
How the Powerball rules were tweaked to make the game an even bigger ripoff - paradygm
http://www.latimes.com/business/hiltzik/la-fi-mh-powerball-rules-were-tweaked-20160112-column.html
======
jccalhoun
I found this statistic to be the most interesting: "In 1999, researchers at
Duke University reported that American households spent an average of $162 per
year on lottery tickets, but low-income households spent $289 and those with
less than $10,000 in income spent $597. Higher lottery purchases also were
associated with lower educational attainment and ethnic minorities."

I didn't find the fact that poorer people were more likely to play surprising
but just how much more. Nor would I have guessed that the overall average was
anywhere near $162 a year. I don't think I've spend that much on the lottery
in my 20+ years of being old enough to play the lottery.

~~~
mikestew
Part of it could be explained by how the lotteries are marketed. For example,
in the south side of Chicago (not exactly known for its manicured lawns and
gated communities) there was a billboard advertising the lottery: "Your ticket
to easy street." As more anecdotal data, it has been my observation (without
actually recording my finds in an organized manner) that one will see
considerably more lottery advertisements in low-income neighborhoods than in
more wealthy neighborhoods.

I'm not saying that advertising is _the_ explanation, but I'd be surprised to
find that it had no bearing at all. I also kind of wish that state governments
would, well, cut it out.

~~~
dgemm
I think that advertising is more likely an effect rather than a cause. The
lottery knows their market.

~~~
jrcii
It's probably a symbiotic relationship to some degree.

~~~
ben174
To a degree. But it would be silly to think Lotto would avoid marketing to a
higher income demographic if they thought there was a chance they could get
the same return from it. (Especially since the higher income demographic would
have more money to spend).

~~~
jbangert
But marketing to a higher income demographic is considerably more expensive
(per eyeball/impression). High income demographics are targeted with ads for
high-margin goods (cars, vacations, fashion goods), which have 3- to 5- digit
margins that can be used to advertise them, so there is more competition to
target ads towards wealthier people.

~~~
TheOtherHobbes
The higher income demo would rather gamble on Wall St, where the odds are much
better.

Sometimes they fund startups and hunt for unicorns.

------
Spooky23
I find it puzzling that the reaction to the lottery here on HN and among many
tech people I know is very different to say... fantasy sports betting.

With sports betting, not only do you have the prospect of wasting lots of
time, but you end up getting hooked to obsessive watching of ESPN and tracking
player stats, wasting lots of time. With lotto, I drop $2 and I'm done.

Yet the consensus seems to be the the millions of people buying lotto tickets
are all rubes, but the folks flouting the law and running bookmaking
operations on the internet are disrupting staid government regulation?

~~~
reverend_gonzo
With the lottery, you are expected to lose. I would the lottery in the same
box as slots, blackjack, and other games where you play against the house. The
house will always win. They spend a lot of money making sure the odds are in
their favor.

Fantasy sports is more like poker. Yes, it is a game of chance, but it is
primarily a game of skill. Maybe most people don't have enough skill to make a
difference, but given enough time, it can be acquired and you can have +EV.

Also, in poker and fantasy sports, you don't play against the house. They just
take their cut, and you play against other people.

Note, I'm excluding blackjack from skill-based mainly because you are playing
against the house, so its by their rules, and if you start winning, they'll
kick you out.

~~~
JoeAltmaier
Recent article posted here in HN shows that fantasy sports are _not_ a game of
skill, since a very few people win all the money (millions) and everybody else
loses. Because those few have written software to game the leagues. So
essentially just a money pit.

~~~
reverend_gonzo
What?

If very few people win all the money, it is most definitely a game of skill
and not a game of chance,

~~~
Spooky23
It's a zero sum game, so the applicability of your skill is relative to the
other players. The average bettor understands the mechanics of the bet and has
an intuitive understanding of what he is betting on. The 25th percentile
bettor is clueless or worse (I like green, go Jets!) and is operating a
reverse ATM.

Look at horse racing. At an off-season harness track where the purse is low
and horses all suck, the professional handicapper loses a lot of his edge, as
you never know when one horse is going to have a great day.

At the Belmont/Preakness/Travers/Kentucky Derby, a pro has a huge edge, as
they generally can call the winner with precision -- the pros are betting on
the finishing order via exacta bets. The crowd tries to picks the winning
horse, and in the event of a win, makes a lousy $0.50 on a $2 bet :)

~~~
Domenic_S
It's negative-sum, because of the rake.

------
dsp1234
(all of this is based on an idea from another poster in a different thread,
which I cannot find at the moment)

odds of winning: 1 in 292,200,000 (approx)

miles between LA and NYC: 2,800 (approx)

feet in a mile: 5,280

inches in a foot: 12

US dimes in an inch: 1.4 (approx)

2800 miles * 5280 feet * 12 inches * 1.4 dimes = 248,371,200 "dimes" between
LA and NYC

Summary:

Assume that someone drove from LA to NYC at stopped at any point of their
choosing along the way and threw a dime onto the ground. Starting from LA you
drive the same route, you have better odds of stopping your car at the exact
spot that that person dropped their dime than you do of winning this Jackpot.

With all the usual caveats about not being evenly distributed. I find this a
little easier to explain to people, such that they can reasonably understand
that it's not just "unlikely". Stuff like 10 times as likely to be hit by a
meteorite or other super rare events just doesn't seem to get the point across
as well. It's also easier to break it down into smaller pieces (throw dimes on
the ground and have people try to pick the right one, guess a mile marker just
in Colorado, etc)

