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I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. So it's not so much the winni

I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. So it's not so much the winning that make people go crazy. It's just what happens when people who don't understand money get lots of it.

DoreenMichele 8y ago
I know rational people that play the lottery. I don't think it works to suggest that only crazy people play. Professional athletes who come into sudden wealth due to becoming professional athletes are also infamous for their financial struggles. However, I will suggest that many poor people think coming into money would solve all their problems because money is very often the most obvious sticking point in their own life. In reality, they trade poor people problems for rich people problems and it doesn't come with some built-in education on how to handle rich people problems. (I mean a la The Matrix: "Download this to my brain." A lot of the advice they get falls on deaf ears and they are ill-equipped to sort good advice from bad.) In fact, many poor people are incredibly dismissive of the idea that rich people have any problems. They often mock the problems that rich people have. So no surprise they aren't psychologically prepared to deal with the reality of sudden wealth in cases where they think "rich people don't have real problems."
- bdhess 8y ago
  > Professional athletes who come into sudden wealth due to becoming professional athletes are also infamous for their financial struggles. I think this group has similar characteristics to the lottery winners. They become rich suddenly, after having beaten long odds. You can make the same sorts of arguments about the rationality of professional athletes too. Most people who aspire to become professional athletes don't make it. Continuing to pursue the dream is largely an irrational decision.
  - DoreenMichele 8y ago
    Not everyone buying lottery tickets sits around hoping to win millions. I know someone who has played for years and had many small wins who decries how they have made it worse by increasing the size of the big payout and decreasing the frequency of the small ones. Similarly, it is possible to play sports because you love it, not because you see it as a get rich scheme. Participating doesn't have to be crazy behavior in either case.
    - wool_gather 8y ago
      > someone who has played for years and had many small wins That only makes it more likely that this person is losing money by playing. "Crazy" is too strong, I agree, but it's certainly not the shrewdest investment.
      - DoreenMichele 8y ago
        Oh, geez. If they played video games for fun, would you be explaining to me how unwise an investment that is? Some people enjoy gambling. If it pays off, yay! If it doesn't, it was only a couple of bucks that they felt they could spare. I'm aware there are very poor people who play the lottery in hopes of it fixing their lives, even homeless people. And I don't think that's a great idea. But there are people who can spare a few bucks who just like playing. One person I know used to call it "Contributing to my nephew's scholarship fund" because the lottery covers education expenses in that state. I have only rarely played the lottery. It's not really my thing. But not everything in life needs to be decided with a slide rule for someone to be fundamentally healthy. In fact, I have seen studies that suggest that people who do a little gambling are typically healthier than average.
      - coldtea 8y ago
        >"Crazy" is too strong, I agree, but it's certainly not the shrewdest investment. It's not supposed to be an investment, it's something you do for the fun of the "what if".
        piker 8y ago
  - spacehome 8y ago
    I think the only similarity is that both groups get to where they are suddenly, without proving any financial acumen, which distinguishes them from the multimillionaires who become such from decades of working, frugality, and investing. However, that's where the similarities end. Athletes become successful from years of hard work and sacrificing present enjoyment for future rewards. Lottery winners are chosen randomly from people who literally demonstrate how poorly they handle money buy buying lottery tickets.
  - crooked-v 8y ago
    Professional athletes usually have the extra money sink of massive health care costs relatively early in life, though.
- rootusrootus 8y ago
  I think it's perfectly rational to play the lottery, as long as you are completely aware of the odds and you are happy with the value of what you are buying. Same as with anything else you buy. I buy a megabucks ticket about once every year. Sometimes twice. I buy it for a little bit of fantasy. It's totally worth the dollar. In reality I'd hate to win a big lottery because the evidence is pretty overwhelming that it would ruin my life (not the financial aspect, I could handle that bit, it's the social consequences that would make me wish I had never won).
- tempestn 8y ago
  Certainly rational people play the lottery, but I would argue that less rational people play proportionally more often and buy more tickets.
graeme 8y ago
I can’t find the source, but someone posted a story here once discussing the curse of winner’s. One was a millionaire businessman. The publicity of the win sent relatives and criminals after hum for money. I believe he was eventually murdered by a robber.
- DoreenMichele 8y ago
  In that vein, there is this Reddit comment: https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_won_a_656_million_dollar_lottery_what_do/chba4bf/ https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_...
  - graeme 8y ago
    Ah, that's exactly the comment I was thinking of. Thanks! Clearly memory is none tol accurate. Though I guess that post doesn't apply to smaller winners.
cperciva 8y ago
Something I've always wondered about, which HN might be the only possible place to get an answer to: Does the "lottery winners' curse" afflict founders of wildly successful startups? (Say, people who walk away from an acquisition with $10M+ -- on par with "winning the lottery".)
- hanniabu 8y ago
  That's an interesting question
- Axsuul 8y ago
  Not as much because the success of a wildly successful startup happens over a longer period which gives you more time to adjust.
  - deleted 8y ago
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- deleted 8y ago
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- pawelmurias 8y ago
  Doubt it, most successful tech startup founders aren't super stupid.
- kd5bjo 8y ago
  I don’t know about founders, but something similar can happen to highly-paid tech employees. The few years I worked in SV [1] changed my spending habits much more than I expected, and I didn’t realize it until I left and went back to a “normal” life. The experience altered my relationship with money, and not necessarily for the better — expensive things don’t have a mystique anymore, but neither does their price instantly turn me away; it’s hard to tell which effect will dominate in the long run. [1] Where I amassed orders of magnitude less capital than you’re asking about
epx 8y ago
I have a slightly more convoluted explanation: There are two types of money. Capital money (or seed money) and income money. People don't understand the difference. When you win the lottey, you get seed money. This money is "worth" 200 times less than you think it's worth, because you can only spend it once. If you put e.g. 10 million in an investment, you get an allowance of less than 50k/month to spend without eroding the original capital. That's the true "value" of this lottery ticket.
- s0rce 8y ago
  10M in capital, you should be able to live conservatively on 300k/yr (today's dollars) without running out. Probably more.
  - epx 8y ago
    My estimation was more optimistic (50k/mo = 600k/yr), but yeah, the less you spend the better.
    - s0rce 8y ago
      Oh, I thought you meant yearly.
  - deleted 8y ago
    [deleted]
coldtea 8y ago
>I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. You'd be surprised. People of all kinds play lottery. The real reason is far more likely to be that people who are not rich already are not prepared for sudden wealth, and do not know how to handle their finances. Plus all kinds of other people (relatives, advisors, etc) will prey on them.
gammateam 8y ago
> I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. I know why you might think that, the articles talking about lottery spending by poor people and socioeconomic "failures". But they are not capable of the lottery spending necessary to reach jackpots numbers we see multiple times a week. Because all classes of society play the lottery at an even distribution. The % of their income or net worth is negligible once you get to the middle class and higher. It is negligible and inconsequential and sometimes you win. Your supposition is flawed, and also many more people are fine winning the lottery and you never hear about them. They buy the condo in South Beach and send their children to Ivy League schools and make up stories about their successful business, the end.
- scarface74 8y ago
  Make of the numbers as you will. https://www.vox.com/identities/2016/1/13/10763268/lottery-poor-prey https://www.vox.com/identities/2016/1/13/10763268/lottery-po...
southerndrift 8y ago
If you think of a lottery as a source of hope then buying lottery tickets is a rational choice for those who don't have the chance of ever being rich.

