11 ms·

A rogue Romanian economist legally gamed the lottery

286 points by gscott 8y ago

bryanlarsen 8y ago
AFAICT, many jackpot style lotteries get an expected value (EV) above 1 when the jackpots get big. They're set up so their average EV is 0.4 - 0.5, but when a jackpot isn't won, the payout is under 0.1. String a bunch of those together in a row, and the EV creeps above 1.0. The calculations are easy to do. You do need to estimate the number of people who buy the tickets so you can calculate the odds of sharing the jackpot. The real number isn't publicly available, but newspapers often have numbers for similar jackpots in the past. As the article mentions, lotteries protect themselves by making it logistically impossible for anybody to buy every ticket. Here's the calculation for Canada's Lotto 6/49 in 2007: https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnOSZBGfmcF0rzQvgM18EVGOyo/edit?usp=sharing https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnO...
- eximius 8y ago
  While true, expected value isn't necessarily a useful metric at that point. If I have a one in a googol chance of winning a googolplex dollars, it doesn't really matter that the expected value is going to be huge, I still won't win anything because I'll be insolvent before the requisite number of tries to have a reasonable chance of winning.
  - solotronics 8y ago
    thats why the people who do this work as a company and pool their resources
    - grkvlt 8y ago
      It's more that the people who do this do more than just buying a single ticket with positive expected value - as described in the article.
  - tunesmith 8y ago
    Yeah, the Kelly Criterion is a good thing to explore in situations like this. If there's (truly) positive EV, you still should only spend a certain percentage of your bankroll on the bet. And if the bet has high payoff and low odds, your bankroll likely has to be astronomical in order for the bet to be a good decision.
  - grkvlt 8y ago
    True, +EV is useless if the variance is huge, as is the case with lotteries.
- lev99 8y ago
  Your EV numbers are high. If the EV was really significantly above 1.0 (say 1.5) then everyone would buy a lot of lotto tickets. It would be simple arbitrage. In reality all of those people buying extra tickets (because of the high perceived EV) would mean a higher chance of splitting the pot. Splitting the pot would reduce the real return by 1/2 for every person that purchased a ticket.
  - astrodust 8y ago
    Sometimes the EV goes above 1.0 and there are several groups of people who closely monitor lotteries all over the US to spot this event. When it does happen, which is very rare, they do calculations on the expected impact, viability and if their conclusions are good, swoop in and buy hundreds of thousands of tickets. They have people printing tickets for an entire day. They pay stores to stay open late. It's a tactical operation. Sometimes the jackpot is so anomalously big that the general public can't buy enough tickets to bring it back down below 1.0.
    - deleted 8y ago
      [deleted]
  - delecti 8y ago
    The post you replied to seem to imply a "naive EV", because they already discussed odds of sharing the jackpot.
  - bryanlarsen 8y ago
    The odds of splitting the pot are calculated in my spreadsheet. In the first scenario, that decreases the EV from 2.15 to 1.11.
    - femto113 8y ago
      Problem with this calculation it it assumes that exactly one person/group undertakes the buy-every-ticket strategy. As soon as there are two or more groups the chances of splitting the pot goes to 100%.
- dfxm12 8y ago
  As the article mentions, lotteries protect themselves by making it logistically impossible for anybody to buy every ticket. I wonder why they care. In fact, they need someone to win big, so as to entice future players...
  - xyzzyz 8y ago
    But someone will win big, sooner or later. It is more enticing that a random lucky person wins rather than a syndicate.
  - moate 8y ago
    Because knowing that you're competing against large, well funded organizations on a regular basis makes people suddenly start to realize (to a small degree) how statistics work. If you assume that everyone else has the same basic odds of winning that you do (1 in a Million for example) you might play. But if you find out that you have a 1:1,000,000 chance and another well funded group has a 1:10 chance, you're going to quickly realize you're just throwing away money. If an unfair game is equally unfair for everyone, it's fair. If it's only unfair for some/most people to a greater degree than some other people, then it's unfair.
