Cali Wolverine

January 8th, 2016 at 3:05 PM ^

In the '90's my friend's father had his trainer buy him 50 tickets...one of the tickets was a winner and he split a $20 million plus jackpot with another winner...after paying the trainer a handsome reward...he invested the rest...he was already wealthy and happened to be an estate planner for very wealthy individuals. You got to be in it to win.

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UMGoRoss

January 8th, 2016 at 3:25 PM ^

The expected ROI is the same for buying one ticket vs. multiple tickets since each ticket has equal odds of winning. A truly rational person (which only exists in economics text books) would either not play or buy every possible combination of ticket (eROI >investment, buy them all, eROI<investment, buy none).

In reality, even at this high a jackpot, your ROI is < than your investment, but it's getting close. Not better than a crappy savigns account, but it's not as stark as you make it seem.  

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JamieH

January 8th, 2016 at 3:45 PM ^

Sure your eROI < inventment.  No question.  However your possible ROI is so magnificent, and your maximum possible loss is so paltry ($2) that there is SOME value IMO in buying 1 ticket when the jackpot is this large.  I think the math would bear me out as well in some way.

I'm not arguing you should necessarily play every week.  But for $800 million?  Even if you had to split it several ways you are still set for life many times over. 

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JamieH

January 8th, 2016 at 5:37 PM ^

I'm not trying to claim the eROI > $2.

 

I'm claiming that the combination of the eROI + the unbelievablely dramatic way that the actual payout would change my life if I were to win - the insignificant way my life will not change at all by losing $2 is high enough to be worth essentially throwing $2 away.  

So essentially I am postulating that once the jackpot is up around $800 million to a billion dollars, having ANY chance of winning it for such a paltry sum of money is essentially worth it.  I think that calculation goes beyond just whether the eROI > $2.  Of course you are going to lose.  But at some point, you are talking about such a huge amount of money, and you are risking almost nothing, so why not take a stab at it?  Again, 1 ticket only. 

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wolfman81

January 9th, 2016 at 1:24 PM ^

Remember baseball cards?  You could get a pack of 20 cards for like $2 or $3. This was ok since common cards were worth like 10 cents.  And if you got a good card, it might be worth a couple bucks. End up with a rookie card for a future hall of famer, and it could be worth thousands someday.

Now, how is the math on that if a pack of cards is $10? Not nearly as good.  The lottery is like that except (1) common cards are worth nothing and (2) good cards are both rarer and more expensive. People don't win with the lottery. That's why the state runs it. So they can make money. It is like a casino on steroids.

"Ok" you say, "but I'm not an addict, and this is part of my disposable income.  What do I have to lose by playing? Plus, I MIGHT EVEN WIN!!!" Well, maybe. Problem is this: fast forward a couple of years ahead in the life of a typical jackpot winner, and you often find that they are WORSE off than they were before they won. It turns out that they were generally poor money managers in the first place.  So when they get lots of money, they go into debt even faster.  And because they are "rich" banks are happy to loan them even more money.  So instead of wasting $2 on a lotto ticket, they spend $2000 on toys.

Maybe you are different.  Maybe not.  Like I said, this isn't worth it to me.

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bgoblue02

January 8th, 2016 at 2:59 PM ^

you don't want to play on every draw because when the pot is small and starting out your EV is even worse.  I can remember the numbers but the EV on a jackpot this large is still only like 85 cents to a dollar. 

Playing the lotto is stupid and throwing your money away, but as someone below said if its the only spare dollar you have, invest it; if you want to get some entertainment value of dreaming what you would do with 800mm then buy some tickets.  

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ak47

January 8th, 2016 at 2:45 PM ^

Yes they technically go up.  They go from .0000003 to .000003.  You want to know what the most likely outcome in both of those situations is?  You lose.

There is one way you can materially adjust your odds of winning the lottery, you can either not play and have a 0% chance of winning or you can play and have a non zero chance of winning.  Beyond that everything else is just window dressing.

