640 effing million

Re: Five hundred effing million

Cigarettes? For whom?

 

Re: Five hundred effing million

I am going to buy a ticket today, even though it goes against every principle I have. I will count it more as an entertainment expense than as an investment. This will be the second time in my life I have bought a lottery ticket.

I do a lot of trading of different instruments in my life, and my decisions are always driven by expected values. I do calculations in my head and on paper to figure out my odds of being successful, and then make decisions that maximize my odds of being successful. I try to give myself the highest expected value for the amount of money I put at risk.

Lotteries are horrible sucker's bets. Your expected value on your dollar is typically 50 cents or less, depending on the jackpot.

When I look at this jackpot, I start off like everyone else. Your odds are 1 in 176 million. And the payout is greater that $176 million. From what I read, after tax, you can expect around $230 million.

The problem is that there is no guarantee you will be the only winner. And according to something the Wall Street Journal blogged (http://blogs.wSportsJournalists.com/economics/2012/03/29/is-mega-millions-540-million-jackpot-a-good-bet/?mod=google_news_blog), lottery officials figure there is a 76 percent chance of someone picking a winner in this drawing, and if there is at least one winner, there will likely be two (actually, 1.9, on average). That would cut your winnings in half and lower your expected payout.

What is interesting is that as jackpots in these things go up, more people buy tickets, and it is pretty linear. And the more people who buy tickets, the more chance there are multiple winners, which lowers the value of any payout.

So for that blog entry, they relied on work a computer scientist did, which plotted the expected value of a ticket against the size of the jackpot and found that it looked kind of like a bell curve.

Up to a certain point, higher jackpots mean higher expected payouts, but after a certain point, the risk of multiple winners takes over and the expected payout goes down.

According to his calculation, the best time to buy a ticket is when the jackpot is $420 million. But even then the expected value of a ticket is just 69 cents.

So the bottom line is that you really are better off hanging onto your dollar.

And with that said, I am going to buy a ticket today, anyhow. I'll rationalize it away with the fact that I have wasted a dollar in lots of other ways without giving it so much thought.

 

Re: Five hundred effing million

I find that so sad.

Your odds of winning are statistically impossible. So the odds even the most unsophisticated person should be working from are, "I am throwing away my money."

State lotteries have the the worst odds of any form of legalized gambling in the country. When you factor in all of the games, for every dollar you wager, you are going to average about 60 cents in payout.

People should be saying to themselves that for every dollar the plunk down, they should expect 60 cents in return. Not "someone is going to win a lot of money and I have to play to be that guy." It should be, "I am trading in a dollar for what on average is going to leave me with 60 cents."

Doesn't that sound like a suckers' game, when put that way?

Let's say you have $1,000 and you decide to use it entirely on lottery tickets, reinvesting the winnings to buy even more lottery tickets. If you buy $1,000 worth of tickets, you can expect an average payout of $600. Spend that $600 on more lottery tickets and you are down, on average, to $360. Keep going at it, and at the end of two weeks you are busted.

Unfortunately, most people don't look at it from that vantage point, which represents the reality of the statistical likelihoods.