- mark-r 8y ago
  I track the EV of 5 different lotteries available in Minnesota. At this moment only one of them is over 0.5, at 0.55. I don't even think about buying a ticket until it gets over 0.8.
  - dagenix 8y ago
    I'm not sure that is really logical. The odds of winning are the same regardless of if it $400m you can win or $20m. However, the effect on your life would be basically the same in either case. To be fair, I do much the same thing. But, it doesn't really have a basis in logic. It's all psychological.
- zwaps 8y ago
  y'all really need to read this https://en.wikipedia.org/wiki/St._Petersburg_paradox https://en.wikipedia.org/wiki/St._Petersburg_paradox
  - GFischer 8y ago
    Very interesting.
- paulie_a 8y ago
  The funny thing is you don't need any stats to win smaller amounts of money. Just the simple question "hey what's the newest 10 dollar ticket" was enough to result in a solid net positive and a lot of beer money in college. They tended to front load the winning tickets for the newest ones.
- zone411 8y ago
  One significant difference compared to the U.S. jackpots - you need to pay taxes, unlike in Canada.
IkmoIkmo 8y ago
Seems kind of silly that they hyped it up as some kind of mathematical savant genius story, when it seems like they just took a simple lottery system (x numbers give y combinations, which sell for $1 per combination, for a total payout of >$3y) where the logistics operation was the more impressive aspect.
- opencl 8y ago
  From the linked article [1](Romanian language) it sounds like he had claimed to have a special mathematical method to convince his early investors in Romania but it was entirely made up. He was basically scamming them and had no idea if they would actually win. [1] http://www.bursa.ro/industria-de-gambling-iulie-1994-primul-si-singurul-interviu-din-presa-romaneasca-stefan-mandel-o...&s=print&sr=articol&id_articol=159657.html http://www.bursa.ro/industria-de-gambling-iulie-1994-primul-...
  - tk75x 8y ago
    > Meanwhile, Mandel paid himself ... $1.7m, and ... $14m. After overhead fees ($5.5m for the tickets, and $500k in expenses), he was left with a princely sum. > Records show that he funneled this cash into the Pacific Basin Fund, a Hong Kong-based account managed by his brother-in-law. “What we calculated to be the reality has changed,” he wrote in a 1994 letter to investors. “It may not seem such a hot investment now.” After that, his investor updates went cold. Proof that it was a scam all along.
- legohead 8y ago
  Exactly.. from the main header graphic I thought this guy was going to set up some kind of mathematical physics model of a sphere with a lot of balls in it and be able to predict the outcome. nope. he just bought all the tickets.
- stephengillie 8y ago
  Others have tried this, and the lottery was cancelled and they got their money back. The reason was they fundamentally changed the nature of the game.
- 8y ago
Beefin 8y ago
It's interesting that Jefferson had thoughts about the original intention of the lottery system. The logistics of buying each ticket seems nightmarish. I wonder if this same gaming can be applied to other things
- dfxm12 8y ago
  Look into arbitrage betting: https://en.wikipedia.org/wiki/Arbitrage_betting https://en.wikipedia.org/wiki/Arbitrage_betting The basic idea is you bet on every possible outcome of a match (win/lose/draw) with different bookies offering different odds that cover each other.
peterburkimsher 8y ago
