Ah probability, the science of denial :-)<p>Having lived in Las Vegas during my teen years I got to see first hand how people rationalize their misunderstanding of statistics into winning 'systems' that if they just had enough money would payoff. I cannot count the number of times someone told me, in complete earnestness, that their system worked, they had proved it worked using a small stake of $X (which was all gone now) and if they had ($10X or $100X) of a stake their working system would return a handsome profit. And you say "Gee if it worked how come you lost all your money?" and they would say "You win and lose some, my system predicts when the big wins will come based on what has happened so far and I make big bets on that, and small bets on the ones we know are more likely to lose but to get them out of the way." And you say "So if you had a coin and you flipped it you would make a really big wager if the coin had just turned up heads 3 times in a row?" and they say "EXACTLY! You know this system?"
The lottery let's people gamble (which is illegal in most US states) because of "the children".<p>EG lottery profits go to support additional money for public schools.<p>This is all after a 16% operating / administrative cost, of course, which amounted to ~$4.83b in California alone in 2012 (2).<p>Back in 1988 an article appeared in the NYTimes suggesting that what was actually happening with the money, only 3 years in, was that state budgetary offices were simply using this newfound windfall to supplant existing commitments.<p>Explained by the State Superintend at the time "the percentage of the state budget spent on public schools declined from 39 percent four years ago to 37.5 percent last year. Lottery dollars, he said, have in effect been used to make up the difference."<p>Part of my frustration with California's recent retroactive tax-raises, ostensibly for education, is borne out of examples like these.<p>(1) <a href="http://www.nytimes.com/1988/10/04/us/california-educators-assert-lottery-has-failed-to-pay-off-for-the-schools.html" rel="nofollow">http://www.nytimes.com/1988/10/04/us/california-educators-as...</a><p>(2) <a href="http://www.calwatchdog.com/2012/09/27/ca-lottery-states-cash-cow/" rel="nofollow">http://www.calwatchdog.com/2012/09/27/ca-lottery-states-cash...</a>
Lotteries are probably regulated to the point where this can't happen, but I used to play poker at some quasi-legal charity games quite often. They sold instant bingo tickets, which are very much like instant lottery tickets. There's a box with a defined number of losers and each prize.<p>Most of the return from a box came from let's say 5 big prizes (out of let's say 1,000 tickets). Let's suppose the return is 50%, and the ticket price $2, so the total payout on a box is $1,000. There would be 5 $100 winners, and a number of smaller winners that added up to the other $500.<p>The people selling them would watch and count how many of the $100 tickets were redeemed. (Gamblers tend to not hold onto the winning ticket secretly, they cash them in right away and buy more.) If there were, say, 2 of the big winners left but only 100 tickets remaining in the box, the guy running it would purchase them all. The two big winners would pay for the whole thing and his profit would then be the sum of all of the small prizes left (which was expected to be roughly equal to the 2 big tickets).<p>Since it was a charity game he was effectively stealing from the charity, but also robbing the players collectively because any time you were near the end of a box but still able to buy tickets you could be sure there were no big prizes left.<p>I wonder if instant lotteries ever do this. If they see it's near the end and they've got a disproportionate number of prizes left they could simply pull all of the tickets.
In the 1970s, when state lotteries were new, the Massachusetts lottery had a parimutuel payout, akin to horse racing -- whoever had the winning 4-digit number divvied up a payout. Based, I suppose, on anecdotal evidence, some guys in the Harvard physics department judged which numbers were likely to be least popular, and bet those, getting a positive return.<p>However, this arbitrage quickly went away. It seemed that organized criminals started using the lottery as a low cost (indeed initially negative cost) way of laundering money, using a similar scheme.<p>The upside is that this turned into a kind of state income tax on criminal income.
If he can consistently reproduce the $41 return, he has it made.<p>He just needs to aggregate bundles of lottery tickets and sell them to investors looking for a guaranteed -60% return, and then pocket the extra 1%.
I think the final paragraph sums it up, although the author seems to miss the point:<p>>The thrill and rush of possibly winning started to wear off after about the twentieth losing ticket. Each card had a couple of “Life” symbols on them, and every time you got a second you just dreamed of seeing the third one under the remaining graphite. However it never appeared and never will and it just kind of turned depressing. How could people put themselves through this humiliation and teasing every day of their lives? This is definitely an investment that is not rigged in your favor and can never really bring you positive returns.<p>There is a thrill to knowing that, however small the chance, there is a large payout potentially waiting for you. Most people don't buy 100 scratchers at a time, or I would guess even one a day. Buying one lotto ticket a week, for instance, is a trivial expense for many people which also happens to be fun (the aforementioned thrill). The inevitability of the loss doesn't become as apparent over those time scales: selective memory results in people remembering their (typically small) wins and forgetting all of the losses in between.
Spending on scratchers is legal... and even encouraged by government advertising.<p>But unless you're already rich enough to qualify as an 'accredited investor', there are legal barriers to investing in private companies<p>Such irrational paternalism is insane.
