
A rogue Romanian economist legally gamed the lottery - gscott
https://thehustle.co/the-man-who-won-the-lottery-14-times
======
peterburkimsher
When I was in my final year of high school, Coca-cola was giving away an iPod
Nano to lucky winners who entered codes from plastic bottle caps or glass
bottle labels.

An iPod was given away once per day, except Monday, when they were given out
once per hour. I was competing against the rest of Switzerland. Each code had
to be entered on a website, earning 0, 5, 10, 20 or 50 points. You could then
choose how many points to gamble during the day/hour, and would hear at the
end of the day/hour whether you won.

The school had a bottle-cap recycling bin. Every day, I dug through that
looking for Coke caps. I volunteered for GAOS (a theatre group) and served
drinks outside their show, collecting many paper wrappers from glass bottles.

After collecting 1500 points, at 2 am on a Monday night, I struck with half my
points. And I failed! Shocked, I tried again at 3 am, risking all the
remaining points I'd saved up. And I won! I was the "lucky" recipient of a 2GB
iPod Nano.

Was it worth it? Yes, because I was under the employment age. I couldn't have
earned money legally, so my opportunity cost of time was low.

Earlier, in primary school, the classes bought Pizza Hut once a week. During a
promotion, their pizza boxes were printed with stars, which could be saved up
and exchanged for free pizza. So I went around and asked all the teachers for
their old boxes, cut out the stars, and got a second pizza every week!

If only it were that easy for me to find a job nowadays, despite a first-class
MEng in Electronic Systems Engineering and 4 years continuous relevant work
experience. Even trying to follow the rules and get all the qualifications
doesn't seem to work.

~~~
whamlastxmas
I had a very similar story for the launch of the Xbox 360. Mountain Dew was
auctioning one every 10 minutes with points. The obvious thing for me, though,
was that you could get a code when signing up with your email. I had my own
domain name at the time so I made a few hundred addresses and signed them all
up. I actually won two Xboxes but never got the second one. Either they saw it
was the same IP or caught on to what I was doing.

As a broke kid who has never won anything in his life, getting that Xbox
(right at launch no less) was AMAZING. I was literally dancing with excitement
which I don't think has ever happened since.

I sold it after a few months (was more of a PC gamer) and the hundreds that I
got for it was also awesome.

~~~
peterburkimsher
Selling it after was a good idea - I built my own iPod Video by fixing broken
iPods for friends, and didn't need the Nano in the end. After a few years I
gave it to a kid at church in Shenzhen.

However, I did find a way to convert UBS KeyClub points into cash. They're a
loyalty-card system similar to frequent flyer miles, and are worth 1 CHF per
point. When my friends visited Geneva, we planned to spend the points in the
Manora restaurant. But it was shut! After some thought, we found a store
willing to accept the points, bought a suitcase, and returned it immediately
for a cash refund. Then we had cash to buy a cheese fondue!

The exchange rate was even better when I could exchange points for iTunes
songs - the songs were worth 1.40 CHF. So that's how I collected a lot of
legal music in the early days of the iTunes Music Store.

~~~
Declanomous
Buying a cheese fondue is the most Swiss thing about this story. Cheese
fondues were a fad in the US before I was born, and I know a lot of people's
parent's who own them and use them maybe once every 5 years.

~~~
dlhavema
We still love fondue but mostly do chocolate at home...

The cheese ones are so yummy...

------
bryanlarsen
AFAICT, many jackpot style lotteries get an expected value (EV) above 1 when
the jackpots get big. They're set up so their average EV is 0.4 - 0.5, but
when a jackpot isn't won, the payout is under 0.1. String a bunch of those
together in a row, and the EV creeps above 1.0.

The calculations are easy to do. You do need to estimate the number of people
who buy the tickets so you can calculate the odds of sharing the jackpot. The
real number isn't publicly available, but newspapers often have numbers for
similar jackpots in the past.

As the article mentions, lotteries protect themselves by making it
logistically impossible for anybody to buy every ticket.