When I was in my final year of high school, Coca-cola was giving away an iPod Nano to lucky winners who entered codes from plastic bottle caps or glass bottle labels. An iPod was given away once per day, except Monday, when they were given out once per hour. I was competing against the rest of Switzerland. Each code had to be entered on a website, earning 0, 5, 10, 20 or 50 points. You could then choose how many points to gamble during the day/hour, and would hear at the end of the day/hour whether you won. The school had a bottle-cap recycling bin. Every day, I dug through that looking for Coke caps. I volunteered for GAOS (a theatre group) and served drinks outside their show, collecting many paper wrappers from glass bottles. After collecting 1500 points, at 2 am on a Monday night, I struck with half my points. And I failed! Shocked, I tried again at 3 am, risking all the remaining points I'd saved up. And I won! I was the "lucky" recipient of a 2GB iPod Nano. Was it worth it? Yes, because I was under the employment age. I couldn't have earned money legally, so my opportunity cost of time was low. Earlier, in primary school, the classes bought Pizza Hut once a week. During a promotion, their pizza boxes were printed with stars, which could be saved up and exchanged for free pizza. So I went around and asked all the teachers for their old boxes, cut out the stars, and got a second pizza every week! If only it were that easy for me to find a job nowadays, despite a first-class MEng in Electronic Systems Engineering and 4 years continuous relevant work experience. Even trying to follow the rules and get all the qualifications doesn't seem to work.
- themodelplumber 8y ago
  I have to wonder--given those impressive experiences, could you find a way to produce the resources you need without needing a job? From reading about your obvious gifts here, I would guess that if you had a list of criteria like how much you need to earn, and whatever other resources you require, you could figure out a clever way to meet those criteria. Job or no job.
  - peterburkimsher 8y ago
    I don't know why this is getting downvotes - entrepreneurship is something I've considered. It doesn't help me get a visa though. I tried emailing computer repair shops asking them to advertise my data migration services - using an Apple II to copy off 5.25" floppies, a Mac LC to read DD floppies, and a PowerBook G3 to read SCSI and JAZ disks. Unfortunately, I only got one reply that asked to see a poster before they'd even discuss it with management. I also tried I tried contacting companies via Seek and TradeMe. Most expect me to already have a work visa. I asked recruiters for help. I put side projects here on Hacker News to try to get attention. I asked friends who I worked with at Fisher & Paykel Healthcare when I was there before. I found random people on Github and offered to work for free on open-source projects just to get an introduction. Nothing has worked. The only interview I had was from an Australian company. Now I'm spamming everyone on the Accredited Employers list who has an email address on their website. I'm willing to take whatever I can get now, wherever that might be.
gesman 8y ago
Virginia Lottery director Ken Thorson pled to the press. “It is an opportunity for the common man to spend a small sum for the possibility of a higher prize… We never anticipated a group trying to make such a large purchase.” Neither corporate lawyers nor government would ever acknowledge that loophole in a business models does not necessarily equals to fraud.
- kbenson 8y ago
  > Neither corporate lawyers nor government would ever acknowledge that loophole in a business models does not necessarily equals to fraud. There's a lot of negations in there, I'm not sure if I'm reading it incorrectly, or you have one too many, but is sounds like you're saying that corporate lawyers and government will always maintain that a loophole in a business model is fraud?
  - mamon 8y ago
    Exactly, because they want business model to benefit them, not customers. Think about casinos banning players for counting cards in Black Jack: the only reasonable strategy of playing the game is considered illegal. In other words - you are welcome to play if you are bad at it, but once you get good you are considered "fraud"
    - kbenson 8y ago
      Card counting is generally legal in the US as long as it's done with the mind, and not an external device[1]. That said, it's usually against casino rules, so they will make you leave if they suspect it, and possibly put your face on the internal list they have of known card counters if you do it enough or win enough. 1: https://en.wikipedia.org/wiki/Card_counting#Legal_status https://en.wikipedia.org/wiki/Card_counting#Legal_status
      - mamon 8y ago
        Ok, so maybe it is not against a federal law but still, making you leave the casino because you are too good at the game you're playing seems weird.
VectorLock 8y ago
It seems strange to me that any lottery would ever let itself get an EV > 1.