DoreenMichele 8y ago

I know rational people that play the lottery. I don't think it works to suggest that only crazy people play. Professional athletes who come into sudden wealth due to becoming professional athletes are also infamous for their financial struggles. However, I will suggest that many poor people think coming into money would solve all their problems because money is very often the most obvious sticking point in their own life. In reality, they trade poor people problems for rich people problems and it doesn't come with some built-in education on how to handle rich people problems. (I mean a la The Matrix: "Download this to my brain." A lot of the advice they get falls on deaf ears and they are ill-equipped to sort good advice from bad.) In fact, many poor people are incredibly dismissive of the idea that rich people have any problems. They often mock the problems that rich people have. So no surprise they aren't psychologically prepared to deal with the reality of sudden wealth in cases where they think "rich people don't have real problems."

bdhess 8y ago
> Professional athletes who come into sudden wealth due to becoming professional athletes are also infamous for their financial struggles. I think this group has similar characteristics to the lottery winners. They become rich suddenly, after having beaten long odds. You can make the same sorts of arguments about the rationality of professional athletes too. Most people who aspire to become professional athletes don't make it. Continuing to pursue the dream is largely an irrational decision.
- DoreenMichele 8y ago
  Not everyone buying lottery tickets sits around hoping to win millions. I know someone who has played for years and had many small wins who decries how they have made it worse by increasing the size of the big payout and decreasing the frequency of the small ones. Similarly, it is possible to play sports because you love it, not because you see it as a get rich scheme. Participating doesn't have to be crazy behavior in either case.
  - wool_gather 8y ago
    > someone who has played for years and had many small wins That only makes it more likely that this person is losing money by playing. "Crazy" is too strong, I agree, but it's certainly not the shrewdest investment.
    - DoreenMichele 8y ago
      Oh, geez. If they played video games for fun, would you be explaining to me how unwise an investment that is? Some people enjoy gambling. If it pays off, yay! If it doesn't, it was only a couple of bucks that they felt they could spare. I'm aware there are very poor people who play the lottery in hopes of it fixing their lives, even homeless people. And I don't think that's a great idea. But there are people who can spare a few bucks who just like playing. One person I know used to call it "Contributing to my nephew's scholarship fund" because the lottery covers education expenses in that state. I have only rarely played the lottery. It's not really my thing. But not everything in life needs to be decided with a slide rule for someone to be fundamentally healthy. In fact, I have seen studies that suggest that people who do a little gambling are typically healthier than average.
    - coldtea 8y ago
      >"Crazy" is too strong, I agree, but it's certainly not the shrewdest investment. It's not supposed to be an investment, it's something you do for the fun of the "what if".
      - piker 8y ago
- spacehome 8y ago
  I think the only similarity is that both groups get to where they are suddenly, without proving any financial acumen, which distinguishes them from the multimillionaires who become such from decades of working, frugality, and investing. However, that's where the similarities end. Athletes become successful from years of hard work and sacrificing present enjoyment for future rewards. Lottery winners are chosen randomly from people who literally demonstrate how poorly they handle money buy buying lottery tickets.
- crooked-v 8y ago
  Professional athletes usually have the extra money sink of massive health care costs relatively early in life, though.
rootusrootus 8y ago
I think it's perfectly rational to play the lottery, as long as you are completely aware of the odds and you are happy with the value of what you are buying. Same as with anything else you buy. I buy a megabucks ticket about once every year. Sometimes twice. I buy it for a little bit of fantasy. It's totally worth the dollar. In reality I'd hate to win a big lottery because the evidence is pretty overwhelming that it would ruin my life (not the financial aspect, I could handle that bit, it's the social consequences that would make me wish I had never won).
tempestn 8y ago
Certainly rational people play the lottery, but I would argue that less rational people play proportionally more often and buy more tickets.

