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How MIT Students Won $8M in the Massachusetts Lottery (2012)
- randlet 11y agoThe url of this article and the titles of other uses the word "scammed" which is unfortunate since they don't seem to have done anything of the sort.
- dtech 11y agoProbably the original title of the article, which they (rightfully so) changed.
- dylanjermiah 11y agoExactly. They did nothing illegal or immoral.
- larrydag 11y agoWhat did they do? BUMP: those downvoting. It's a serious question. The article doesn't explain the student's methods. I really don't know what they did to game the system. Is it well known?
- Jtsummers 11y agoOk, found the summary on Wikipedia [0], which matched my recollection from a TV news magazine report from a few years ago when this came out. When the jackpot reached a certain point, they'd increase the payout on the lower tier prizes (match 5, 4, 3) from ($4000, $150, $5) to something more significant. Instead of needing to match all 6 numbers (range 1..46), you could get a good return by only trying to match a smaller set. I guess they worked out a good distribution of tickets to purchase that covered a large percentage of those possibilities. They were purchasing 300k tickets to guarantee their 15-20% ROI. [0] http://en.wikipedia.org/wiki/Massachusetts_Lottery#Cash_Winfall http://en.wikipedia.org/wiki/Massachusetts_Lottery#Cash_Winf...
- ben010783 11y agoI think the tone of the article is because the lottery officials did nothing to stop the practice. "The inspector general’s report claims that lottery officials actually bent rules to allow the group to buy hundreds of thousands of the $2 tickets, because doing so increased revenues and made the lottery even more successful."
- shawn-furyan 11y agoI find the tone of the article, which I would characterize as righteous indignation that the group was able to partially unrig a mostly rigged game to their favor, baffling. The fact that everyone involved apparently got what they wanted[1] out of the situation makes that posture even more absurd. [1] viz. per the article, the MIT group got a 15-20% return, the Lottery profited from the tickets the MIT group bought, and the normal lottery winners, presumably got a mildly lower EV, but were never completely deprived of their shot at the jackpot (which is the only thing they apparently care about, since if they were sensitive to EV, they wouldn't be playing the lottery without a strategy like the MIT group's).
- whyaduck 11y agoWell, the Lottery profited from the game - they lost money on the tickets purchased by the MIT group.
- shawn-furyan 11y agoI suppose that's true from a technical perspective, if the group was making any return. But the article says that game officials understood what the group was doing and facilitated it because it 'increased revenues and made the lottery even more successful'. So they weren't making money on those specific tickets, but still supposedly knew what was going on and allowed it to continue because they were getting what they wanted out of the situation, so my main point still stands, even with regards to the game officials.
- hownottowrite 11y ago"This isn’t the first time that MIT has been involved in a gambling controversy." If it isn't illegal, what's wrong with using brains to make money?
- dtech 11y agoLot's of things aren't exactly illegal, yet still amoral or can cause controversy. E.g. big corporations funneling their profits to other countries to avoid being taxed (Dutch sandwich) My point being, something doesn't have to be illegal to be wrong. In this case it's mainly strange that the lottery didn't change things when they became aware of the scheme.
- dylanjermiah 11y ago>yet still amoral or can cause controversy. E.g. big corporations funneling their profits to other countries to avoid being taxed I see nothing morally wrong with that. I do agree the law has nothing to do with morality, eg. war on drugs, slavery, etc.
- balabaster 11y ago> I see nothing morally wrong with that. Exactly - if the loan shark has his legs broken and is robbed of his ill-gotten fortune, how immoral is that?
- dylanjermiah 11y agoI'd say it's more akin to a theft taking a smaller percentage of your income.
- balabaster 11y agoWho's the thief? The lottery company or the person "robbing" the lottery company? Once you pay over your cash, it belongs to the lottery commission. Your chance of winning is infinitesimal to the point that you may as well spend your money on other things, like paying down your mortgage quicker or paying off your car quicker or whatever other debts you have - either way, the money is gone - unless what you're getting out of it is that period between purchase and draw - the _hope_ of the win, you're likely getting nothing out of your purchase. If you're getting your emotional high from playing rather than the hope of winning, then perhaps the $5 is a good purchase, it's hard to say; otherwise, I'd say it's better spent on something the _does_ have a financial or emotional reward. Either way, I'm not really clear on what your point is... perhaps you can clarify.