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Muttley

January 8th, 2016 at 3:34 PM ^

If you're feeling like it's your month for one-in-a-gazillion events, then go ahead and buy a ticket.  But after you win your 1 in 292,000,000 shot you'll probably die in a 1-in-1,000,000 plane accident on your way to Hawaii.

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707oxford

January 8th, 2016 at 3:08 PM ^

So if odds of winning are roughly 1 in 300M, and tickets cost $2, anytime the jackpot surpasses $600M, the risk/reward actually starts to lean toward reward.

...oh wait, taxes.  Not sure what the tax rate would be, but guessing the jackpot probably needs to be closer to $1B. 

I think most people understand their chances are slim but enjoy playing anyway.  Nothing wrong with that.

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ak47

January 8th, 2016 at 3:13 PM ^

The jackpot needs to get to somewhere between 3 or 4 billion for your EV to be positive as an individual winner. Factor in that at that point you almost certainly wouldn't be an individual winner and the expected EV drops to negative again.  It would probably never be the right monetary decision to purchase a lottery ticket.

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UMGoRoss

January 8th, 2016 at 3:35 PM ^

Here are some faults in that assumption (some covered by AK47)

1.) There isn't guarenteed to be one winner, and the pot may be split

2.) The prize is shown as a payout over 20+ years,the actual immediate prize is about 60% of the quoted number (estimated at $496M for a an $800M prize)

3.) Taxes

 

Their is one thing that does help the expected return (prizes in addition to the jackpot), but they don't makeup for the above.

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FanInSTL

January 8th, 2016 at 2:56 PM ^

By that logic, there is no reason to make, say, air travel safer.  The odds of a crash or hijacking are next to zero, and incremental safety costs huge sums of money and inconvenience.  

Or auto safety.


Or putting your baby on his/her back to reduce the odds of SIDS.

 

People make decisions on the incremental margins all the time.

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ak47

January 8th, 2016 at 3:07 PM ^

Holy strawman batman. For one those things save lives so even on the smallest of margins saving lives is worth it whereas this doesn't.

Second of all those odds aren't even in the same realm of reality as the odds of winning the powerball.

Your odds of dying in a plane crash are 1 in 11 million.

Dying in a car crash? 1 in 470

SIDS is the leadig cause of death among infants in America.

The lottery is a 1 in 292 million chance.  Going out of your way to get a lottery ticket makes you more likely to die than it does to win the lottery.

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Alton

January 8th, 2016 at 3:15 PM ^

The lottery is 1:292MM odds?  And the jackpot is $800MM plus?  The tickets are $2 each, correct?

As long as fewer than 250 million or so tickets are sold, that sounds like it has a positive Expected Value (+EV) for this particular drawing (leaving out taxes).  I guess with the taxes, you need a jackpot of over $1.5 billion or so.

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Alton

January 8th, 2016 at 3:22 PM ^

I edited before you posted, but I saw that above from 707oxford.  I think about a billion and a half is the breakeven point on ROI, although of course the higher the jackpot the more tickets sold and therefore the higher the jackpot needs to be to have a +EV.

Of course, I am conflating "total wealth" with "value."  In other words, I am assuming that having $200 million is exactly 200 million times better than having $1. 

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FanInSTL

January 8th, 2016 at 3:32 PM ^

So, say you go to a casino and you play blackjack, where at best your odds of winning are 49%?

Let's say a successful night for you is a night in which you (arbitrarily) win $200.  Do you recommend simply betting $200 on one hand, because each successive hand reduces the odds of winning $200?

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JamieH

January 8th, 2016 at 3:52 PM ^

The best is when the dealer catches on to what you are doing and starts making small talk to try and distract you.  At that point I always wonder if I'm going to get myself thrown out of the casino.  I bet such small amounts that I figure I'm not worth the effort. 

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KC Wolve

January 8th, 2016 at 2:52 PM ^

And here is.....that guy. Only fucking morons actually think they are going to win. Maybe some people find it fun to throw a few bucks and dream a bit about the chance of winning. I bet you were the kid that told all the other kids that Santa wasn't real and screams "photoshopped" to every funny pic on the Internet.



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