- sokoloff 8y ago
  Over the long run, sure. In the short run, temporary excursions above 1.0 provide huge amounts of free advertising and buzz.
- foobaw 8y ago
  Sometimes, the big lotteries like Powerball and Megamillions do get to EV > 1. Not only is it unreasonable to buy the 240 million tickets for every combination (financially and logistically), but even if you did, if you end up sharing the winnings, then you lose millions. EV > 1 is still not horrible.
- driverdan 8y ago
  It only happens when you don't factor in split prizes. When you include the odds of having to share the prize it never goes over 1.
- Nasrudith 8y ago
  Well it also has to do oddly with 'fairness'. If the pool never grows from failures they are more likely to suspect that it is 'rigged' against them instead of merely being unlucky. But if the pool growth is fixed as either an absolute or a percentage there is no incentive for the running agency to try to make people lose. So long as people keep buying in they really haven't lost anything even if the build up turns it into a sure bet. And winning splitting solves the equilibrium as well in a rather market allegorical way - if everyone puts money into a sure bet the returns eventually diminish.
gwern 8y ago
> His legacy lives on in US legislation: All 44 states that run lotteries have enacted laws preventing the profitable replication of Mandel’s strategy. In effect, this secures him a title as the first and last man to ever successfully game the lottery by buying every possible combination. This doesn't seem true? He didn't buy all of the tickets in question, he only bought most, and people have been running lottery syndicates under the same logic which buy some or most tickets to ensure winning for centuries. Even Voltaire ran one.
jy1 8y ago
Don't they split the prize if there are multiple winners? How can they ensure +EV? They could spend money to buy every combination but split the jackpot with multiple winners? Am I missing something?
- netsharc 8y ago
  I think they know it's still a gamble...
narag 8y ago
That brought some memories. I calculated that Spanish football quiniela had a little more than three million possible results. Since you could make multi-result bets, only a few thousands boletos were needed to make a sure win. The rules required to manually fill the bets, but it was workable building a robot. Then the government, that was not happy of paying a percentage of the profits to football teams, introduced loto and prizes plummeted.
person_of_color 8y ago
Similar to David Walsh, he set up MoNA with his profits.
ggm 8y ago
The investors — small business owners, machine operators, housekeepers, and doctors — had been regaled with tales of riches, and promised participation in up to 9 lottos per year. Yet, they’d only received a $1.4k return on their $4k investment. Folks: thats > 25% return on investment. I'm sorry but my sympathies with these investors walked out the door at this point: If you can get 25% ROI, stop looking for more.
- delinka 8y ago
  Is that $1.4k in addition to getting their $4k back? I always assume that with lotto-based shenanigans, the "return" isn't actually a profit, but the maximum of payouts after having bought all the chances their money could buy. I'll spend $20 on tickets for a large jackpot, and I'll will $2 on occasion - that's not a "10% return" but a "10% refund," and I'd expect a non-finance journalist to get that wrong.
  - ggm 8y ago
    Oh I totally misread it (or read it the other way). If its a loss of 3/4 of their investment, thats a poor investment indeed.
goofingaround 8y ago
>... he was a natural with numbers who spent every spare minute analyzing theoretical probability papers written by the 13th-century mathematician Leonardo Fibonacci. Hope Pascal doesn’t read this.
YayamiOmate 8y ago
This was also possible in Poland last year or two years ago. The string of failed top prizes was so big that cummulated prize was so big in the end that buying tickets for all combinations was abt 2/3rds of the top one. This isn't gaming the system though its brute forcing it. And you are not guaranteed a profit. You bet against other ppl hitting the jackpot. Excluding oneself from the system, what is the chance that after N fails for top prize N+1 will also fail? Earning this way is not so easy as just winning the lottery.

