5 ms·

Why We Keep Playing the Lottery

49 points by baoyu 12y ago

ivanche 12y ago
Being professionally involved in somewhat similar industry, this is definitely one of best articles I've read about lottery. Well done!
- 3rd3 12y ago
  The stock market?
Tomte 12y ago
I don't play for expected value, I play for variance. And I'm tired of people telling me that it's irrational to play the lottery, it isn't.
- ryandvm 12y ago
  Agreed. It's not irrational if you derive enjoyment from losing money.
  - DougWebb 12y ago
    if you derive enjoyment from losing money That's a funny way to put it. Exchanging money for entertainment has been a common and accepted practice for a very long time. Technically, when you buy something you lose the money, but it's weird to highlight the losing part over the buying part.
  - goatforce5 12y ago
    It's exactly the same as going to the cinema and enjoying the cost of the movie tickets and popcorn there. Why would anyone go to the cinema? Pro-tip: When a telemarketer calls saying "We've got a great offer to save you money on your snarfleblarg bills!" just tell them you enjoy you enjoy spending as much money as possible on your snarfleblarg. It goes so far off their script that i've never had one of them provide a decent response to it. At which point you hang up.
- smtddr 12y ago
  The message isn't for people like you or me(I play too when the jackpot is some crazy value). It's for the poor & uneducated who think that by spending half of their month's salary on 350 lottery tickets gives them a better chance at winning.
  - hobbes78 12y ago
    But they do get a better chance at winning. Instead of 1 in 175 million, they get 1 in 500 thousand. The problem is either is approximately zero...
  - Spooky23 12y ago
    I think you need to learn whether lottery is a vice in of itself, or a substitute for other vices. I know that in NYC, the lottery basically put the corner numbers rackets (and associated street crime) out of business. I'm curious if the stereotypical old person wasn't spending a day a month at the casino, would they be drinking more? Sitting around not talking to anyone? Abusing drugs? We also need to consider the reality of the situation... Is the lotto makin s material impact. People have vices... Sports betting is illegal in most places in the United States, but sports betting is pervasive.
- fennecfoxen 12y ago
  Putting down money and expecting to get less money back is irrational, unless you're rationally pursuing some higher goal (in the case of lotteries' education funds, more efficiently obtained by writing checks to the appropriate agencies as donations.) Of course, there are worse things in life than being irrational, and a variety of human beings' irrational instincts form incredibly useful heuristics for long-term value maximization (on both individual and societal levels) which might otherwise be difficult to attain, given the limitations of the rational brain: love, patriotism, et cetera. It sounds like the unpredictability of the results is something you value, perhaps because it's exciting. That's a pretty irrational thing to value, but not intrinsically harmful in small doses; people put down money for plenty of ridiculous forms of entertainment. But you could own up to it. :b
  - LordKano 12y ago
    I play sparingly and it's irrational if you expect to win more than you spend on the tickets. It's not irrational if you're playing for fun. The $10 that I spent on PowerBall tickets provided me with much more enjoyment than the $10 that I spent to see The Blair Witch Project.
    - Tyr42 12y ago
      My grandparents consider going to a casino entertainment, and expect to lose the money they go in with. It's fun, and sometimes they fund their next few trips there with the winnings.
    - barkingcat 12y ago
      Irrationality by definition is a big part of fun by the way. It can be irrational if you're playing for fun! I think there's some kind of a mistaken association between irrationality and "goodness" - like anything irrational is not good. That is what you are trying to argue against!
      - LordKano 12y ago
        I think that you're misunderstanding the motives of some players. I fully concede that some people play because they think they're going to win. They had a dream or some charlatan has convinced them that this is their lucky day to play. That kind of thinking is not rational. People like me, exchange money for entertainment. It's no different than paying to see a movie or to listen to a streaming music service. It's entertainment, not investment and it's not irrational.
- philh 12y ago
  If the utility function of money was superlinear (has a steeper slope the more you have) this would make sense. But since you're a human being, I'm fairly confident that your utility function is sublinear (has a shallower slope the more you have). Playing for variance doesn't make sense in this case.
  - dllthomas 12y ago
    I think the parent claiming to value the variance first-order (experienced as "excitement").
  - tomp 12y ago
    I'd say that utility of money is a sublinear functions only for small amounts of money. When you get into the range of "never having to work again" or "can build my own rocket company", then the utility of money can quickly become superlinear (c.f. the productivity of the team is more than the sum of productivity of individuals).
- MichaelGG 12y ago
  Then you should love this proposal for an improved lottery: http://lesswrong.com/lw/hm/new_improved_lottery/ http://lesswrong.com/lw/hm/new_improved_lottery/ In fact, as mentioned, why not just keep an eye out for winning lottery tickets on the ground? Because you have an ~epsilon chance of getting a winning lottery ticket, and you also have an ~epsilon chance of finding a winning lottery ticket on the ground.