Here's the calculation for Canada's Lotto 6/49 in 2007:
[https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnO...](https://docs.google.com/spreadsheets/d/1vHOOdmobb3729ezH1BnOSZBGfmcF0rzQvgM18EVGOyo/edit?usp=sharing)

~~~
eximius
While true, expected value isn't necessarily a useful metric at that point.

If I have a one in a googol chance of winning a googolplex dollars, it doesn't
really matter that the expected value is going to be huge, I still won't win
anything because I'll be insolvent before the requisite number of tries to
have a reasonable chance of winning.

~~~
solotronics
thats why the people who do this work as a company and pool their resources

~~~
grkvlt
It's more that the people who do this do more than just buying a single ticket
with positive expected value - as described in the article.

------
IkmoIkmo
Seems kind of silly that they hyped it up as some kind of mathematical savant
genius story, when it seems like they just took a simple lottery system (x
numbers give y combinations, which sell for $1 per combination, for a total
payout of >$3y) where the logistics operation was the more impressive aspect.

~~~
opencl
From the linked article [1](Romanian language) it sounds like he had _claimed_
to have a special mathematical method to convince his early investors in
Romania but it was entirely made up. He was basically scamming them and had no
idea if they would actually win.

[1] [http://www.bursa.ro/industria-de-gambling-
iulie-1994-primul-...](http://www.bursa.ro/industria-de-gambling-
iulie-1994-primul-si-singurul-interviu-din-presa-romaneasca-stefan-
mandel-o...&s=print&sr=articol&id_articol=159657.html)

~~~
tk75x
> Meanwhile, Mandel paid himself ... $1.7m, and ... $14m. After overhead fees
> ($5.5m for the tickets, and $500k in expenses), he was left with a princely
> sum.

> Records show that he funneled this cash into the Pacific Basin Fund, a Hong
> Kong-based account managed by his brother-in-law. “What we calculated to be
> the reality has changed,” he wrote in a 1994 letter to investors. “It may
> not seem such a hot investment now.” After that, his investor updates went
> cold.

Proof that it was a scam all along.

------
gesman
Virginia Lottery director Ken Thorson pled to the press. “It is an opportunity
for the common man to spend a small sum for the possibility of a higher prize…
We never anticipated a group trying to make such a large purchase.”

Neither corporate lawyers nor government would ever acknowledge that loophole
in a business models does not necessarily equals to fraud.

~~~
kbenson
> Neither corporate lawyers nor government would ever acknowledge that
> loophole in a business models does not necessarily equals to fraud.

There's a lot of negations in there, I'm not sure if I'm reading it
incorrectly, or you have one too many, but is sounds like you're saying that
corporate lawyers and government will always maintain that a loophole in a
business model is fraud?

~~~
mamon
Exactly, because they want business model to benefit them, not customers.

Think about casinos banning players for counting cards in Black Jack: the only
reasonable strategy of playing the game is considered illegal.

In other words - you are welcome to play if you are bad at it, but once you
get good you are considered "fraud"

~~~
kbenson
Card counting is generally legal in the US as long as it's done with the mind,
and not an external device[1]. That said, it's usually against casino rules,
so they will make you leave if they suspect it, and possibly put your face on
the internal list they have of known card counters if you do it enough or win
enough.

1:
[https://en.wikipedia.org/wiki/Card_counting#Legal_status](https://en.wikipedia.org/wiki/Card_counting#Legal_status)

~~~
mamon
Ok, so maybe it is not against a federal law but still, making you leave the
casino because you are too good at the game you're playing seems weird.

~~~
kbenson
Eh. They've defined rules that say you can't count cards. If you do so, you
aren't playing by the rules, therefore you aren't allowed to play.

It's slightly odd to set rules that define what you can and can't do within
your own mind, but it's not out of bounds, just hard to _correctly_ enforce.
Lucky for casinos, they don't care about correctly enforcing, they just care
about making money. They're happy to let you count cards badly and lose money,
and they're happy to kick out people winning a lot, regardless of whether they
are actually breaking any rules.