286 points by gscott 8y ago

AFAICT, many jackpot style lotteries get an expected value (EV) above 1 when the jackpots get big. They're set up so their average EV is 0.4 - 0.5, but when a jackpot isn't won, the payout is under 0.1. String a bunch of those together in a row, and the EV creeps above 1.0. The calculations are easy to do. You do need to estimate the number of people who buy the tickets so you can calculate the odds of sharing the jackpot. The real number isn't publicly available, but newspapers often have numbers for similar jackpots in the past. As the article mentions, lotteries protect themselves by making it logistically impossible for anybody to buy every ticket. Here's the calculation for Canada's Lotto 6/49 in 2007: https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnOSZBGfmcF0rzQvgM18EVGOyo/edit?usp=sharing https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnO...

eximius 8y ago
While true, expected value isn't necessarily a useful metric at that point. If I have a one in a googol chance of winning a googolplex dollars, it doesn't really matter that the expected value is going to be huge, I still won't win anything because I'll be insolvent before the requisite number of tries to have a reasonable chance of winning.
- solotronics 8y ago
  thats why the people who do this work as a company and pool their resources
  - grkvlt 8y ago
    It's more that the people who do this do more than just buying a single ticket with positive expected value - as described in the article.
- tunesmith 8y ago
  Yeah, the Kelly Criterion is a good thing to explore in situations like this. If there's (truly) positive EV, you still should only spend a certain percentage of your bankroll on the bet. And if the bet has high payoff and low odds, your bankroll likely has to be astronomical in order for the bet to be a good decision.
- grkvlt 8y ago
  True, +EV is useless if the variance is huge, as is the case with lotteries.
lev99 8y ago
Your EV numbers are high. If the EV was really significantly above 1.0 (say 1.5) then everyone would buy a lot of lotto tickets. It would be simple arbitrage. In reality all of those people buying extra tickets (because of the high perceived EV) would mean a higher chance of splitting the pot. Splitting the pot would reduce the real return by 1/2 for every person that purchased a ticket.
- astrodust 8y ago
  Sometimes the EV goes above 1.0 and there are several groups of people who closely monitor lotteries all over the US to spot this event. When it does happen, which is very rare, they do calculations on the expected impact, viability and if their conclusions are good, swoop in and buy hundreds of thousands of tickets. They have people printing tickets for an entire day. They pay stores to stay open late. It's a tactical operation. Sometimes the jackpot is so anomalously big that the general public can't buy enough tickets to bring it back down below 1.0.
  - deleted 8y ago
    [deleted]
- delecti 8y ago
  The post you replied to seem to imply a "naive EV", because they already discussed odds of sharing the jackpot.
- bryanlarsen 8y ago
  The odds of splitting the pot are calculated in my spreadsheet. In the first scenario, that decreases the EV from 2.15 to 1.11.
  - femto113 8y ago
    Problem with this calculation it it assumes that exactly one person/group undertakes the buy-every-ticket strategy. As soon as there are two or more groups the chances of splitting the pot goes to 100%.
dfxm12 8y ago
As the article mentions, lotteries protect themselves by making it logistically impossible for anybody to buy every ticket. I wonder why they care. In fact, they need someone to win big, so as to entice future players...
- xyzzyz 8y ago
  But someone will win big, sooner or later. It is more enticing that a random lucky person wins rather than a syndicate.
- moate 8y ago
  Because knowing that you're competing against large, well funded organizations on a regular basis makes people suddenly start to realize (to a small degree) how statistics work. If you assume that everyone else has the same basic odds of winning that you do (1 in a Million for example) you might play. But if you find out that you have a 1:1,000,000 chance and another well funded group has a 1:10 chance, you're going to quickly realize you're just throwing away money. If an unfair game is equally unfair for everyone, it's fair. If it's only unfair for some/most people to a greater degree than some other people, then it's unfair.
mark-r 8y ago
I track the EV of 5 different lotteries available in Minnesota. At this moment only one of them is over 0.5, at 0.55. I don't even think about buying a ticket until it gets over 0.8.
- dagenix 8y ago
  I'm not sure that is really logical. The odds of winning are the same regardless of if it $400m you can win or $20m. However, the effect on your life would be basically the same in either case. To be fair, I do much the same thing. But, it doesn't really have a basis in logic. It's all psychological.
zwaps 8y ago
y'all really need to read this https://en.wikipedia.org/wiki/St._Petersburg_paradox https://en.wikipedia.org/wiki/St._Petersburg_paradox
- GFischer 8y ago
  Very interesting.
paulie_a 8y ago
The funny thing is you don't need any stats to win smaller amounts of money. Just the simple question "hey what's the newest 10 dollar ticket" was enough to result in a solid net positive and a lot of beer money in college. They tended to front load the winning tickets for the newest ones.
zone411 8y ago
One significant difference compared to the U.S. jackpots - you need to pay taxes, unlike in Canada.

IkmoIkmo 8y ago

Seems kind of silly that they hyped it up as some kind of mathematical savant genius story, when it seems like they just took a simple lottery system (x numbers give y combinations, which sell for $1 per combination, for a total payout of >$3y) where the logistics operation was the more impressive aspect.

opencl 8y ago
From the linked article [1](Romanian language) it sounds like he had claimed to have a special mathematical method to convince his early investors in Romania but it was entirely made up. He was basically scamming them and had no idea if they would actually win. [1] http://www.bursa.ro/industria-de-gambling-iulie-1994-primul-si-singurul-interviu-din-presa-romaneasca-stefan-mandel-o...&s=print&sr=articol&id_articol=159657.html http://www.bursa.ro/industria-de-gambling-iulie-1994-primul-...
- tk75x 8y ago
  > Meanwhile, Mandel paid himself ... $1.7m, and ... $14m. After overhead fees ($5.5m for the tickets, and $500k in expenses), he was left with a princely sum. > Records show that he funneled this cash into the Pacific Basin Fund, a Hong Kong-based account managed by his brother-in-law. “What we calculated to be the reality has changed,” he wrote in a 1994 letter to investors. “It may not seem such a hot investment now.” After that, his investor updates went cold. Proof that it was a scam all along.
legohead 8y ago
Exactly.. from the main header graphic I thought this guy was going to set up some kind of mathematical physics model of a sphere with a lot of balls in it and be able to predict the outcome. nope. he just bought all the tickets.
stephengillie 8y ago
Others have tried this, and the lottery was cancelled and they got their money back. The reason was they fundamentally changed the nature of the game.
8y ago