  - goatforce5 12y ago
    What's the ratio of lottery winners who bought their tickets vs the number of lottery winners who found their tickets on the ground?
- tfederman 12y ago
  When the expected value is so definitively against you I guess it's implied that you're playing for variance. Maybe you also feel that you're playing for the entertainment value, which isn't subject to the same mathematical rationality. I get that. When I play poker for 5 hours and come out even at the end of the night or slightly behind, I consider it worthwhile because I had fun for 5 hours.
- pelario 12y ago
  I totally agree. A more evident case is with the insurances: We also know that the expected value of buying insurance is negative for us; but we pay for reducing the variance of the money we lose. In lottery, we pay to increase the variance of the money we win.
- stronglikedan 12y ago
  If you spend your money on something that makes you happy, then it's money well spent. So, in that context, "irrational" is subjective.
- busyant 12y ago
  So...maybe I'm being nitpicky here, but I mention it b/c maybe I just don't understand... They state in the article: You will have to plunk down your $2 at least 86 million times. Williams...could have simply said the odds of winning ... were 1 in 175 million It might cost you > $172MM, but aren't the odds 1 in 86 million? Or am I being obtuse?
  - thedufer 12y ago
    You may have missed > To get your chance of winning down to a coin toss, or 50 percent If it takes 86 million tickets to get a 50% chance of winning, the odds per ticket must be somewhat worse than 1 in 86 million.
- JoeAltmaier 12y ago
  ...but once the payout grows after several iterations of nobody winning the jackpot, the expected value CAN be positive!
  - Iftheshoefits 12y ago
    There's a catch to that that not many consider: the likely number of winners, which divides the jackpot and reduces the expected value per-play. The number of likely winners increases with the number of tickets sold, which increases (dramatically) with the jackpot beyond a certain threshold.
    - JoeAltmaier 12y ago
      A random pick can mitigate that considerably, without changing the odds of actually winning.
hyperliner 12y ago
"It’s a game where reason and logic are rendered obsolete, and hope and dreams are on sale." For a second there I thought the article was about one of the below: - Starbucks - BMW - A diamond ring - iPhone
jtheory 12y ago
I'm finding this a depressing read. Hooray, we're figuring out all of the tricks to push people into "thinking myopically" and buying what we want them to buy. Here are the triggers; here's how people make mistakes in buying decisions, and how to exploit that. Here's how to frame your sell (Get them to focus on loss! Remind them of their poverty!), here's how to get them to buy more tickets instead of just one. Lottery tickets aren't too bad; they're harmless for most people buying them, there's a fun little kick of "what if...?", but (as the article points out) as revenue for the state, they are a regressive tax; poor people pay a much larger percentage of their income into lottery schemes than people who are better off, and of course some of them pay enough to really harm themselves, going for the "Hail Mary" solution to their money woes but just bleeding themselves slowly instead. Winning isn't actually a positive result, either -- the article doesn't get into stats on attempted suicide, etc. for lottery winners, but they're not good. Is there anyone out there using this kind of research to actually help people? Or to let people who're just playing a fun game, play it; but still protect the people who are grabbing at a false life preserver?
- stevesearer 12y ago
  I wonder if the government could use some of the same marketing for income taxes to feel like they are fun and interesting rather than being such a negative experience. Something like 100 people each year never have to pay taxes again.
  - jtheory 12y ago
    That's a great idea! Each year, they could choose some number of winners from everyone who gets their return in on time, with no corrections required. They'd have to sort it carefully enough that it wouldn't be a loophole for abuse (e.g., if you win, could you be hired by a major corporation who will somehow funnel their entire worldwide revenue though you?), and to be sure a Zuck-level taxpayer doesn't win it, but then that'd be a huge motivation for people who do pay taxes to get their paperwork together in time. Of course, simplifying US tax law would be even better -- "filing your tax" return could be trivial for most people, but it isn't -- but that's proved a hard nut to crack.
  - 12y ago
gwbas1c 12y ago
I like lotteries that are basically just fundraisers. At least I know most of my money goes to a cause that I support.
- fennecfoxen 12y ago
  Most lottery games these days are state-owned lotteries, fundraisers for the government which also spend a lot of money on their own logistics and advertising.
sizzzzlerz 12y ago
Its nothing more than state sanctified crack cocaine. Yeah, somebody is going to win eventually. Just not you.
- protonfish 12y ago
  That's not a good metaphor. If I buy crack I can get high right now, guaranteed. It's a much wiser purchase.
  - kazagistar 12y ago
    Selling crack to pay for schools; our next great social program.
mrweasel 12y ago
