4 ms·

That is actually commonly recommended for exactly that reason. Often right after recommending to not play the lottery at all ;)

katrotz 4y ago
Remember reading in some book on probability and statistics that one will be better off betting insignificant amounts of money rather than not playing at all.
- Semaphor 4y ago
  Sounds wrong, that would essentially be saying one should play the cheapest level of all lotteries.
  - mellavora 4y ago
    naw, it is probably based on the assumption that the payout can be life-changing big. risking pocket change to win big is quasi-reasonable, even though it is a loosing bet. Because you don't notice the downside/drawdowns. risking more than pocket change is not reasonable, because it is a loosing bet. NB: I don't play the lottery.
    - lupire 4y ago
      Similarly, you should make small high-upside bets bets like "strike up a chat with a as stranger"
- 317070 4y ago
  You might be thinking about the Kelly criterion [0]. It does go the other way around: even if the expected value of a lottery were positive, you should only bet insignificant amounts. If I have a lottery, and you have a 1 in a billion chance to gain 10 billion utility, tickets cost 1 utility. How much of your current utility wealth should you put in? Classical expected value reasoning would pour in everything, even though you are almost guaranteed bankrupt at the end of that transaction. The Kelly criterion recommends an exact (small) percentage for this style of lotteries, and is therefore probably more sensible than decision making based on expected values. [0] https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion
  - Semaphor 4y ago
    That sounds sensible
  - FeepingCreature 4y ago
    Notable: Kelly only works if you're playing a multi-round game. Also careful; I believe money-to-utility is already logarithmic for most people. We don't have a good intuition for what "billions of utility vs 1 utility" represents.
    - ReflectedImage 4y ago
      How can you have a game that isn't multi-round? Surely after you finish playing one game, the next game you play (even if it's a completely different game) is the second round.
      - lupire 4y ago
        You have considered if the number of rounds is large enough. A weekly lottery doesn't have many rounds. A "huge jackpot" is even more rare.
        kgwgk 4y ago
        > A weekly lottery doesn't have many rounds. It doesn't if you're a house fly. Average life expectancy at birth in OECD countries is around 4'000 weeks.
  - kgwgk 4y ago
    Kelly maximizes (logarithmic) utility. Kelly is equivalent to decision making based on expected values (of the logarithm of wealth). Maybe you wanted to say "[...] gain 10 billion dollars, tickets cost 1 dollar. How much of your current dollar wealth [...]".
  - lupire 4y ago
    Kelly criterion assumes you will increase your bet when you win, to increase overall final value, and the EV is positive. It doesn't work when you expect to only win at most once.
fny 4y ago
It actually depends on the size of the pot. There have been times where there was positive expectancy. [0]: https://uncommondescent.com/intelligent-design/saturday-fun-when-the-lottery-bet-has-a-positive-expected-value/ https://uncommondescent.com/intelligent-design/saturday-fun-...
- Semaphor 4y ago
  But that still says you shouldn’t :D > if you could afford to buy several hundred million tickets, the math says you should. I mean, unless you happen to be filthy rich already.
  - fny 4y ago
    The article is wrong. You should still play if there's positive expectancy and the money you spent won't be missed (i.e. you won't be ruined.) See https://quantwolf.com/doc/powerball/powerball.html https://quantwolf.com/doc/powerball/powerball.html
    - Semaphor 4y ago
      My reading is different, it’s more "together with the kelly criterion or a weaker version of it, you can say it doesn’t matter if you do". This is still "eh maybe I’ll be lucky" and not "it’s mathematically sensible" because > What it means is that you would have to play the game for thousands of years with the jackpot being greater than 117 million each time in order to realize a positive expected return.
    - okintheory 4y ago
      If any expected value matters, it's utility, not wealth. If you think utility is linear in wealth, you need to check Jeff Bezos' instagram more.
  - onion2k 4y ago
    The key to getting rich and staying rich is figuring out how to risk other people's money. If you want to buy millions of lottery tickets, or launch a startup, or start a poker career, or anything really, it's far better to do it without risking your own security. Let other people invest in your venture for a reasonable return if you succeed, but also make sure you some non-trivial amount of equity for yourself so you make a killing if it's wildly successful. This is how most VC backed unicorns have worked. The early investors made a lot, but the founders who mostly only risked their time, energy, and opportunity-costed salary made far, far, far better returns.
checkyoursudo 4y ago
I never understood the admonishment not to play the lottery at all. I waste lots of money doing things that are fun experiences, or buying unnecessary foods or drinks, or gadgets or toys, etc. I can understand recommending not to get addicted to playing, or not to spend money that should be going elsewhere, right? But when that admonishment is not qualified, then it is a little silly. Might as well say, never buy extra dip for your french fries or something. It's true that I haven't bought lottery tickets in years, but spending a few hundred cents on some longshot jackpot can be its own kind of fun.
- Tainnor 4y ago
  If you find the act of playing itself fun, all the more power to you. That said, personally, I don't think the act of buying a lottery ticket would give me anywhere near the same amount of pleasure as... a dip for french fries, for example. If you look at it purely monetarily, it's not rational to play the lottery because you're expected to lose money.
  - denton-scratch 4y ago
    > I don't think the act of buying a lottery ticket would give me anywhere near the same amount of pleasure as... ...my once-a-year flutter on the Grand National. Having skin in the game multiplies the excitement of this horse-race, which is already one of the most exciting races there is. Making selections on a lottery ticket, or rubbing stuff off a scratch-card somehow doesn't have the same appeal; and doesn't give you nearly nearly 10 minutes of fun. Last time I picked a winner was about 20 years ago. Last time I got a place was at least 6 years ago. I know my money's going down the sewer. /me not a betting man; apart from the GN, I don't bet on sports; I don't gamble on cards, and I've only once been in a casino. I'm not much of an investor.
- RickHull 4y ago
  What is the value in buying a lottery ticket? The expected value of the ticket itself is negative, relative to its purchase price. So the buyer gets additional value from the "little thrill" of the purchase and observing the results. With extra dip sauce, you clearly value the sauce more than the money in your pocket. The dip tastes good, has calories, and maybe some bad health side effects. Lotteries lack fundamental value, and the "little thrill" often turns into a bad health side effect. That said, adults should be free to spend their money how they like. Those giving advice are worried that vulnerable people will get sucked into a "trap", like a gambling addiction.

