10 ms·

Coming from relative poverty, I can say that, counterintuitively, a lot of people way down on the socioeconomic ladder would rather gamble on a moonshot to rich

Coming from relative poverty, I can say that, counterintuitively, a lot of people way down on the socioeconomic ladder would rather gamble on a moonshot to riches rather than invest in an index fund. One large part of this is simply lack of education. The other part is the realization that if making close to minimum wage, investing in an index fund would still take quite a very long time to go up significantly. Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter. Of course, now I'm fortunate enough to be a well paid SW. The marginal utility of every dollar above 75K is low in the present, so I can put all that in investment funds.

jjav 4y ago
> Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter. Indeed. For someone who can save $25/month, if they invest it on an index fund for 40 years, assuming 8% average/year, by the end they have about 87K. Adjusted for inflation 40 years from today, that's won't be much money. So if you all have left is $25/mo, it's almost more rational to buy lottery tickets with it. Sure you'll almost certainly never win but the investing won't get you much either.
chii 4y ago
> gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter. which is why it's overwhelmingly large number of lottery buyers are poorer folks.
effingwewt 4y ago
Too true. This is why lottery tickets are called 'poor people savings'. It's especially bad in Mexican communities. I've seen so many buy them, scratch them at the counter, and go back for more. Sometimes they don't even play the 'game' they just scratch the barcode and scan them. No method, just hope. You can see the fever in the eyes sometimes, no different than casino slot pullers, or a drug addict getting a fix. Some of my family members (on the mexican side) spend insane amounts, $20/card and lost constantly. Easily spending thousands but all they seem to remember are the times they won $20-200. I've thought about this a lot, and think a better idea would be for people to pool money together, and using a program to choose several winners a day. once you've won you can't again for X days. once you've paid so much without a win you're guaranteed $x or something. I think it's along the lines of what insurance was supposed to be in theory. Without admin costs and some random people leeching money from the top (C-suites) maybe it'd work better.
- lmwnshn 4y ago
  I think you're thinking of a ROSCA [0], e.g., from Poor Economics [1], > In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs) - more commonly known as "merry-go-rounds" in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotating basis, one member gets the whole pot. [0] https://en.wikipedia.org/wiki/Rotating_savings_and_credit_association https://en.wikipedia.org/wiki/Rotating_savings_and_credit_as... [1] https://en.wikipedia.org/wiki/Poor_Economics https://en.wikipedia.org/wiki/Poor_Economics
  - effingwewt 4y ago
    Yes! I'm actually pretty stoked to find out it'd been done! It mentions tons of users in Brazil but not really whether it's successful. Maybe something like that truly could be tried here. Of course it mentions trust and social connections being imperative and I feel we now have a glaring lack of those hwre in the US :(
  - charlie0 4y ago
    Yeah, it's basically an interest free loan for all participants in it, opportunity cost notwithstanding.

jjav 4y ago

> Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter. Indeed. For someone who can save $25/month, if they invest it on an index fund for 40 years, assuming 8% average/year, by the end they have about 87K. Adjusted for inflation 40 years from today, that's won't be much money. So if you all have left is $25/mo, it's almost more rational to buy lottery tickets with it. Sure you'll almost certainly never win but the investing won't get you much either.

chii 4y ago

> gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter. which is why it's overwhelmingly large number of lottery buyers are poorer folks.

effingwewt 4y ago

Too true. This is why lottery tickets are called 'poor people savings'. It's especially bad in Mexican communities. I've seen so many buy them, scratch them at the counter, and go back for more. Sometimes they don't even play the 'game' they just scratch the barcode and scan them. No method, just hope. You can see the fever in the eyes sometimes, no different than casino slot pullers, or a drug addict getting a fix. Some of my family members (on the mexican side) spend insane amounts, $20/card and lost constantly. Easily spending thousands but all they seem to remember are the times they won $20-200. I've thought about this a lot, and think a better idea would be for people to pool money together, and using a program to choose several winners a day. once you've won you can't again for X days. once you've paid so much without a win you're guaranteed $x or something. I think it's along the lines of what insurance was supposed to be in theory. Without admin costs and some random people leeching money from the top (C-suites) maybe it'd work better.

lmwnshn 4y ago
I think you're thinking of a ROSCA [0], e.g., from Poor Economics [1], > In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs) - more commonly known as "merry-go-rounds" in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotating basis, one member gets the whole pot. [0] https://en.wikipedia.org/wiki/Rotating_savings_and_credit_association https://en.wikipedia.org/wiki/Rotating_savings_and_credit_as... [1] https://en.wikipedia.org/wiki/Poor_Economics https://en.wikipedia.org/wiki/Poor_Economics
- effingwewt 4y ago
  Yes! I'm actually pretty stoked to find out it'd been done! It mentions tons of users in Brazil but not really whether it's successful. Maybe something like that truly could be tried here. Of course it mentions trust and social connections being imperative and I feel we now have a glaring lack of those hwre in the US :(
- charlie0 4y ago
  Yeah, it's basically an interest free loan for all participants in it, opportunity cost notwithstanding.