Of cause people don't react to the statistics that proclaim that they won't win, because someone won the last time. It doesn't matter that the chances are 1 to 175 million, because someone did win, that's all that counts. The only guaranteed result is not to play, that will ensure that you do not win 100% of the time.
- DougWebb 12y ago
  The only guaranteed result is not to play, that will ensure that you do not win 100% of the time. Not quite true; every time you don't play you win $1. If you don't play often enough, that can really add up.
  - giarc 12y ago
    Given that every week you put that $1 aside.
ggambetta 12y ago
> To get your chance of winning down to a coin toss [...] You will have to plunk down your $2 at least 86 million times. What am I missing here? $2x86 million gives me a 50% chance of getting $590 million? 172 < 295!
- bryanlarsen 12y ago
  2 factors: - you also have to account for the highly likely probability that the jackpot will be split between multiple winners. - even after that accounting, lotteries do sometimes have an expected value higher than the ticket price. The expected value of purchasing N tickets for the N lotteries that led up to and include the big lottery is still the standard 40-50%, but the N-1 previous paid out much less than expected, so the one with the big jackpot pays out more than expected.
- delluminatus 12y ago
  Most lotteries have multiple winners of varying amounts, depending on how many of your numbers match and how many other people happened to pick the winning set of numbers. I suspect that in order to get a 50% chance of winning the jackpot, you would have to invest into considerably more than 86 million tickets.
- roberthahn 12y ago
  You're not missing anything. It is technically possible to design and build a business focused solely on buying lottery tickets for profit (i.e.: buy enough to ensure good enough odds to win) But there are a number of risks. The list below isn't exhaustive: * sharing the winning number with someone else * do you buy every single ticket or enough to "virtually guarantee" a win? (and the fewer tickets you buy, the more risky it becomes) * the logistics of purchasing that many tickets I have even read stories of people trying this before - but haven't been able to find the link. The story I remember best is one man hiring a bunch of people to buy lottery tickets on his behalf. Anyway. I'd love to see someone make a go of doing this "professionally", but when you have 172 million or more, the incentive isn't really there anymore.
  - mquan 12y ago
mercnet 12y ago
I enjoy playing Virginia's New Year's Millionaire Raffle lottery which sells a finite number of tickets. They cost a decent amount (I think $20) but it brings me excitement on the day they release the numbers.
gyardley 12y ago
This is the article's key insight: “It’s not an investment. It’s entertainment. For a very small amount of money you might change your life. For $2 you can spend the day dreaming about what you would do with half a billion dollars—half a billion dollars!” You're not making a bet with negative expected value, you're purchasing an entertaining daydream to help you through your miserable day.
- lmm 12y ago
  Why pay for it though? I can daydream that a billionaire will randomly decide to give me half his fortune, for free!
  - gyardley 12y ago
    Because although you can, you won't - probably because there's not 'news' every week about a billionaire randomly giving a person half his fortune. The lottery win happens to somebody, while the billionaire scenario doesn't. If someone established a reality TV version of something like The Millionaire [http://en.wikipedia.org/wiki/The_Millionaire_(TV_series) http://en.wikipedia.org/wiki/The_Millionaire_(TV_series)] then I bet people would start having that sort of daydream. Perhaps such a show would even lead to a decline in lottery ticket purchases, since the get-rich daydream would be available from another source.
    - mlrtime 12y ago
      I think an important piece missing is the active vs passive decision making. When you purchase a ticket your are actively triggering the thought process. In your scenario there would be a passive trigger that would dull the entertainment affect. I wouldn't discount the little piece of paper with numbers on it.
    - JoeAltmaier 12y ago
      My buddy Bob dreams and doesn't buy a ticket. His rationale: his chances of the winning ticket blowing down the street and into his open hand are microscopically different from his chance of buying the winning ticket.
larrydag 12y ago
Best definition I've heard on the lottery and I wish it came from me. "The lottery is a tax on the innumerate"
cpwright 12y ago
The "postcode" lottery is interesting. I'm glad that it doesn't exist in the US, because I expect it would get even more people who can't actually afford it to play.
pelario 12y ago
Why we keep paying for insurance, when the expected value is negative ? To reduce the variance of the money we lose. With lottery is the same, I pay to increase the variance of the money we win.
- cpwright 12y ago
  However, with many forms of insurance the expected value is very nearly 1. Term life, for example, pays out 90%+ of premiums as death benefits. You are unlikely to get any of that money, as most policies do not pay out; but the low probability of a payout multiplied by a comparably high death benefit results in E(X) not to far from 1. Another reason we keep paying for insurance even with bad expected values (e.g., title insurance) is because we have no choice about the matter. If I want a mortgage, I need title insurance, even though only a small fraction of the premiums are actually paid out as claims.
viach 12y ago