Of note is that there is at least one documented case of someone (supposedly) reverse engineering lottery algorithms to give themselves better odds:<p><a href="http://www.dailymail.co.uk/news/article-2023514/Joan-R-Ginther-won-lottery-4-times-Stanford-University-statistics-PhD.html" rel="nofollow">http://www.dailymail.co.uk/news/article-2023514/Joan-R-Ginth...</a>
Speaking of which, I need to buy a few Powerball tickets!<p><a href="http://www.usatoday.com/story/news/2013/05/17/saturdays--550-million-powerball-jackpot-could-get-even-bigger/2194135/" rel="nofollow">http://www.usatoday.com/story/news/2013/05/17/saturdays--550...</a>
I think he's underestimating the time he invested in this project. He says he scratched 100 tickets in 15 minutes. That's a pace of 9 seconds per ticket. I've bought a sizable number of lottery tickets, and that's a blazingly fast pace to scratch off (or otherwise remove) the latex, read the revealed numbers, determine if you have a winner, tear the ticket at the perforation, and sort the ticket into the appropriate pile.
It looks like he bought 100 consecutive tickets. If the winning tickets are truly random, it wouldn't matter, but I wouldn't be surprised if the distribution is controlled in some way that ensures winning tickets will be more evenly distributed than random. Anyone know whether this is the case?<p>If it is, the variance at least (if not the expected return) could be different if the tickets were purchased in 100 different places.
In the 90's right before ND was part of PowerBall, I was asked to buy the tickets for a whole office because I was going to MN. I bought $120 of tickets and did not have one ticket with any winning numbers (never mind a powerball). I was never asked to buy tickets again. I seem to remember the odds were better to win than miss all (5/49 + 1/42 era).<p>Its a cute diversion for most and one of those weird office group things.
nyud.net cached version, as I’m getting a DB error:<p><a href="http://www.investinged.com.nyud.net/100-invested-in-100-1-lottery-tickets/" rel="nofollow">http://www.investinged.com.nyud.net/100-invested-in-100-1-lo...</a>
I took a look at the odds in my state. The lower dollar amount tickets have worse odds. The higher you go up in ticket price the better the odds get.<p>At $1 you might see odds up too 1:5 but all of the $20 tickets are <1:4. The best I saw was 1:2.89. I'm not goot with stats but wouldn't have been better to buy 5 $20 instead of 100 $1 tickets?
I love statistics and probability...but I thought this was going to start off like one of those old mastercard commercials lol. Just a question...isn't the odds and probability on the back of the scratchers???<p>100 $1 lottery tickets = $100 bucks<p>scratching tickets = 15 mins<p>learning ROI and tending to a cramped hand = priceless
A second test would be to purchase 10 tickets from 10 different locations in order to change the influence of the state's internal randomization procedure during print production.<p>Would be interesting to see if the payouts lined up with the expected value as well.
It helps if the game isn't fully random: <a href="http://www.wired.com/magazine/2011/01/ff_lottery/all/" rel="nofollow">http://www.wired.com/magazine/2011/01/ff_lottery/all/</a><p>It's Jonah Lehrer, but I doubt it's completely fabricated.
Previous discussion: <a href="https://news.ycombinator.com/item?id=4398665" rel="nofollow">https://news.ycombinator.com/item?id=4398665</a><p>Also note that winning a $4 ticket will net you $6 :-)
So the actual expected ROI is -64%
You just need to find a way to hack the lottery: <a href="http://www.wired.com/magazine/2011/01/ff_lottery/" rel="nofollow">http://www.wired.com/magazine/2011/01/ff_lottery/</a>
My friend once went to a concert where entry cost "5 scratch cards" – there were about 150 people in attendance. I always wondered how the concert organisers did…
"spend just $1 and be rewarded in prizes that are worth exponentially more"<p>Any exponent of 1 is 1. So you wouldn't be able to win anything 'more' than that at all. Exponentially.
I wonder if there's any sort of somewhat even distribution to the winning tickets. If it's entirely random, there's shouldn't be. However, I knew a guy who worked at a gas station and he'd watch whenever people bought a bunch of tickets. If they scratched them off right there and didn't win anything, he'd buy the next few tickets. I believe he spent about $50-$100/week, but regularly won about $150/week.
>But wouldn’t it be great if you could just on a whim plop down $1 and buy a ticket that changed your life?<p>Aside from the monetary loss this might not even be a good thing to <i>dream about.</i> Consider <a href="http://lesswrong.com/lw/hl/lotteries_a_waste_of_hope/" rel="nofollow">http://lesswrong.com/lw/hl/lotteries_a_waste_of_hope/</a>.
Just out of curiosity, does anyone know they do it at the power ball? I know the system shuts down long before drawing, but what else do they do? Some sort of DB dump and lock it in the safe or something? What are chances that an employee leaves a virus that randomly insert a row with winning numbers after being drawn?
It would have been interesting to see him continue the investing with the $41 for a second round. If you go into it already willing to lose $100, reinvesting the winnings gives you more chances to win that big prize.
I'm always amused that when they list the overall odds of "winning", they include the odds of just getting your money back ($1 prize on a ticket that cost $1), which isn't "winning" at all in my book.