I originally wrote this on November 28, 2012, but I think it's a valuable article and should be remembered and/or accessed by anyone who wants ammo in the war against lotteries. I'm just doing my part.
This isn’t about sports. It’s about odds. And, it’s about sanity. As you probably know. even if you’ve never spent a cent on the lottery (like me), the Powerball Jackpot is up to $500 million dollars and the odds of someone winning tonight are over 90%. This is going to be the second highest payout ever behind a $646M jackpot from the Mega Millions last year (split three ways with a winner in Kansas, Illinois and Maryland). I’m not going to tell you what to do, but you should know at least one thing before you fork over your hard-earned money.
I always wondered whether or not it would make cents to spend $2 on a lottery ticket if the pot grew large enough. The theory being that there was a lot of “old” money in the pot that had already been lost by the bozos who tried to win already. This is, by my way of thinking, the benefit of a “progressive lottery” because if you simply waited to play until the pot was huge, it might be true that you could actually get $1+ return for every $1 you spent. At that point, it would be free entertainment and I might consider “playing”.
So, I finally decided to research it. I can tell you right now that if you’ve ever wondered the same thing… forget about it. It’s a scam no matter how big the size of the pot is. In fact, once it surpasses about $400M, your return on your $1 investment actually begins to decline. The reason being that the number of gamblers increases at a logarithmic rate the higher it goes. And, the more tickets sold, the odds of splitting it multiple ways increases dramatically.
I can’t criticize anyone for spending money on whatever it is that gives them a thrill. Personally, I wouldn’t waste a cent on anything in which the reward was monetary because the system is ALWAYS designed to win in the long run. For every dollar you give them, you get back 90 cents on a slot machine and progressively less depending on the form of gambling. The house always wins and so do the states that support this legalized raping and pillaging of middle and lower-income Americans. It is, without a doubt, the most regressive form of tax there is. You can be smart enough not to participate, but if money is no real issue to you and you find it fun to “play”, go for it.
I suspect, or at least hope, anyone reading this – meaning anyone who typically reads what I write – would not also be one to “play” the lottery. It’s a scam in every conceivable way in which something could be called a scam. If you tried to set it up personally, you would be thrown in jail because you would be, essentially, stealing. But, the hypocrisy of government allows it to get away with stealing. Of course, that’s become the bidness of gubment, so why should I be surprised? I’m not. In fact, as time has gone on, I’m just surprised they haven’t been smart enough to figure out more ways to pull the wool over our (your?) eyes.
The lottery begins on the premise that it will never give away 100% of what it is given. Not even close. But, it’s far more sinister than that. Even if you win, you only get 26 years of payments despite the fact the dollar you gave them was priced in TODAY’s terms. Add the 40% you lose to Uncle Sam and your state from taxes despite the fact the dollar you gave them was AFTER TAX 99% of the time, and already you are only getting 50 cents on the dollar.
But, as I said, I wanted to know about progressive pots that keep building based upon “old” money that was already lost from previous attempts at striking gold.
I found a great website that discusses this very issue. The guy’s name is Jeremy Elson and here is his site.
His math and logic are impeccable IMO. Without going through all his steps (read them if you so desire), you have to factor in net present value, taxes and ties. And, after that, you have to evaluate the progressive pot issue based upon the increased number of tickets sold.
As he nears the end of his discussion, he shows a graph. And, on that graph, it indicates the return on your dollar grows until the pot gets to about $400 million. After that, it begins going back down. But, even at the peak of about $400M, you are only going to see about 69 cents on the dollar. If the lottery were to grow to say $700 million, your return would drop to only 45 cents on the dollar. Even casinos in Vegas would go to jail for that return!
This is nothing more than a HUGE scam perpetrated upon people who either 1) believe in “luck” or 2) are ignorant of simple issues related to probability or 3) simply want to “play” and feel that a few bucks every week is small potatoes.
But, I also think it is related to a mentality that has seemingly overcome this nation whereby we want that which we have not earned. Thus, credit card debt as well as all debt is out of control – and it is led by the Federal Government. Millions of people believe they can be a winner and, if not them, then who?
There are dozens of good analogies trying to explain the odds of winning and getting a fantastic (sarcasm) return of somewhere around 50 cents on the dollar. Should you decide that you want to throw away money for no other reason than ignorance or “fun”, your chances are about the same as if someone had put pennies one right after the other from Los Angeles to Chicago. One of them has an X written on the back. You come down from outer space and with one chance, pick the one with an X. Good luck.
I can never think about this whole lottery issue without remembering an experience I had in a grocery store in Topeka, Kansas about 20 years ago. I was behind a woman who was checking out. Once her total had been determined, she asked for five tickets of some kind. They were a dollar apiece. The cashier gave her the tickets and then began checking me out. As my stuff was being scanned, I was watching her. The first ticket she scratched off was obviously a loser. She just discarded it. The same for the second, third and fourth. Finally, she came to the fifth ticket, scratched and let out an excited yelp (or whatever it is called when women win something). The cashier asked her what she had won. “I won two bucks!” she said with glee on her face.
Well, I just couldn’t resist. I’m sorry, but I’m not wired to let stupidity go without doing something to arrest it – not to mention make fun of it. I looked at her and said, “Maam, if you want another thrill, just give me $5 and I’ll give you $2 back in winnings. And, I’ll do it all day long!” She looked at me like a deer in the headlights. Frankly, I don’t know if she had never put two and two together before or if she just couldn’t believe anyone would be so negative as to bring her down off her high. Either way, she was, and almost certainly still is, a moron!
Unfortunately, there will be millions of morons throwing money away all day today not realizing they are handing the person a dollar and, on average based upon $500M, getting 62 cents in return.