Anyway it's cheaper than bootstrapping a startup and has similar odds to succeed. // pessimistic mode off
sosuke 12y ago
This was/is key to why I play: "For many poor people, he adds, there is “no scenario they can come up with in which they are suddenly going to get very rich.” To them, the lottery may be a low probability event—but so is getting a job that pays six figures." Even in the case of you making six figures a year, 100,000 dollars, a $2 million dollar win is still 20 years of your life earnings all at once.
Strilanc 12y ago
When someone tells me they play the lottery for entertainment, I lose a serious amount of respect for them. There's being irrational, and then there's understanding exactly how your irrationality is being exploited and just going along with it! The negative expected value in dollars is enough by itself, but the "how happy will I be?" calculations are even more depressingly bad. The utility of money is usually measured on a log scale, because your first thousand dollars does a lot more for your happiness than your first ten thousand. By that measure going from ten thousand dollars in the bank to ten million wouldn't make you a thousand times happier, it would make you twice as happy. At least until you get used to it (see: Hedonic treadmill [1]). There's a surprising number of bankruptcies caused by lottery winniners, too [1]. Also the whole stressed friendship thing. So... yeah, playing the lottery gets you negative respect from me and I think that's justified. 1: http://en.wikipedia.org/wiki/Hedonic_treadmill http://en.wikipedia.org/wiki/Hedonic_treadmill 2: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845## http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845##
- seanflyon 12y ago
  You misunderstand what "play the lottery for entertainment" means. It very clearly does not mean play for the entertainment winning the lottery would bring. It means play for the entertainment of playing the lottery. Many people enjoy playing the lottery, though I am not one of them.
- tfederman 12y ago
  When someone gets entertainment value from playing the lottery, is it really about the chance of winning multiplied by the amount of happiness the money would bring? Or does it have more to do with the excitement that comes with each drawing? (Similar to how I can enjoy watching a football season even if my team doesn't win the Super Bowl.) I think it's more likely the latter, though I don't personally see the entertainment value of playing the lottery. I wouldn't lose respect for someone for having a hobby I don't share or understand, though.
ewzimm 12y ago
Most of this makes sense, but I have a problem with the often-repeated assertion that humans can't handle large numbers. We might not have an intuitive sense of astronomical odds, but that's why we developed mathematics. We have the ability to compensate for our lack of numeracy by thinking through problems with structured languages. We can do much stranger things than calculate whether we should play the lottery. With math, we can calculate what it would be like to navigate in four-dimensional space. When I hear that people act irrationally when it comes to probability, I feel like it should be replaced with the assertion that people tend to act irrationally when they have not been trained to think methodically in a particular situation or because of circumstances rely on primitive approximations. The first assertion sounds like an immutable property of human nature, when it is more of a cultural and educational issue.
- JoeAltmaier 12y ago
  Its not about how we think; its about how we feel. Some people feel safe without wearing a bicycle helmet or seatbelt, because they perceive the chances of an accident to be small or zero. The decision is made without thinking; get in the car, skip the seatbelt 'just this once, I'm not going far' and never consider the odds analytically at all.
  - ewzimm 12y ago
    I can definitely see feelings overriding an opportunity for thought. Personally, I have never bought a lottery ticket. I always wear a bike helmet or a seatbelt. I don't really feel anything about these issues. It just makes sense to do or not do them. I could see myself buying lottery tickets if there was a mathematical argument for doing so, as is the case in some lotteries where if you buy a certain number of tickets you are pretty much guaranteed a win, but not in any other case. If I'm picking something to eat, however, there's definitely an emotional component in addition to the nutrition. I won't just optimize for nutrition. Maybe I'm just the same as the lottery ticket people, but I have different priorities. An emotional attachment to making rational decisions maybe. If that's the case, could a person override irrational emotions with more powerful emotional impulses toward rationality? It would come back to a cultural issue in that case.
mstefff 12y ago
Most lotteries are not 1 in 175 million.. using the hardest-to-win lottery skews this article a bit.. I don't really understand the point of this article. Is he trying to expose the "morons" who play the lottery for being just that? Maybe the $2 or so bucks means nothing to people playing. Maybe the excitement of the lead-up to the drawing and the checking of the numbers is more fun than $2 in my pocket. You can barely even buy a soda with $2 now. If those jackpots swell over $200M, betting $1 to win against 1:175M odds is a good bet. If I could bet $1 to win $15 and I had a 1 in 10 chance of winning, I'd do it every time. In the end, the lottery funds go towards the city/state, and usually education. It's a fun form of charity.