katrotz 4y ago

Remember reading in some book on probability and statistics that one will be better off betting insignificant amounts of money rather than not playing at all.

Semaphor 4y ago
Sounds wrong, that would essentially be saying one should play the cheapest level of all lotteries.
- mellavora 4y ago
  naw, it is probably based on the assumption that the payout can be life-changing big. risking pocket change to win big is quasi-reasonable, even though it is a loosing bet. Because you don't notice the downside/drawdowns. risking more than pocket change is not reasonable, because it is a loosing bet. NB: I don't play the lottery.
  - lupire 4y ago
    Similarly, you should make small high-upside bets bets like "strike up a chat with a as stranger"
317070 4y ago
You might be thinking about the Kelly criterion [0]. It does go the other way around: even if the expected value of a lottery were positive, you should only bet insignificant amounts. If I have a lottery, and you have a 1 in a billion chance to gain 10 billion utility, tickets cost 1 utility. How much of your current utility wealth should you put in? Classical expected value reasoning would pour in everything, even though you are almost guaranteed bankrupt at the end of that transaction. The Kelly criterion recommends an exact (small) percentage for this style of lotteries, and is therefore probably more sensible than decision making based on expected values. [0] https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion
- Semaphor 4y ago
  That sounds sensible
- FeepingCreature 4y ago
  Notable: Kelly only works if you're playing a multi-round game. Also careful; I believe money-to-utility is already logarithmic for most people. We don't have a good intuition for what "billions of utility vs 1 utility" represents.
  - ReflectedImage 4y ago
    How can you have a game that isn't multi-round? Surely after you finish playing one game, the next game you play (even if it's a completely different game) is the second round.
    - lupire 4y ago
      You have considered if the number of rounds is large enough. A weekly lottery doesn't have many rounds. A "huge jackpot" is even more rare.
      - kgwgk 4y ago
        > A weekly lottery doesn't have many rounds. It doesn't if you're a house fly. Average life expectancy at birth in OECD countries is around 4'000 weeks.
- kgwgk 4y ago
  Kelly maximizes (logarithmic) utility. Kelly is equivalent to decision making based on expected values (of the logarithm of wealth). Maybe you wanted to say "[...] gain 10 billion dollars, tickets cost 1 dollar. How much of your current dollar wealth [...]".
- lupire 4y ago
  Kelly criterion assumes you will increase your bet when you win, to increase overall final value, and the EV is positive. It doesn't work when you expect to only win at most once.