- akhilcacharya 11y agoHah, what can't these people do.
- bradfa 11y agoThis is from 2012, probably should include in the title.
- rglovejoy 11y agoThe card counting rings mentioned in the article have been going on for decades. Edward Thorp, while a math professor at MIT, was the first to do a rigorous analysis of card counting. http://en.wikipedia.org/wiki/Edward_O._Thorp http://en.wikipedia.org/wiki/Edward_O._Thorp
- baldfat 11y agoLottery = Poor People Tax and should be removed from Government. http://www.businessinsider.com/lottery-is-a-tax-on-the-poor-2012-4 http://www.businessinsider.com/lottery-is-a-tax-on-the-poor-...
- Nicholas_C 11y agoAt least the revenue generated from the lottery (in Texas, not sure about other states) go to pay for education.
- larrydag 11y agoTexas resident here. That claim is dubious. http://www.kcbd.com/story/14579932/kcbd-investigates-is-the-tx-lottery-really-funding-education http://www.kcbd.com/story/14579932/kcbd-investigates-is-the-...
- harryh 11y agoReally? Or does it just mean that money from general taxes that would have been spent on education is spent on something else?
- pc86 11y agoIt's both. Lottery money replaced other tax revenue, which freed that revenue to be either a) returned to the people in the form of lower taxes; or b) spent on other projects. You'd need to look at when the lottery proceeds were first used for education and track the changes since to know which one actually happened.
- caminante 11y agoOld article. Please put (2012) in title. prior discussions on HN: https://news.ycombinator.com/item?id=4340852 https://news.ycombinator.com/item?id=4340852 https://news.ycombinator.com/item?id=4341645 https://news.ycombinator.com/item?id=4341645 https://news.ycombinator.com/item?id=9678607 https://news.ycombinator.com/item?id=9678607
- pmorici 11y agoThis article strongly implies there was something morally wrong about what the students did but doesn't detail any actual misconduct on anyones part. Sounds like the lottery officials just got their pants in a bunch because they like to be the ones taking advantage of other people's naiveté and not the other way around. Ironic that the article embeds a video of John Oliver ripping the lottery for taking advantage of those who can least afford it.
- __z 11y agoSounds like lottery officials didn't "get their pants in a bunch" - they were actually complacent in the scheme. >A recent report by the state’s inspector general reveals more details about the scheme, including the fact that the Massachusetts Lottery knew of the students’ ploy and for years did nothing to stop it. The inspector general’s report claims that lottery officials actually bent rules to allow the group to buy hundreds of thousands of the $2 tickets, because doing so increased revenues and made the lottery even more successful. While the students’ actions are not illegal, state treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year.
- ska 11y agoI think you meant to say "complicit in the scheme". You could be complacent about it, but not in it.
- balabaster 11y agoThey're (wilfully) complacent and indirectly complicit. The more people buy tickets, the more money they make. If someone finds a flaw that causes them to buy a shit ton of tickets, the lottery commission makes a shit ton of cash - a portion of which gets paid out in winnings. If someone exploiting the system makes the lottery commission more money, why on earth would they fix it? They're getting more rich by not fixing it.
- drblast 11y agoThis doesn't make sense if the group buying the shit ton of tickets is making money. Overall more money goes out than comes in. If someone puts $600k and get $660k out, you can't make that up in volume. If the lottery is still making money, it must come from other people who aren't winning but still playing. I'm not sure exactly how this lottery works, but I think in other games there is no pile of cash sitting around. Instead the owner of the game insures it so that an intermediary (insurance company) pays the winner. If that's the case here the lottery commission will end up paying higher insurance premiums over the long term, but might show a short term profit. But if you take into account all of the sources of money, there's no way the lottery commission could come out ahead on this.
- chrisBob 11y agoI don't understand why the lottery commission would know and not stop this. If they are guaranteed to win I think that is the same thing as the state have a guaranteed loss.