Beefin 8y ago

It's interesting that Jefferson had thoughts about the original intention of the lottery system. The logistics of buying each ticket seems nightmarish. I wonder if this same gaming can be applied to other things

dfxm12 8y ago
Look into arbitrage betting: https://en.wikipedia.org/wiki/Arbitrage_betting https://en.wikipedia.org/wiki/Arbitrage_betting The basic idea is you bet on every possible outcome of a match (win/lose/draw) with different bookies offering different odds that cover each other.

peterburkimsher 8y ago

When I was in my final year of high school, Coca-cola was giving away an iPod Nano to lucky winners who entered codes from plastic bottle caps or glass bottle labels. An iPod was given away once per day, except Monday, when they were given out once per hour. I was competing against the rest of Switzerland. Each code had to be entered on a website, earning 0, 5, 10, 20 or 50 points. You could then choose how many points to gamble during the day/hour, and would hear at the end of the day/hour whether you won. The school had a bottle-cap recycling bin. Every day, I dug through that looking for Coke caps. I volunteered for GAOS (a theatre group) and served drinks outside their show, collecting many paper wrappers from glass bottles. After collecting 1500 points, at 2 am on a Monday night, I struck with half my points. And I failed! Shocked, I tried again at 3 am, risking all the remaining points I'd saved up. And I won! I was the "lucky" recipient of a 2GB iPod Nano. Was it worth it? Yes, because I was under the employment age. I couldn't have earned money legally, so my opportunity cost of time was low. Earlier, in primary school, the classes bought Pizza Hut once a week. During a promotion, their pizza boxes were printed with stars, which could be saved up and exchanged for free pizza. So I went around and asked all the teachers for their old boxes, cut out the stars, and got a second pizza every week! If only it were that easy for me to find a job nowadays, despite a first-class MEng in Electronic Systems Engineering and 4 years continuous relevant work experience. Even trying to follow the rules and get all the qualifications doesn't seem to work.

themodelplumber 8y ago
I have to wonder--given those impressive experiences, could you find a way to produce the resources you need without needing a job? From reading about your obvious gifts here, I would guess that if you had a list of criteria like how much you need to earn, and whatever other resources you require, you could figure out a clever way to meet those criteria. Job or no job.
- peterburkimsher 8y ago
  I don't know why this is getting downvotes - entrepreneurship is something I've considered. It doesn't help me get a visa though. I tried emailing computer repair shops asking them to advertise my data migration services - using an Apple II to copy off 5.25" floppies, a Mac LC to read DD floppies, and a PowerBook G3 to read SCSI and JAZ disks. Unfortunately, I only got one reply that asked to see a poster before they'd even discuss it with management. I also tried I tried contacting companies via Seek and TradeMe. Most expect me to already have a work visa. I asked recruiters for help. I put side projects here on Hacker News to try to get attention. I asked friends who I worked with at Fisher & Paykel Healthcare when I was there before. I found random people on Github and offered to work for free on open-source projects just to get an introduction. Nothing has worked. The only interview I had was from an Australian company. Now I'm spamming everyone on the Accredited Employers list who has an email address on their website. I'm willing to take whatever I can get now, wherever that might be.

gesman 8y ago

Virginia Lottery director Ken Thorson pled to the press. “It is an opportunity for the common man to spend a small sum for the possibility of a higher prize… We never anticipated a group trying to make such a large purchase.” Neither corporate lawyers nor government would ever acknowledge that loophole in a business models does not necessarily equals to fraud.

kbenson 8y ago
> Neither corporate lawyers nor government would ever acknowledge that loophole in a business models does not necessarily equals to fraud. There's a lot of negations in there, I'm not sure if I'm reading it incorrectly, or you have one too many, but is sounds like you're saying that corporate lawyers and government will always maintain that a loophole in a business model is fraud?
- mamon 8y ago
  Exactly, because they want business model to benefit them, not customers. Think about casinos banning players for counting cards in Black Jack: the only reasonable strategy of playing the game is considered illegal. In other words - you are welcome to play if you are bad at it, but once you get good you are considered "fraud"
  - kbenson 8y ago
    Card counting is generally legal in the US as long as it's done with the mind, and not an external device[1]. That said, it's usually against casino rules, so they will make you leave if they suspect it, and possibly put your face on the internal list they have of known card counters if you do it enough or win enough. 1: https://en.wikipedia.org/wiki/Card_counting#Legal_status https://en.wikipedia.org/wiki/Card_counting#Legal_status
    - mamon 8y ago
      Ok, so maybe it is not against a federal law but still, making you leave the casino because you are too good at the game you're playing seems weird.