49 points by baoyu 12y ago

Being professionally involved in somewhat similar industry, this is definitely one of best articles I've read about lottery. Well done!

3rd3 12y ago
The stock market?

Tomte 12y ago

I don't play for expected value, I play for variance. And I'm tired of people telling me that it's irrational to play the lottery, it isn't.

ryandvm 12y ago
Agreed. It's not irrational if you derive enjoyment from losing money.
- DougWebb 12y ago
  if you derive enjoyment from losing money That's a funny way to put it. Exchanging money for entertainment has been a common and accepted practice for a very long time. Technically, when you buy something you lose the money, but it's weird to highlight the losing part over the buying part.
- goatforce5 12y ago
  It's exactly the same as going to the cinema and enjoying the cost of the movie tickets and popcorn there. Why would anyone go to the cinema? Pro-tip: When a telemarketer calls saying "We've got a great offer to save you money on your snarfleblarg bills!" just tell them you enjoy you enjoy spending as much money as possible on your snarfleblarg. It goes so far off their script that i've never had one of them provide a decent response to it. At which point you hang up.
smtddr 12y ago
The message isn't for people like you or me(I play too when the jackpot is some crazy value). It's for the poor & uneducated who think that by spending half of their month's salary on 350 lottery tickets gives them a better chance at winning.
- hobbes78 12y ago
  But they do get a better chance at winning. Instead of 1 in 175 million, they get 1 in 500 thousand. The problem is either is approximately zero...
- Spooky23 12y ago
  I think you need to learn whether lottery is a vice in of itself, or a substitute for other vices. I know that in NYC, the lottery basically put the corner numbers rackets (and associated street crime) out of business. I'm curious if the stereotypical old person wasn't spending a day a month at the casino, would they be drinking more? Sitting around not talking to anyone? Abusing drugs? We also need to consider the reality of the situation... Is the lotto makin s material impact. People have vices... Sports betting is illegal in most places in the United States, but sports betting is pervasive.
fennecfoxen 12y ago
Putting down money and expecting to get less money back is irrational, unless you're rationally pursuing some higher goal (in the case of lotteries' education funds, more efficiently obtained by writing checks to the appropriate agencies as donations.) Of course, there are worse things in life than being irrational, and a variety of human beings' irrational instincts form incredibly useful heuristics for long-term value maximization (on both individual and societal levels) which might otherwise be difficult to attain, given the limitations of the rational brain: love, patriotism, et cetera. It sounds like the unpredictability of the results is something you value, perhaps because it's exciting. That's a pretty irrational thing to value, but not intrinsically harmful in small doses; people put down money for plenty of ridiculous forms of entertainment. But you could own up to it. :b
- LordKano 12y ago
  I play sparingly and it's irrational if you expect to win more than you spend on the tickets. It's not irrational if you're playing for fun. The $10 that I spent on PowerBall tickets provided me with much more enjoyment than the $10 that I spent to see The Blair Witch Project.
  - Tyr42 12y ago
    My grandparents consider going to a casino entertainment, and expect to lose the money they go in with. It's fun, and sometimes they fund their next few trips there with the winnings.
  - barkingcat 12y ago
    Irrationality by definition is a big part of fun by the way. It can be irrational if you're playing for fun! I think there's some kind of a mistaken association between irrationality and "goodness" - like anything irrational is not good. That is what you are trying to argue against!
    - LordKano 12y ago
      I think that you're misunderstanding the motives of some players. I fully concede that some people play because they think they're going to win. They had a dream or some charlatan has convinced them that this is their lucky day to play. That kind of thinking is not rational. People like me, exchange money for entertainment. It's no different than paying to see a movie or to listen to a streaming music service. It's entertainment, not investment and it's not irrational.
philh 12y ago
If the utility function of money was superlinear (has a steeper slope the more you have) this would make sense. But since you're a human being, I'm fairly confident that your utility function is sublinear (has a shallower slope the more you have). Playing for variance doesn't make sense in this case.
- dllthomas 12y ago
  I think the parent claiming to value the variance first-order (experienced as "excitement").
- tomp 12y ago
  I'd say that utility of money is a sublinear functions only for small amounts of money. When you get into the range of "never having to work again" or "can build my own rocket company", then the utility of money can quickly become superlinear (c.f. the productivity of the team is more than the sum of productivity of individuals).
MichaelGG 12y ago
Then you should love this proposal for an improved lottery: http://lesswrong.com/lw/hm/new_improved_lottery/ http://lesswrong.com/lw/hm/new_improved_lottery/ In fact, as mentioned, why not just keep an eye out for winning lottery tickets on the ground? Because you have an ~epsilon chance of getting a winning lottery ticket, and you also have an ~epsilon chance of finding a winning lottery ticket on the ground.
- goatforce5 12y ago
  What's the ratio of lottery winners who bought their tickets vs the number of lottery winners who found their tickets on the ground?
tfederman 12y ago
When the expected value is so definitively against you I guess it's implied that you're playing for variance. Maybe you also feel that you're playing for the entertainment value, which isn't subject to the same mathematical rationality. I get that. When I play poker for 5 hours and come out even at the end of the night or slightly behind, I consider it worthwhile because I had fun for 5 hours.
pelario 12y ago
I totally agree. A more evident case is with the insurances: We also know that the expected value of buying insurance is negative for us; but we pay for reducing the variance of the money we lose. In lottery, we pay to increase the variance of the money we win.
stronglikedan 12y ago
If you spend your money on something that makes you happy, then it's money well spent. So, in that context, "irrational" is subjective.
busyant 12y ago
So...maybe I'm being nitpicky here, but I mention it b/c maybe I just don't understand... They state in the article: You will have to plunk down your $2 at least 86 million times. Williams...could have simply said the odds of winning ... were 1 in 175 million It might cost you > $172MM, but aren't the odds 1 in 86 million? Or am I being obtuse?
- thedufer 12y ago
  You may have missed > To get your chance of winning down to a coin toss, or 50 percent If it takes 86 million tickets to get a 50% chance of winning, the odds per ticket must be somewhat worse than 1 in 86 million.
JoeAltmaier 12y ago
...but once the payout grows after several iterations of nobody winning the jackpot, the expected value CAN be positive!
- Iftheshoefits 12y ago
  There's a catch to that that not many consider: the likely number of winners, which divides the jackpot and reduces the expected value per-play. The number of likely winners increases with the number of tickets sold, which increases (dramatically) with the jackpot beyond a certain threshold.
  - JoeAltmaier 12y ago
    A random pick can mitigate that considerably, without changing the odds of actually winning.

