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As somebody who lived as a professional gambler for a while, I would agree that your assessment of value of most lotteries is correct: they are poor value and s
by PaulRobinson 9y ago
As somebody who lived as a professional gambler for a while, I would agree that your assessment of value of most lotteries is correct: they are poor value and should be avoided.
However, we're not expecting people to deploy Kelly criterion here, nobody is playing lotto for EV and a need to maximise returns on known value parameters.
But I play lotto. And I know all this more than most. I have literally paid my rent with money earned from understanding this and exploiting it. WTF am I doing playing poor odd games?
When you're playing $5k to win $5k on something where you think true odds are more like 55% in your favour, you are doing so most likely knowing $5k is 10% of your total bank (based on Kelly), and that you're 45% likely to lose. You're going to hopefully play over and over again and in the long run make money.
When you're playing $2 to win $100m, do you actually care?
The $2 is likely such a tiny part of your bank that you could literally lose it down the back of the sofa and not care, but the payout is so large and life-changing, that not having access to that very remote possibility - given the cost is so tiny and marginal and unnoticeable - is short-sighted.
Yes, the maths don't work from a probability angle, but arguing that playing the lottery is a tax on ignorance is juvenile and short-sighted. Optimising your bank at that level is like trying to make sure you don't leave a single grain of rice on your plate at dinner.
The maths of starting a business are pretty harsh, the costs of failure are higher and yet still, many people choose to do it. Are they fools? Perhaps. But they consider the cost and potential payouts to be worth it.
See the bigger picture from time to time.
- sigstoat 9y ago> The $2 is likely such a tiny part of your bank... and when it isn't a tiny part? > Optimising your bank at that level is like trying to make sure you don't leave a single grain of rice on your plate at dinner. many individuals playing the lottery are in a position like that, and frequently spend significantly more than $2 in hopes of winning. > See the bigger picture from time to time. ...seriously? nobody cares if people like you or me burn a few dollars on a month on a lottery. the concern is for folks not in a position to do so.
- soundwave106 9y agoWhat would be helpful in this discussion is a report on lottery spending per capita, sorted by income level and other demographics. Currently I'm not finding any out there. I do see a study showing that the average amount spent per person in the US is around $200ish (https://lendedu.com/blog/lottery-study-report/ https://lendedu.com/blog/lottery-study-report/), which doesn't sound completely terrible. However, it is very probable that this number masks widespread differences in spending habits. I do find it problematic that states lean on a gambling game for revenue that (due to the population distribution of typical lottery players) acts as a defacto regressive tax. There's a side of me thinks this is rather exploitative, particularly with the evidence that lottery advertising is strongest in poor neighborhoods. (https://www.wsj.com/articles/powerbull-the-lottery-loves-poverty-1503868287 https://www.wsj.com/articles/powerbull-the-lottery-loves-pov...) With the recent emphasis in America of pooling together multiple states and tweaking odds to produce these headline-grabbing 9 figure jackpots, one other complaint: it's pretty clear to me that American lotteries fail to prepare winners for the "consequence" of winning... that is, the huge amount of financial planning and protection (even lifestyle and location changes, I'd say, along with how to handle relationships with people you know), that is necessary for having a public-known 9 figure asset base. Even lotteries that reward 6 or 7 figures may come with some shocks, but leaping to that sort of base is a whole other sort of ball game.
- sigstoat 9y ago> I do see a study showing that the average amount spent per person in the US is around $200ish (https://lendedu.com/blog/lottery-study-report/ https://lendedu.com/blog/lottery-study-report/), which doesn't sound completely terrible. i feel like that's pretty bad, next to an article like: https://www.fool.com/investing/2017/10/01/why-half-of-americans-cant-come-up-with-400-in-an.aspx https://www.fool.com/investing/2017/10/01/why-half-of-americ...
- jonbarker 9y agoIs that annual? If it is anything like any other vice, basically it follows the pareto principle, causing massive damage to a small subset of the population which does most of the overuse. "Don't bet the rent money" very much applies here.
- jonbarker 9y agoI never said the word 'ignorant' nor did I say anyone was a fool. I said 'not understanding'. If someone doesn't understand chess, I don't call them a fool, I just point out they are not trained in chess. Also to your point about grains of rice, I think the world would probably benefit from everyone purchasing the optimal number of grains of rice, and eating that number of grains of rice. Food waste is a problem, as is the belief that 2 dollars here and there doesn't add up.