graeme 8y ago

I can’t find the source, but someone posted a story here once discussing the curse of winner’s. One was a millionaire businessman. The publicity of the win sent relatives and criminals after hum for money. I believe he was eventually murdered by a robber.

DoreenMichele 8y ago
In that vein, there is this Reddit comment: https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_won_a_656_million_dollar_lottery_what_do/chba4bf/ https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_...
- graeme 8y ago
  Ah, that's exactly the comment I was thinking of. Thanks! Clearly memory is none tol accurate. Though I guess that post doesn't apply to smaller winners.

cperciva 8y ago

Something I've always wondered about, which HN might be the only possible place to get an answer to: Does the "lottery winners' curse" afflict founders of wildly successful startups? (Say, people who walk away from an acquisition with $10M+ -- on par with "winning the lottery".)

hanniabu 8y ago
That's an interesting question
Axsuul 8y ago
Not as much because the success of a wildly successful startup happens over a longer period which gives you more time to adjust.
- deleted 8y ago
  [deleted]
deleted 8y ago
[deleted]
pawelmurias 8y ago
Doubt it, most successful tech startup founders aren't super stupid.
kd5bjo 8y ago
I don’t know about founders, but something similar can happen to highly-paid tech employees. The few years I worked in SV [1] changed my spending habits much more than I expected, and I didn’t realize it until I left and went back to a “normal” life. The experience altered my relationship with money, and not necessarily for the better — expensive things don’t have a mystique anymore, but neither does their price instantly turn me away; it’s hard to tell which effect will dominate in the long run. [1] Where I amassed orders of magnitude less capital than you’re asking about

epx 8y ago

I have a slightly more convoluted explanation: There are two types of money. Capital money (or seed money) and income money. People don't understand the difference. When you win the lottey, you get seed money. This money is "worth" 200 times less than you think it's worth, because you can only spend it once. If you put e.g. 10 million in an investment, you get an allowance of less than 50k/month to spend without eroding the original capital. That's the true "value" of this lottery ticket.

s0rce 8y ago
10M in capital, you should be able to live conservatively on 300k/yr (today's dollars) without running out. Probably more.
- epx 8y ago
  My estimation was more optimistic (50k/mo = 600k/yr), but yeah, the less you spend the better.
  - s0rce 8y ago
    Oh, I thought you meant yearly.
- deleted 8y ago
  [deleted]

coldtea 8y ago

>I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. You'd be surprised. People of all kinds play lottery. The real reason is far more likely to be that people who are not rich already are not prepared for sudden wealth, and do not know how to handle their finances. Plus all kinds of other people (relatives, advisors, etc) will prey on them.

gammateam 8y ago

> I suspect the reason why many lottery winners end up broke soon is because most rational well adjusted people don't play lottery. I know why you might think that, the articles talking about lottery spending by poor people and socioeconomic "failures". But they are not capable of the lottery spending necessary to reach jackpots numbers we see multiple times a week. Because all classes of society play the lottery at an even distribution. The % of their income or net worth is negligible once you get to the middle class and higher. It is negligible and inconsequential and sometimes you win. Your supposition is flawed, and also many more people are fine winning the lottery and you never hear about them. They buy the condo in South Beach and send their children to Ivy League schools and make up stories about their successful business, the end.

scarface74 8y ago
Make of the numbers as you will. https://www.vox.com/identities/2016/1/13/10763268/lottery-poor-prey https://www.vox.com/identities/2016/1/13/10763268/lottery-po...

southerndrift 8y ago

If you think of a lottery as a source of hope then buying lottery tickets is a rational choice for those who don't have the chance of ever being rich.