hyperliner 12y ago

"It’s a game where reason and logic are rendered obsolete, and hope and dreams are on sale." For a second there I thought the article was about one of the below: - Starbucks - BMW - A diamond ring - iPhone

jtheory 12y ago

I'm finding this a depressing read. Hooray, we're figuring out all of the tricks to push people into "thinking myopically" and buying what we want them to buy. Here are the triggers; here's how people make mistakes in buying decisions, and how to exploit that. Here's how to frame your sell (Get them to focus on loss! Remind them of their poverty!), here's how to get them to buy more tickets instead of just one. Lottery tickets aren't too bad; they're harmless for most people buying them, there's a fun little kick of "what if...?", but (as the article points out) as revenue for the state, they are a regressive tax; poor people pay a much larger percentage of their income into lottery schemes than people who are better off, and of course some of them pay enough to really harm themselves, going for the "Hail Mary" solution to their money woes but just bleeding themselves slowly instead. Winning isn't actually a positive result, either -- the article doesn't get into stats on attempted suicide, etc. for lottery winners, but they're not good. Is there anyone out there using this kind of research to actually help people? Or to let people who're just playing a fun game, play it; but still protect the people who are grabbing at a false life preserver?

stevesearer 12y ago
I wonder if the government could use some of the same marketing for income taxes to feel like they are fun and interesting rather than being such a negative experience. Something like 100 people each year never have to pay taxes again.
- jtheory 12y ago
  That's a great idea! Each year, they could choose some number of winners from everyone who gets their return in on time, with no corrections required. They'd have to sort it carefully enough that it wouldn't be a loophole for abuse (e.g., if you win, could you be hired by a major corporation who will somehow funnel their entire worldwide revenue though you?), and to be sure a Zuck-level taxpayer doesn't win it, but then that'd be a huge motivation for people who do pay taxes to get their paperwork together in time. Of course, simplifying US tax law would be even better -- "filing your tax" return could be trivial for most people, but it isn't -- but that's proved a hard nut to crack.
- 12y ago

gwbas1c 12y ago

I like lotteries that are basically just fundraisers. At least I know most of my money goes to a cause that I support.

fennecfoxen 12y ago
Most lottery games these days are state-owned lotteries, fundraisers for the government which also spend a lot of money on their own logistics and advertising.

sizzzzlerz 12y ago

Its nothing more than state sanctified crack cocaine. Yeah, somebody is going to win eventually. Just not you.

protonfish 12y ago
That's not a good metaphor. If I buy crack I can get high right now, guaranteed. It's a much wiser purchase.
- kazagistar 12y ago
  Selling crack to pay for schools; our next great social program.

mrweasel 12y ago

Of cause people don't react to the statistics that proclaim that they won't win, because someone won the last time. It doesn't matter that the chances are 1 to 175 million, because someone did win, that's all that counts. The only guaranteed result is not to play, that will ensure that you do not win 100% of the time.