It's sort of like cheating at playing Marco Polo. Sure, you're _capable_ of
opening your eyes when people can't see, but doing so is cheating, and calling
out people you suspect of cheating but can't prove can be somewhat common.

------
gwern
> His legacy lives on in US legislation: All 44 states that run lotteries have
> enacted laws preventing the profitable replication of Mandel’s strategy. In
> effect, this secures him a title as the first and last man to ever
> successfully game the lottery by buying every possible combination.

This doesn't seem true? He didn't buy all of the tickets in question, he only
bought most, and people have been running lottery syndicates under the same
logic which buy some or most tickets to ensure winning for centuries. Even
Voltaire ran one.

------
VectorLock
It seems strange to me that any lottery would ever let itself get an EV > 1.

~~~
Nasrudith
Well it also has to do oddly with 'fairness'. If the pool never grows from
failures they are more likely to suspect that it is 'rigged' against them
instead of merely being unlucky. But if the pool growth is fixed as either an
absolute or a percentage there is no incentive for the running agency to try
to make people lose.

So long as people keep buying in they really haven't lost anything even if the
build up turns it into a sure bet. And winning splitting solves the
equilibrium as well in a rather market allegorical way - if everyone puts
money into a sure bet the returns eventually diminish.

------
Beefin
It's interesting that Jefferson had thoughts about the original intention of
the lottery system. The logistics of buying each ticket seems nightmarish. I
wonder if this same gaming can be applied to other things

~~~
dfxm12
Look into arbitrage betting:
[https://en.wikipedia.org/wiki/Arbitrage_betting](https://en.wikipedia.org/wiki/Arbitrage_betting)

The basic idea is you bet on every possible outcome of a match (win/lose/draw)
with different bookies offering different odds that cover each other.

------
YayamiOmate
This was also possible in Poland last year or two years ago.

The string of failed top prizes was so big that cummulated prize was so big in
the end that buying tickets for all combinations was abt 2/3rds of the top
one.

This isn't gaming the system though its brute forcing it. And you are not
guaranteed a profit. You bet against other ppl hitting the jackpot. Excluding
oneself from the system, what is the chance that after N fails for top prize
N+1 will also fail? Earning this way is not so easy as just winning the
lottery.

------
narag
That brought some memories. I calculated that Spanish football _quiniela_ had
a little more than three million possible results. Since you could make multi-
result bets, only a few thousands _boletos_ were needed to make a sure win.
The rules required to manually fill the bets, but it was workable building a
robot.

Then the government, that was not happy of paying a percentage of the profits
to football teams, introduced loto and prizes plummeted.

------
goofingaround
>... he was a natural with numbers who spent every spare minute analyzing
theoretical probability papers written by the 13th-century mathematician
Leonardo Fibonacci.

Hope Pascal doesn’t read this.

------
jy1
Don't they split the prize if there are multiple winners? How can they ensure
+EV?

They could spend money to buy every combination but split the jackpot with
multiple winners? Am I missing something?

~~~
netsharc
I think they know it's still a gamble...

------
person_of_color
Similar to David Walsh, he set up MoNA with his profits.

------
ggm
_The investors — small business owners, machine operators, housekeepers, and
doctors — had been regaled with tales of riches, and promised participation in
up to 9 lottos per year. Yet, they’d only received a $1.4k return on their $4k
investment._

Folks: thats > 25% return on investment. I'm sorry but my sympathies with
these investors walked out the door at this point: If you can get 25% ROI,
stop looking for more.

~~~
delinka
Is that $1.4k _in addition_ to getting their $4k back? I always assume that
with lotto-based shenanigans, the "return" isn't actually a profit, but the
maximum of payouts after having bought all the chances their money could buy.
I'll spend $20 on tickets for a large jackpot, and I'll will $2 on occasion -
that's not a "10% return" but a "10% refund," and I'd expect a non-finance
journalist to get that wrong.

~~~
ggm
Oh I totally misread it (or read it the other way). If its a loss of 3/4 of
their investment, thats a poor investment indeed.

