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MegaMillions at $350m cash payout.

Discussion in 'Off Topic' started by ElSupreme, Mar 28, 2012.

  1. ElSupreme

    ElSupreme Model S 03182

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    At this level the expected value of a ticket it well over $2 (assuming 1 jackpot winner) and still above $1 if two people win. So would you consider purchasing tickets an 'investment'? Sure it is really high risk, but you have an expected return.
     
  2. Robert.Boston

    Robert.Boston Model S VIN P01536

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    It has a positive NPV, but that's not the complete analysis for individuals. Most people are risk averse. Having $1 for sure in my pocket, vs. having $350m* with a 1:176m probability doesn't always say "buy the ticket".

    To put it more starkly, would you put your life's savings into buying tickets? The most likely outcome, that you lose, puts you in a very bad position (no Model S!!!), versus a very small likelihood of your suddenly being fairly wealthy. Most people would choose to remain financially secure, rather than bet it all on thin odds of becoming rich.

    *The 359m cash option is taxable, so it's only about $215m after tax. You're buying tickets with after-tax dollars to win pre-tax dollars, so the expected after-tax value is only $1.23 currently.
     
  3. ElSupreme

    ElSupreme Model S 03182

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    With the smaller purses it ends up being a $1.41 value to a ticket. But realistically you have to hit the jackpot for a large investment to pay off. I was sort of poking fun a probability/statistics with this post. Sure they have a higher value than what they cost, but you are really still throwing half your money away. The other half is going to schools.

    I also think anything more than about $80M is the same to anyone winning the lottery. You can live a stupidly lavish lifestyle off just very basic/safe investments for pretty much forever. I personally think larger 1st and 2nd prizes would be better. But I guess the big payoff sells.

    I normally buy a few bucks worth when the cash payout is more than $175,711,536.
     
  4. JRod0802

    JRod0802 Member

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    Having $10,000 in savings (instead of $0) is a bigger personal difference to you than having $310,000 (instead of $300,000). So the first dollars in your savings have greater personal value than the last dollars.

    Put another way, if you had $5,000,000 in the bank, would you go double-or-nothing if the double was actually $11,000,000? Probably not because the difference in life style between 5 million and 11 million is low, but the difference in lifestyle between 5 million and $0 is high.
     
  5. JRod0802

    JRod0802 Member

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    At 1.23X expected payout, wouldn't that make this a good investment for Warren Buffet (or anyone else that can easily afford to lose)?
     
  6. ElSupreme

    ElSupreme Model S 03182

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    #6 ElSupreme, Mar 28, 2012
    Last edited: Mar 28, 2012
  7. dpeilow

    dpeilow Moderator

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  8. daniel

    daniel Active Member

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    While I lived in Spain, the biggest lottery of the year was won by a ticket purchased at a booth located on a street I walked past a couple of times a week. Spain has a weekly lottery run by the Spanish National Blind People's Organization, ONCE (Organizacion Nacional de Ciegos Espanoles).

    Digression: in Spanish, "once" means "eleven" and when I first arrived, I wondered what all these booths on the street labeled, in Spanish, "eleven" were all about. I finally went up to one and asked.

    You don't pick numbers. There's just tickets, and you buy them. They come in large sheets and you can buy a whole sheet, or just one. I figure that when you buy a lottery ticket, what you're really buying is dreams: You get to dream about what you'll do if you win. So the farther away the drawing is, the more the ticket is worth, because you get to dream for longer. But two tickets are worth no more than one, because you still get the same amount of time to dream. With weekly lotteries, you mostly only get six days or less to dream. But they have a really big one once a year that goes on sale much earlier. A few months, IIRC. I did buy one once. ONCE is a good organization, AFAIK, so I didn't mind giving them the equivalent of about $5. I didn't win, of course, but for a few months I got to dream about what I'd do with all that money. I forget now, but I think it was something like $50 million. It's the only time I've bought a lottery ticket. I have no regrets over the $5, it was kind of fun, but I also have no interest in doing it again.

    On a separate line of thought: When figuring the "value" of a ticket, do you take into account the inevitable threats on your life from crackpots, attempts to kidnap your loved ones, bags of mail from people with inventions they want you to bankroll, possible abuse of your kids by schoolmates, or the need to move into a secure gated community and send your kids to a posh private school, etc. if you win? Or do you just figure that if you had $350,000,000 and an after-tax income of around a million, you'd want to move in among the equally-rich and hire bodyguards and secretaries anyway?
     
  9. richkae

    richkae VIN587

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    You are much better off with a $1 ticket with a 51% chance of winning $2
    That lets you "remove chance" by repeating thousands of times, and have a positive expected value.
    The expected value of the lottery is zero.
     