- leoedin 11y agoNot really. The guaranteed wins (presumably done by buying enough tickets to cover a large proportion of the available number space) would be taken at the expense of either any coincidental winners or at the expense of the rollover. Lotteries are designed to take their cut from the tickets bought - some proportion of the money from tickets then goes to the prize pot. More tickets sold means more money for the lottery organisation, regardless of who buys those tickets. So the loser in this case was the "lucky" lottery player, who would have found that, had they won, they had to share their prize with these guys.
- balabaster 11y agoBut just like every casino, the house always wins. The more tickets sold, the more money the lottery makes. This is why despite knowing the flaws in the system, it doesn't get fixed, they don't care... in fact, it's in their favor to ignore it because those attempting to exploit the flaw only line the lottery's pockets more. It's more profitable for them to ignore it and hope that as little ruckus as possible draws attention to this corruption.
- topynate 11y agoSo I suppose there's a sort of intergenerational underground community of advantage players at MIT that these exploits come out of? Hard to imagine that MIT just happens to be the source of unrelated rings.
- Symmetry 11y agoIn terms of these guys and the poker players no. But you'd be amazed how many people from the MIT Assassins' Guild go into computer security.
- downandout 11y agoThis isn't the first time someone has been able to turn lottery odds in their favor. A woman named Joan Ginther, who has a PhD in Statistics from Stanford, won more than $15 million from a Texas lottery scratch card based game [1]. Though she has never spoken and exactly how she did it remains a mystery, her odds of winning the number of times she did as a random buyer of scratch cards were 1 in 18 septillion and should occur approximately once every quadrillion years. Here's another case, where a geologist named Mohan Srivastava cracked several different lottery scratch ticket games [2]. He warned lottery officials, who did....nothing. [1] http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-the-luckiest-woman-in-the-world/ http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-the... [2] http://www.wired.com/2011/01/ff_lottery/ http://www.wired.com/2011/01/ff_lottery/
- deleted 11y ago[deleted]
- mcv 11y agoVoltaire is also famous for making quite a lot of money gaming the lottery: http://www.todayifoundout.com/index.php/2013/05/how-voiltaire-made-a-fortune-rigging-the-lottery/ http://www.todayifoundout.com/index.php/2013/05/how-voiltair... Though the actual scheme was hatched by Charles Marie de la Condamine, rather than Voltaire. But Voltaire is the one who got the most fame (and possibly money) out of it.
- billpg 11y agoNext you'll be telling me he didn't really say that thing about defending my right to say things.
- niuzeta 11y agoI'm absolutely sure you are aware of it, and is making a sarcastic account of the misattribution. But just to spread the 'correct' knowledge - the quote, while attributed to Voltaire, as it fits his style so succinctly well, is not actually said by him. It was a quote from 'The Friends of Voltaire', and misrepresented him.
- S4M 11y agoDoesn't that mean that the lottery was losing money? How is that even possible?
- jib 11y agoIt's related to jackpots, so no. Lets say a lottery is set up to pay out 60% of money in over a year, but those payouts are done by 40% 9 weeks out of 10, and 240% the 10th week. If you only play the lottery on the 10th week, then your EV is +140%, even though the overall EV is still 60%. From the article it was a version of this that happened.
- eloisant 11y agoIf I understand correctly, when there is no winner the prize is rolled over the next day. The technique involves playing these days specifically, and getting a big enough coverage of the numbers. That means that if the (global) prize becomes big enough, then for this day the lottery gives out more money that it cashed, but it's actually money they accumulated during the days there was no grand prize winner. So in average the lottery doesn't lose money.
- deleted 11y ago[deleted]
- balabaster 11y agoI'm quite sure this scenario was modeled extensively and they were well aware of it and had worked to ensure they were still profitable (or perhaps more so) even if the flaw was exploited.
- qbrass 11y agoThe state takes their money off the top, and the rest goes towards the jackpot. They make money as long as people play the game. They might have made more money by hyping the higher jackpot to get more ticket sales, but it obviously wasn't worth their time. The people rushing to buy tickets because of that jackpot have the same chances of winning as they would without MIT students buying tickets. They have a reduced amount of time to try and win it, since MIT winning will lower the jackpot, but they're probably better off for it by not throwing their money at the game as much. The people really losing out are the ones who buy tickets no matter what the jackpot is, and that's only if they win after the jackpot has been lowered. They may have won more money, but if that was their concern, they shouldn't have been playing when the payout was so low.