VectorLock 8y ago

It seems strange to me that any lottery would ever let itself get an EV > 1.

sokoloff 8y ago
Over the long run, sure. In the short run, temporary excursions above 1.0 provide huge amounts of free advertising and buzz.
foobaw 8y ago
Sometimes, the big lotteries like Powerball and Megamillions do get to EV > 1. Not only is it unreasonable to buy the 240 million tickets for every combination (financially and logistically), but even if you did, if you end up sharing the winnings, then you lose millions. EV > 1 is still not horrible.
driverdan 8y ago
It only happens when you don't factor in split prizes. When you include the odds of having to share the prize it never goes over 1.
Nasrudith 8y ago
Well it also has to do oddly with 'fairness'. If the pool never grows from failures they are more likely to suspect that it is 'rigged' against them instead of merely being unlucky. But if the pool growth is fixed as either an absolute or a percentage there is no incentive for the running agency to try to make people lose. So long as people keep buying in they really haven't lost anything even if the build up turns it into a sure bet. And winning splitting solves the equilibrium as well in a rather market allegorical way - if everyone puts money into a sure bet the returns eventually diminish.

gwern 8y ago

> His legacy lives on in US legislation: All 44 states that run lotteries have enacted laws preventing the profitable replication of Mandel’s strategy. In effect, this secures him a title as the first and last man to ever successfully game the lottery by buying every possible combination. This doesn't seem true? He didn't buy all of the tickets in question, he only bought most, and people have been running lottery syndicates under the same logic which buy some or most tickets to ensure winning for centuries. Even Voltaire ran one.

jy1 8y ago

Don't they split the prize if there are multiple winners? How can they ensure +EV? They could spend money to buy every combination but split the jackpot with multiple winners? Am I missing something?

netsharc 8y ago
I think they know it's still a gamble...

narag 8y ago

That brought some memories. I calculated that Spanish football quiniela had a little more than three million possible results. Since you could make multi-result bets, only a few thousands boletos were needed to make a sure win. The rules required to manually fill the bets, but it was workable building a robot. Then the government, that was not happy of paying a percentage of the profits to football teams, introduced loto and prizes plummeted.

person_of_color 8y ago

Similar to David Walsh, he set up MoNA with his profits.

ggm 8y ago

The investors — small business owners, machine operators, housekeepers, and doctors — had been regaled with tales of riches, and promised participation in up to 9 lottos per year. Yet, they’d only received a $1.4k return on their $4k investment. Folks: thats > 25% return on investment. I'm sorry but my sympathies with these investors walked out the door at this point: If you can get 25% ROI, stop looking for more.

delinka 8y ago
Is that $1.4k in addition to getting their $4k back? I always assume that with lotto-based shenanigans, the "return" isn't actually a profit, but the maximum of payouts after having bought all the chances their money could buy. I'll spend $20 on tickets for a large jackpot, and I'll will $2 on occasion - that's not a "10% return" but a "10% refund," and I'd expect a non-finance journalist to get that wrong.
- ggm 8y ago
  Oh I totally misread it (or read it the other way). If its a loss of 3/4 of their investment, thats a poor investment indeed.

goofingaround 8y ago

>... he was a natural with numbers who spent every spare minute analyzing theoretical probability papers written by the 13th-century mathematician Leonardo Fibonacci. Hope Pascal doesn’t read this.

YayamiOmate 8y ago

This was also possible in Poland last year or two years ago. The string of failed top prizes was so big that cummulated prize was so big in the end that buying tickets for all combinations was abt 2/3rds of the top one. This isn't gaming the system though its brute forcing it. And you are not guaranteed a profit. You bet against other ppl hitting the jackpot. Excluding oneself from the system, what is the chance that after N fails for top prize N+1 will also fail? Earning this way is not so easy as just winning the lottery.