DougWebb 12y ago
The only guaranteed result is not to play, that will ensure that you do not win 100% of the time. Not quite true; every time you don't play you win $1. If you don't play often enough, that can really add up.
- giarc 12y ago
  Given that every week you put that $1 aside.

ggambetta 12y ago

> To get your chance of winning down to a coin toss [...] You will have to plunk down your $2 at least 86 million times. What am I missing here? $2x86 million gives me a 50% chance of getting $590 million? 172 < 295!

bryanlarsen 12y ago
2 factors: - you also have to account for the highly likely probability that the jackpot will be split between multiple winners. - even after that accounting, lotteries do sometimes have an expected value higher than the ticket price. The expected value of purchasing N tickets for the N lotteries that led up to and include the big lottery is still the standard 40-50%, but the N-1 previous paid out much less than expected, so the one with the big jackpot pays out more than expected.
delluminatus 12y ago
Most lotteries have multiple winners of varying amounts, depending on how many of your numbers match and how many other people happened to pick the winning set of numbers. I suspect that in order to get a 50% chance of winning the jackpot, you would have to invest into considerably more than 86 million tickets.
roberthahn 12y ago
You're not missing anything. It is technically possible to design and build a business focused solely on buying lottery tickets for profit (i.e.: buy enough to ensure good enough odds to win) But there are a number of risks. The list below isn't exhaustive: * sharing the winning number with someone else * do you buy every single ticket or enough to "virtually guarantee" a win? (and the fewer tickets you buy, the more risky it becomes) * the logistics of purchasing that many tickets I have even read stories of people trying this before - but haven't been able to find the link. The story I remember best is one man hiring a bunch of people to buy lottery tickets on his behalf. Anyway. I'd love to see someone make a go of doing this "professionally", but when you have 172 million or more, the incentive isn't really there anymore.
- mquan 12y ago

mercnet 12y ago

I enjoy playing Virginia's New Year's Millionaire Raffle lottery which sells a finite number of tickets. They cost a decent amount (I think $20) but it brings me excitement on the day they release the numbers.

gyardley 12y ago

This is the article's key insight: “It’s not an investment. It’s entertainment. For a very small amount of money you might change your life. For $2 you can spend the day dreaming about what you would do with half a billion dollars—half a billion dollars!” You're not making a bet with negative expected value, you're purchasing an entertaining daydream to help you through your miserable day.

lmm 12y ago
Why pay for it though? I can daydream that a billionaire will randomly decide to give me half his fortune, for free!
- gyardley 12y ago
  Because although you can, you won't - probably because there's not 'news' every week about a billionaire randomly giving a person half his fortune. The lottery win happens to somebody, while the billionaire scenario doesn't. If someone established a reality TV version of something like The Millionaire [http://en.wikipedia.org/wiki/The_Millionaire_(TV_series) http://en.wikipedia.org/wiki/The_Millionaire_(TV_series)] then I bet people would start having that sort of daydream. Perhaps such a show would even lead to a decline in lottery ticket purchases, since the get-rich daydream would be available from another source.
  - mlrtime 12y ago
    I think an important piece missing is the active vs passive decision making. When you purchase a ticket your are actively triggering the thought process. In your scenario there would be a passive trigger that would dull the entertainment affect. I wouldn't discount the little piece of paper with numbers on it.
  - JoeAltmaier 12y ago
    My buddy Bob dreams and doesn't buy a ticket. His rationale: his chances of the winning ticket blowing down the street and into his open hand are microscopically different from his chance of buying the winning ticket.

larrydag 12y ago

Best definition I've heard on the lottery and I wish it came from me. "The lottery is a tax on the innumerate"

cpwright 12y ago

The "postcode" lottery is interesting. I'm glad that it doesn't exist in the US, because I expect it would get even more people who can't actually afford it to play.

pelario 12y ago

Why we keep paying for insurance, when the expected value is negative ? To reduce the variance of the money we lose. With lottery is the same, I pay to increase the variance of the money we win.

cpwright 12y ago
However, with many forms of insurance the expected value is very nearly 1. Term life, for example, pays out 90%+ of premiums as death benefits. You are unlikely to get any of that money, as most policies do not pay out; but the low probability of a payout multiplied by a comparably high death benefit results in E(X) not to far from 1. Another reason we keep paying for insurance even with bad expected values (e.g., title insurance) is because we have no choice about the matter. If I want a mortgage, I need title insurance, even though only a small fraction of the premiums are actually paid out as claims.

viach 12y ago

Anyway it's cheaper than bootstrapping a startup and has similar odds to succeed. // pessimistic mode off

sosuke 12y ago

This was/is key to why I play: "For many poor people, he adds, there is “no scenario they can come up with in which they are suddenly going to get very rich.” To them, the lottery may be a low probability event—but so is getting a job that pays six figures." Even in the case of you making six figures a year, 100,000 dollars, a $2 million dollar win is still 20 years of your life earnings all at once.