- reagency 11y agoReading between the lines, there is a very strong hint that lottery officials violated lottery rules to enable the exploitation, possibly for indirect benefits. What the students is very similar to how card counting is supposed to not work: they violated the maximum bet. And lottery officials let them, against the rule of the lottery system. It seems like no real harm done though: they guaranteed themselves winnings, causing the jackpot to never grow, before anyone else bought tickets against the larger jackpot. So in a sense they just stomped the game before it started, no other players got screwed out of their chance at any existing jackpot.
- mcv 11y agoAs I understand it, there was no rule against the maximum number of tickets (and therefore no maximum bet). But somebody buying up all the tickets did increase the total revenue of the lottery, which is presumably something that lottery officials are supposed to encourage (if there's any advertising for it, at least), and may have been rewarded for.
- stygiansonic 11y agoThe Irish National Lottery format used to be 36 choose 6, giving odds of a jackpot win at 1 in 1,947,792. The cost of a single ticket was £0.50; therefore you could buy up the entire "space" for £973,896. Thus, when the jackpot rose above this value, it became economically viable to buy up the entire "space" to guarantee a win; this would result in a profit so as long as no one else bought a winning ticket. This is what a group of individuals attempted to do in May 1992.[0] They were limited by the physical requirement of filling out all such possible combinations on the paper tickets, but they attempted to spread out the work by pre-filling out combinations over several months and waiting for the jackpot to rise to a large value before "deploying" the tickets. 0. https://en.wikipedia.org/wiki/National_Lottery_(Ireland)#History_of_Lotto https://en.wikipedia.org/wiki/National_Lottery_(Ireland)#His...
- elwell 11y ago> when the jackpot rose above this value Maybe twice that value, to account for taxes (idk Irish lottery tax rates though).
- derriz 11y agoNot quite. Covering the space only guarantees you a share of the jackpot - it wasn't unknown for there to be more than 5 winners especially when the jackpot was big as ticket sales skyrocketed What made the play profitable was the introduction of novelty guaranteed amounts for matching 5 and 4 numbers - regardless of the number of winners.
- helloz_0707 11y agoThis is overrated. Grant that you can make 15-20% ROI on your 600K investment, however, you could have 95% chance to lose all of it and 5% chance to hit jackpot and win say 26 mil. Your expected value is high but no one would play 600K like that, unless you are some rogue hedge fund manager. You might well invest it in stock market, which has better Risk-reward ratio.
- cpncrunch 11y agoWhere does your 95% figure come from? Although the article doesn't give specific details, it does say "it would only take about $100,000 in tickets to guarantee success", which I take to mean 100% chance you will win the jackpot.
- ryandrake 11y agoYou're not going to make 15-20% in one shot and unlikely to make it yearly, on the stock market.
- __z 11y agoYou are totally missing the point. This one lottery game was set up in a way that if you spend enough money at exactly the right time you are mathematically guaranteed to make more money than you spent. You can't guarantee success in the stock market and certainly not 20% ROI in a few days. It isn't like they just threw $600k at the lottery blindly hoping for a payout. This was a mathematical analysis.
- conanbatt 11y agoThere was still the massive risk of the strategy being replicated by someone else and then both parties would lose money.
- deleted 11y ago[deleted]
- helloz_0707 11y agoThis is overrated. Grant that you can make 15-20% ROI on your 600K investment, however, you could have 95% chance to lose all of it and 5% chance to hit jackpot and win say 26 mil. Your expected value is high but no one would play 600K like that, unless you are some rogue hedge fund manager. You might well invest it in stock market, which has better Risk-reward ratio.
- peter303 11y agoIt takes a fair amount of man power to buy hundreds of thousands dollars of lottery tickets. Especially if you have to fill out forms and submit them to a cashier. I've heard of consortiums hiring people to do such.
