Over 28 years ago I had an essay published in the Henry Herald (I was then an occasional columnist for the newspaper. Henry County is a county that’s part of the Atlanta metro area; the Henry Herald has been published since 1874.) As I thought about writing about lotteries for this Letter…, I decided to raid my paper files (I don’t have any electronic files of those columns) and review that 1995 column. To my surprise, it held up well enough that I’m going to run it here pretty much unchanged [current additions shown in brackets like this]. I even managed to make, reasonably well, the same point about the deceptive size of jackpots that the New York Times made 28.5 years later (a week or two ago).
"How to Pick a Sure Winner in the Lottery"
The Georgia Lottery is one of those agencies that can count itself a success only if it goes out of business.
As my wife (the source of most of my good ideas, even if I don’t always admit it) points out, when the lottery has generated enough money for education that all Georgia’s citizens know enough about probability to understand that the lottery is a bad bet, it’ll be time to pull the plug.
I’m not arguing against betting here, only against “bad” bets, by which I mean bets where the payoff is not proportionate to the bet. If—only in a state where it is legal, of course—you bet your buddy from Georgia that Tech will beat Georgia this year, and if the two teams are evenly matched, then regardless of which team wins, it is a good bet for both of you. If Tech’s team in a given year is three times as good as Georgia’s and you give your buddy 3 to 1 odds (betting your $3 against his $1, say), that’s also a good bet for both of you.
A “bad” bet is one where the odds and risk are not the same, or at least close to it. A dollar spent on the Georgia Lotto is just such a bad bet, because the risk is at least twice as big as the payoff. [It’s worse now.]
All the Lotto players are betting against each other as to who will pick the winning set of six numbers, and everybody’s odds are 9 million to one against success with any one entry. If 9 million entries were received and a single winner got $9 million, it would be a good bet, but the Georgia Lotto folks admit up front that only $4.5 million is winnable in such a situation.
The other half, roughly, is spent on advertising, the salary of the Georgia Lotto employees, the 5 percent the retailers get, and, of course, education. (If, like many others, you justify playing by saying,”Oh, well, it’s all for a good cause,” why not contribute half your entry money to the nearest school, for which you can at least get a tax deduction, and spend the other half on “good” bets with your buddies who live where it’s legal to gamble?) And what of the new (in Georgia) Powerball game? I’ve heard folks say that the odds on any of them are so long, why not? Well it is as bad a bet and the odds are dramatically worse. Would $20 million really make you any happier than $2 million if you did win?
The Georgia Lottery folks, like their counterparts in every other state, also engage in a little sleight of hand regarding the winning pools. The winner of a Georgia Lotto jackpot will only get winnings worth a little over half the amount advertised to go to a “single winner,” and that’s before taxes.
[The games have been changed since 1995, with things like MegaBalls added, and are now substantially less fair—substantially more of a bad bet.]
Before the Lottery people sue me or the Henry Herald, let me explain. The reason they can get away with this is that most people don’t know about—or don’t care about—the time value of money.
The lottery folks, like anyone else, can buy what they advertise as being worth $9 million for about $5 million—and they do, taking the best bid from among several companies that buy conservative financial instruments for them. Spreading the money out over 20 years dramatically changes what it’s worth now—$450,000 a year times 20 years does equal $9 million—but it’s worth a lot less than that when the ability of money to make money—to earn interest [or dividends]—is taken into account.
There is, of course, one sure-fire way to make money off the lottery: put out a magazine or book (or a column?) on “How to Pick a Sure Winner in the Lottery.” People will buy it even though it’s utterly worthless.
An “analysis” of recent winning numbers, plus an “analysis” of your lucky numbers or your dreams or your loved ones’ birthdays, plus any number of gimmicks, will get you exactly the same chance of winning as letting the computer “quick-pick” your numbers for you.
[And, pretty bizarrely, the official 2024 Georgia Lottery website features “Hot & Cool Numbers” in case you want to indulge in thinking numbers can actually have such features. Of course, if the number 23 hasn’t been drawn in weeks and weeks, its chances of being drawn this time are… exactly the same as they were last week and the week before. If that isn’t true, the game is well and truly rigged.]
So, am I joining the local preachers in telling you that playing the lottery is sinful or immoral?
No, only that it’s a bad bet, especially if you’re in any sense counting on it for your retirement or your daughter’s college education, say. If it’s only entertainment to you and you can afford to throw away the money you spend, have at it. I’ll try to remember to let you know if my numbers come up. [So far, bupkis.]
https://www.nytimes.com/2024/03/29/business/lottery-jackpot-megamillions-powerball.html?
Amazing how much younger I was when I was so much younger—
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When I saw the title of your piece, I thought you were going to say, “buy all of the tickets.”
Thanks for a fun read! Jordan Ellenberg has a chapter on lotteries in his book How Not To Be Wrong. He describes how Voltaire, as a young man, made his fortune using a group strategy to take advantage of a flaw in the lottery in France. It took a while for the government to catch on (long before computers and the internet). They fixed the problem, but not before Voltaire became rich. As you point out, his winnings were paid by the other bettors, so the state’s earnings were not affected at all. — By the way, I have never bought a lottery ticket or gambled (outside of owning securities in my retirement plan), because it is indeed a sin against our creator. 😎