Strilanc 12y ago

When someone tells me they play the lottery for entertainment, I lose a serious amount of respect for them. There's being irrational, and then there's understanding exactly how your irrationality is being exploited and just going along with it! The negative expected value in dollars is enough by itself, but the "how happy will I be?" calculations are even more depressingly bad. The utility of money is usually measured on a log scale, because your first thousand dollars does a lot more for your happiness than your first ten thousand. By that measure going from ten thousand dollars in the bank to ten million wouldn't make you a thousand times happier, it would make you twice as happy. At least until you get used to it (see: Hedonic treadmill [1]). There's a surprising number of bankruptcies caused by lottery winniners, too [1]. Also the whole stressed friendship thing. So... yeah, playing the lottery gets you negative respect from me and I think that's justified. 1: http://en.wikipedia.org/wiki/Hedonic_treadmill http://en.wikipedia.org/wiki/Hedonic_treadmill 2: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845## http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845##

seanflyon 12y ago
You misunderstand what "play the lottery for entertainment" means. It very clearly does not mean play for the entertainment winning the lottery would bring. It means play for the entertainment of playing the lottery. Many people enjoy playing the lottery, though I am not one of them.
tfederman 12y ago
When someone gets entertainment value from playing the lottery, is it really about the chance of winning multiplied by the amount of happiness the money would bring? Or does it have more to do with the excitement that comes with each drawing? (Similar to how I can enjoy watching a football season even if my team doesn't win the Super Bowl.) I think it's more likely the latter, though I don't personally see the entertainment value of playing the lottery. I wouldn't lose respect for someone for having a hobby I don't share or understand, though.

ewzimm 12y ago

Most of this makes sense, but I have a problem with the often-repeated assertion that humans can't handle large numbers. We might not have an intuitive sense of astronomical odds, but that's why we developed mathematics. We have the ability to compensate for our lack of numeracy by thinking through problems with structured languages. We can do much stranger things than calculate whether we should play the lottery. With math, we can calculate what it would be like to navigate in four-dimensional space. When I hear that people act irrationally when it comes to probability, I feel like it should be replaced with the assertion that people tend to act irrationally when they have not been trained to think methodically in a particular situation or because of circumstances rely on primitive approximations. The first assertion sounds like an immutable property of human nature, when it is more of a cultural and educational issue.

JoeAltmaier 12y ago
Its not about how we think; its about how we feel. Some people feel safe without wearing a bicycle helmet or seatbelt, because they perceive the chances of an accident to be small or zero. The decision is made without thinking; get in the car, skip the seatbelt 'just this once, I'm not going far' and never consider the odds analytically at all.
- ewzimm 12y ago
  I can definitely see feelings overriding an opportunity for thought. Personally, I have never bought a lottery ticket. I always wear a bike helmet or a seatbelt. I don't really feel anything about these issues. It just makes sense to do or not do them. I could see myself buying lottery tickets if there was a mathematical argument for doing so, as is the case in some lotteries where if you buy a certain number of tickets you are pretty much guaranteed a win, but not in any other case. If I'm picking something to eat, however, there's definitely an emotional component in addition to the nutrition. I won't just optimize for nutrition. Maybe I'm just the same as the lottery ticket people, but I have different priorities. An emotional attachment to making rational decisions maybe. If that's the case, could a person override irrational emotions with more powerful emotional impulses toward rationality? It would come back to a cultural issue in that case.

mstefff 12y ago

Most lotteries are not 1 in 175 million.. using the hardest-to-win lottery skews this article a bit.. I don't really understand the point of this article. Is he trying to expose the "morons" who play the lottery for being just that? Maybe the $2 or so bucks means nothing to people playing. Maybe the excitement of the lead-up to the drawing and the checking of the numbers is more fun than $2 in my pocket. You can barely even buy a soda with $2 now. If those jackpots swell over $200M, betting $1 to win against 1:175M odds is a good bet. If I could bet $1 to win $15 and I had a 1 in 10 chance of winning, I'd do it every time. In the end, the lottery funds go towards the city/state, and usually education. It's a fun form of charity.