- tokenadult 11y agoAs this article from 2012 makes clear, the positive return on investment resulted from unusual rules in one state lottery game that has now been discontinued. The typical state lottery in most parts of the United States has parimutuel pay-outs for winning tickets, meaning that if multiple purchasers have winning numbers, they split the prize in a way that ensures that the lottery doesn't pay out more money than was bet for that drawing. An example from Britain was a national lottery that had something like seventy-six different winners, who all bet on the same "lucky" number that happened to be drawn in that drawing. They split the prize equally, so that each bettor's individual winnings from a large prize were not particularly large. The number may have been lucky in the sense that it matched the drawn number on that one occasion, but the number wasn't INDIVIDUALLY lucky for each person who bet it. Over and over and over, some people have winning tickets, but most people have losing tickets. When a lottery is structured in the typical parimutuel way, as most lotteries are, even if you buy all the tickets available for sale in the next drawing, which takes a big investment, you can't be sure of winning a full prize individually, because other bettors may have a collision with your choice of a winning ticket number. tl;dr: A bug in one state lottery game was discovered by MIT students, who invested in exploiting the bug until the game was closed.
- delinka 11y ago"While most students at [MIT] use their powers for good [...] others are busily using their prodigious math skills to" win the lottery. Interesting morals on display by the author. Further: "While the students’ actions are not illegal, state treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year." I expected the last part to say they'd filed charges against the students. Since they didn't (because their activity wasn't illegal), the state treasurer made the right decision to stop the game. I'm not impressed by this author's writing skill.
- plorg 11y agoHere's the Boston Globe source article for the Time piece. * http://www.boston.com/news/local/massachusetts/articles/2012/07/31/inspector_general_says_lottery_allowed_gambling_syndicates_to_take_over_winfall_game/?page=full http://www.boston.com/news/local/massachusetts/articles/2012... And a couple of investigative pieces the Globe had run previously: * http://www.boston.com/news/local/massachusetts/articles/2011/07/31/a_lottery_game_with_a_windfall_for_a_knowing_few/?page=full http://www.boston.com/news/local/massachusetts/articles/2011... * http://www.boston.com/news/local/massachusetts/articles/2011/10/16/a_game_of_chance_became_anything_but/?page=full http://www.boston.com/news/local/massachusetts/articles/2011... A fun quote from the first piece they ran: Mark Fettig of Tennessee, one of the top 10 winners during the May rolldown week, urged the Globe not to write a story at all, saying “it would be immoral’’ to attract more people to Cash WinFall and potentially dilute the winnings of current players.
- kdamken 11y agoIt bothers me how the article implies that they were doing something wrong. They figured out a trick to the system and used it to their benefit.
- dheera 11y agoExactly. Also, lotteries and gambling are all about who can come up with the best strategy to game the system within a prescribed set of written rules. Like everything else in life, it's a puzzle. What's the point of any game if it's all chance and no strategy?
- JoeAltmaier 11y agoI don't think that's generally assumed. Gambling is random; its exciting to risk and win. There doesn't have to be any strategy at all. What 'strategy' are all those grandmas using at the nickel slots?
- dheera 11y agoThat's why those grandmas lose money most of the time. One day a smart grandma will figure out how to game those machines too; it's an open-ended puzzle left to the world. They may build a better machine, and the world will again build a better grandma over time. The world and economy is a system with rules and ethics, and entrepreneurs game that system within those rules and ethical bounds. Ping-pong wasn't first played with the intention of having back-spins and side-spins, but spin balls are perfectly within the written rules and are supposed to confuse and defeat your opponent. If you want to have an edge at rock-paper-scissors, it's all about statistically analyzing and gaming your opponent, because humans are extremely bad at being uniformly random. There are tournaments for this. It's just humans being intelligent beings. These students are gaming the lottery just the same. Rules are rules; game and engineer the hell out of anything within those bounds, I say. Make the world an interesting place.
- SonicSoul 11y agoThis story (and the math behind it) is discussed at length in "How Not to Be Wrong: The Power of Mathematical Thinking" by Jordan Ellenberg. I highly recommend it, the other stories in it are equally enlightening.