fny 4y ago

It actually depends on the size of the pot. There have been times where there was positive expectancy. [0]: https://uncommondescent.com/intelligent-design/saturday-fun-when-the-lottery-bet-has-a-positive-expected-value/ https://uncommondescent.com/intelligent-design/saturday-fun-...

Semaphor 4y ago
But that still says you shouldn’t :D > if you could afford to buy several hundred million tickets, the math says you should. I mean, unless you happen to be filthy rich already.
- fny 4y ago
  The article is wrong. You should still play if there's positive expectancy and the money you spent won't be missed (i.e. you won't be ruined.) See https://quantwolf.com/doc/powerball/powerball.html https://quantwolf.com/doc/powerball/powerball.html
  - Semaphor 4y ago
    My reading is different, it’s more "together with the kelly criterion or a weaker version of it, you can say it doesn’t matter if you do". This is still "eh maybe I’ll be lucky" and not "it’s mathematically sensible" because > What it means is that you would have to play the game for thousands of years with the jackpot being greater than 117 million each time in order to realize a positive expected return.
  - okintheory 4y ago
    If any expected value matters, it's utility, not wealth. If you think utility is linear in wealth, you need to check Jeff Bezos' instagram more.
- onion2k 4y ago
  The key to getting rich and staying rich is figuring out how to risk other people's money. If you want to buy millions of lottery tickets, or launch a startup, or start a poker career, or anything really, it's far better to do it without risking your own security. Let other people invest in your venture for a reasonable return if you succeed, but also make sure you some non-trivial amount of equity for yourself so you make a killing if it's wildly successful. This is how most VC backed unicorns have worked. The early investors made a lot, but the founders who mostly only risked their time, energy, and opportunity-costed salary made far, far, far better returns.

checkyoursudo 4y ago

I never understood the admonishment not to play the lottery at all. I waste lots of money doing things that are fun experiences, or buying unnecessary foods or drinks, or gadgets or toys, etc. I can understand recommending not to get addicted to playing, or not to spend money that should be going elsewhere, right? But when that admonishment is not qualified, then it is a little silly. Might as well say, never buy extra dip for your french fries or something. It's true that I haven't bought lottery tickets in years, but spending a few hundred cents on some longshot jackpot can be its own kind of fun.

Tainnor 4y ago
If you find the act of playing itself fun, all the more power to you. That said, personally, I don't think the act of buying a lottery ticket would give me anywhere near the same amount of pleasure as... a dip for french fries, for example. If you look at it purely monetarily, it's not rational to play the lottery because you're expected to lose money.
- denton-scratch 4y ago
  > I don't think the act of buying a lottery ticket would give me anywhere near the same amount of pleasure as... ...my once-a-year flutter on the Grand National. Having skin in the game multiplies the excitement of this horse-race, which is already one of the most exciting races there is. Making selections on a lottery ticket, or rubbing stuff off a scratch-card somehow doesn't have the same appeal; and doesn't give you nearly nearly 10 minutes of fun. Last time I picked a winner was about 20 years ago. Last time I got a place was at least 6 years ago. I know my money's going down the sewer. /me not a betting man; apart from the GN, I don't bet on sports; I don't gamble on cards, and I've only once been in a casino. I'm not much of an investor.
RickHull 4y ago
What is the value in buying a lottery ticket? The expected value of the ticket itself is negative, relative to its purchase price. So the buyer gets additional value from the "little thrill" of the purchase and observing the results. With extra dip sauce, you clearly value the sauce more than the money in your pocket. The dip tastes good, has calories, and maybe some bad health side effects. Lotteries lack fundamental value, and the "little thrill" often turns into a bad health side effect. That said, adults should be free to spend their money how they like. Those giving advice are worried that vulnerable people will get sucked into a "trap", like a gambling addiction.