  10. daniel

    daniel Active Member

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    According to an article that turned up on my Yahoo email page, your chances of being struck by lightning are 1:280,000. Your chances of winning this lottery's jackpot are 1:176,000,000. Makes you think! There are 628 victims of lightning strikes for every MM lottery jackpot winner.

    The "value" of a lottery ticket is that you get to dream about what you'd do with all that money. So a hundred tickets have the same value as one. And an active imagination is worth as much as a lottery ticket. I can dream that Catherine Zeta Jones will leave her husband and marry me, and I don't have to buy a lottery ticket.

    Buying one ticket is understandable: One dollar is a minuscule amount of money unless you are destitute, and the dreams of wealth may distract you from real problems for a while. Buying two tickets makes absolutely no sense at all because the dreaming potential is unchanged, and your actual chances of winning are still as near zero as makes no difference.
     
  11. JRod0802

    JRod0802 Member

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    While I agree with what you say, I can imagine many people responding:
    "Except with two tickets the chance of your dream coming true is twice as much!"
    I know that statement doesn't make sense to me or you, but I'm sure it does make sense to all the people buying more than one ticket.

    I've always hated that statistic. In some places on planet Earth the chances are much higher than others. I bet my chances of being struck by lightening are much lower.

    I don't live in a rural area (which matters because of the lack of tall buildings near by).
    I don't walk in open fields when there's a lighten storm above (some people might get caught in one, but based on my work and what I do, I wouldn't).
    I experience less lightening storms per year than the average person (I kind of made that up, but it's certainly true for some people).

    Some people, based on their lifestyle and location might have a 1:10,000 chance of being hit by lightening. Others might have a 1:1,000,000,000 chance of being hit. It's a loaded statistic, if there is such a thing.

    The lottery, on the other hand, really is random. No matter your lifestyle or location, you could win.
     
  12. ElSupreme

    ElSupreme Model S 03182

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    But the "Except ..." statement is 100% factually correct. If I buy a second ticket I have exactly doubled (assuming I don't buy the same numbers) my chances of winning. Granted you chances are still near zero, they are still exactly doubled.

    I am not saying those people are correct, or you are wrong. EVERYONE is throwing their money away in the lottery ... EXCEPT those select people who actually win.

    With it probably being over a $400M cash payout by Fridays draw I wanted to point out that the expected value of a ticket (even after taxes) will probably be over the cost to buy one. Sure I am not dumping my Model S money to play the lotto. But it brings up a disconnect between real life and theory. I find it very interesting. And well I will probably play $20 bucks worth, and eat at home one extra night.
     
  13. drees

    drees Active Member

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    Bought $20 worth of tickets on the way to work today. One does have to figure that the jackpot will be split among multiple winners thus lowering your actual return - seems like big jackpots like this have multiple winners more often than not.
     
  14. daniel

    daniel Active Member

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    I never denied that two tickets have double the chance of winning. I said that the chance is still as near zero as makes no difference, and that the REAL "value" is in the dreaming, which you can do exactly as well with just one ticket as with twenty.

    I'm going to do an experiment. I'm going to pick numbers, but not buy the ticket. Then I'll see if I would have won. If I do pick the winning numbers, I'll be very unhappy that I didn't buy the ticket. If I don't pick winning numbers I'll be glad I saved my dollar. First, though, I have to visit their site because I don't even know how many numbers, in what range, to pick.

    Okay, I decided to use their random number generator and picked the middle of the five they offered me. My number that I'm not going to buy is: 15 19 28 50 55 46. ... No, wait, that's a bad test, because if I did buy a ticket and let the machine pick my number, it would not be this number. So I will pick my own numbers:

    56 8 7 52 6 4.

    If this number wins, I'll kick myself. If not, I'll know I made the right choice in not buying a ticket.

    Of course there's this also: If I won the jackpot (and who's interested in anything less?) I'd have to collect my prize in Olympia. (I live in WA.) I'd have to drive to the airport and fly to SeaTac and then take a cab. (I don't drive that far if there's a plane.) My chances of being killed in an auto or plane crash on the way to collect would probably be greater than my chances of winning in the first place.

    I'll stick to dreaming that Catherine Zeta Jones sees my avatar on this web site and falls for me. I don't need a lottery ticket for that.
     
  15. ElSupreme

    ElSupreme Model S 03182

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    Damn! I thought for sure I would have won. :cursing:



    :redface:
     
  16. daniel

    daniel Active Member

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    As predicted, the numbers I picked would have won nothing. I'm glad I did this, though, because if I hadn't picked any numbers, I never would have known for sure. And since I didn't actually buy a ticket, it cost me nothing. :)
     

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