as good at math as you think you are.
As for your three links about how all it takes to win lotteries is intelligent strategy or whatever the hell you think they prove, not one of them actually proves that.
The first one is an example of exactly what I said earlier about expected value: it’s useless for any small number of tickets when the odds of winning are astronomically low, because the real expected value is always essentially zero, BUT it really does mean something if you corner the market and buy up practically all the possible numerical combinations. That’s just what this group was doing in this specific case. But that’s impossible in the Powerball lottery – realistically no one could even come close.
The other two are just examples of flawed lottery designs in which loopholes were exploited.
No you were not ‘obviously talking about modern 20th century lotteries’ as you did not write that. I can only go by what you wrote and you didn’t write anything about modern lotteries.
You obviously don’t understand time value of being filthy fucking rich.
The lottery is not an investment (although there are hedge funds set up to play lotteries).
I’m old now but I was a young professional when Megamillions first came to New York. I earned a very high salary and there was a very good possibility that I would retire comfortably when I was 60 or 65. But the only way for me to retire comfortably at the age of 25 was Megamillions (later on the dot com boom would give me other options).
How much present enjoyment are you willing to pay for a chance to accelerate your very comfortable retirement by 40 years?
Being old and rich is not nearly as much fun as being young and rich.
I get that you’re being sarcastic, but I never even came close to saying - let alone implying - that I was mathematically determined to win. I just talked about probabilities. But if you know something about my odds that I don’t, clue me in. I’d love the $1.4 Billion.
Notice how I didn’t include lottery players in the group of poker, blackjack and sports? It’s because there aren’t “smart lottery players” in the traditional sense. As my examples showed, the two ways you net a profit off the lottery are 1) Find a +ev situation and corner the market or 2) find a loophole/error and exploit it.
In either case, these aren’t smart lottery players. These are smart people who happen to play the lottery when they recognize profitable situations. I didn’t include these examples to show that I was gonna win tomorrow night. I included them as counter-examples when someone says something stupid like “gambling is a voluntary tax on the mathematically challenged.”
No, what I notice is some furious backpedaling on what you allegedly “meant”. The entire thrust of your post is that buying Powerball tickets right now is the right thing to do and you figured this out because you’re good at math. I don’t want to be difficult just because this is the Pit but it’s hard to read anything else into it. The essence of what you said is summed up thusly:
“Effective gambling in +ev situations creates a long term net profit … It’s why smart poker, blackjack, and sports gamblers can turn a profit … suffice it to say Powerball is +ev right now.”
The clear implication is that +ev makes buying this particular 1 in 292 million ticket a winner in the long run, just like poker, blackjack, etc. Else why did you even bring those up? The thing about those other games is that the chances of winning are distinctly non-zero and in some cases fairly close to even odds, while the odds of winning the Powerball jackpot are essentially zero for any realistic non-ridiculous number of tickets.
If that’s what your examples were supposed to show, why didn’t you say so, instead of only admitting it now after I pointed it out? Your point was stated to be that “lotteries on a whole are NOT guaranteed to be money losers”, but in fact they always are, unless you manage to corner the market or exploit a gaping flaw. You know how I know this? Because the purpose of lotteries is to provide a revenue stream for governments. Know where that money comes from? From the net long-term money losers. The payers of the voluntary tax on stupid.
A great example of the opposite is the stock market. Even an idiot could historically make lots of money in the long term just by buying index funds or a portfolio reflecting the DJIA or the S&P 500. Because in a healthy market with a growing economy both sides are winners.
That “smart lottery player” is an oxymoron has been my point from the beginning. There’s certainly such a thing as an otherwise smart person who plays the lottery just for fun once in a while, but there’s no such a thing as a smart way to play the lottery. Your counter-examples show nothing. Lotteries are a tax on stupid, period. That’s why they’re lucrative sources of money for the governments that run them.
You are neglecting the non-jackpot prizes. To calculate EV you need to add them to the big jackpot also. Given the probability of multiple winners, the ev is still probably negative, but not as much as in normal lotteries.
Plus there are other forms of value than monetary value. If you have term life insurance, are you and your beneficiaries pissed off that you haven’t died at the end of a year? Probably not. That’s because though the ev of your insurance is negative in monetary terms, the non-monetary value is positive.
Finally, as others have mentioned, the marginal utility of $2 for a ticket is near zero for most people. I’d bet the marginal utility of a billion dollar prize is more than 500 million times greater.
None of this includes the entertainment value. When the marginal utility of the $2 is high, it is a bad bet. But not so much for most of us.
BTW, the very first money I ever spent on a lottery was on a recruiting trip to a major university. One of the people in the pool (of about five) was one of the world’s leading experts on combinatorics. So let’s not get snotty.
Actually yes. I’m not just implying that. I’m outright saying it. When the Powerball is in a +ev situation, you will profit from playing it over the long term. I also believe that right now the Powerball is in a +ev situation.
So why have I only bought 3 tickets for it instead of cashing out my 401K and taking a second mortgage on my house? Because the odds of winning are 1 in 292,201,338. When I say that the Powerball is a winner long term I’m talking looooooooong term. As in, based upon an assumption of this situation happening every quarter, we’re looking at a range of about 6,000 times the length of all of human history.
But +ev is +ev and that doesn’t change with one ticket or 30 million. If I were immortal and knew the lottery were going on forever, it would be strategic for me to play. Eventually I’ll win and, when that happens, I’ll net a profit.
Somebody’s gotta win it, and it might be me. Think the lottery is stupid? Don’t fucking buy a ticket. It’s two fucking bucks. Besides, doesn’t a percentage of lottery sales go towards charities? (I know that’s the case in PA)
Yes, if by “charity” you mean tax rebates and services which would normally be funded via tax dollars.
In a typical state, with lottery touted as helping schools the effect on balance sheets looks about like this:
Lottery
+$1,000,000,000 revenue from tickets sold
-$100,000,000 profit and expenses of private companies operating the lottery
-$400,000,000 prizes paid out
-$500,000,000 paid to schools
Schools
+$500,000,000 revenue from lottery
-$600,000,000 lost to tax cuts since lottery now pays for schools
With less money for education, students get more free-play days. Win-win for everybody!