~~~
ratsmack
People go to casino's every day and for every winner there is a looser, and in
the middle the house takes a cut. The Lottery is no different except that the
pot is a little larger as in the case of Powerball. It is entertainment pure
and simple, so if someone spends $200 per year entertaining themselves, I
can't see a problem with it. The -odds- are that someone is going to win, and
if you don't play at all, it is impossible to win.

~~~
dsp1234
I'm all for people having fun. I'm also all for people really understanding
their odds. In my experience, 'pick a dime' works better than 'struck by a
meteorite' in the limited time I've used the example. It seems that people
around me have a harder time grasping the wide gulf between abstract stuff
like "struck by lightning" vs "10 times as likely to be struck by a
meteorite", and something they can measure/visualize and break down in to
pieces.

The driving example is exactly the same as saying "put 250M dimes in a big
pot, then pick the exact one randomly". However, restating the problem, in a
way that breaks down naturally into individual units that people can grasp,
can help prevent it from becoming too abstract.

------
strictnein
For the curious, at the current jackpot level, with a cash lump sum payout of
$930 million, the expected average return on a $2 ticket is $3.50.

Unfortunately, that's before tax. After tax (45% for estimation purposes, this
will vary by state) it's $1.93. After taxes, the lump sum payout would need to
be around $970 million for it to average a $2 payout on a $2 ticket.

This doesn't include the possibility of you splitting the money with another
winner, but it also doesn't include the additional value of the money if you
invested it wisely, etc.

~~~
bryanlarsen
According to [1] the expected average return on a $2 ticket is $1.34. That's
accounting for the almost certain chance you'll have to share the prize, the
lump sum payout and taxes.

1: [http://fivethirtyeight.com/features/billion-dollar-
powerball...](http://fivethirtyeight.com/features/billion-dollar-powerball-
lottery/)

~~~
appleflaxen
> the almost certain chance you'll have to share the prize

What are you basing that on? I don't know what you mean by "almost certain",
but to me that phrase means at least 90%, and the chance of two people hitting
the powerball jackpot are substantially less.

~~~
mason240
During the last drawing they estimate that 75% of all possible numbers were
chosen. This time there will be even more tickets sold and the possibility of
doubling up is probably going to be higher than ever.

~~~
chrisparsons
Currently, they're projecting 85% of all combinations will have been purchased
for this upcoming drawing.

------
martinko
Saying the game is a bigger ripoff after odds change without discussing
changes to expected values and then going on to say:

> people don't understand odds

Is quite ironic.

------
guelo
As a kid in the 80s I wrote a program in Basic to randomly pick lottery
numbers and print them as fast as it could and stop when it matched a
predefined number.

Watching the program spin for hours disabused me of any notion that the
lottery could be won. It was a good way to get a feel for the ridiculous odds
involved and to this day I've never felt tempted to play the lottery.

~~~
clentaminator
I also like comparisons to the chances of other things happening as a way to
get a feel for the odds, for example you're (apparently) more likely to be
killed by a vending machine (1 in 112,000,000), become US president (1 in
10,000,000), or become an astronaut (1 in 12,000,000), than win the powerball.

Of course, just because your program never found the right numbers, doesn't
mean it couldn't. People do win...

~~~
dtparr
I'm curious about some of those numbers. In particular, it seems unlikely that
one is more likely to become US President than an astronaut given that we have
an order of magnitude more astronauts than presidents. Are the populations
different?

------
ceejayoz
"Dec. 23, 2015: A prominent lottery official who has run the Powerball game
since its inception was quietly removed from his 28-year post leading the
Multi-State Lottery Association after a jackpot-fixing scandal inside his
organization had spread, according to a document obtained by The Associated
Press."

[http://bigstory.ap.org/article/63f14f1932164832a7f571d0c1b4e...](http://bigstory.ap.org/article/63f14f1932164832a7f571d0c1b4e967/apnewsbreak-
key-lottery-leader-out-amid-jackpot-fixing-case)

Certainly interesting timing.

~~~
JoeAltmaier
Wow - they're handling this with kid gloves. No FBI escorting him handcuffed
from the building. Just an exit interview about "how they could improve
security". He stole millions!

~~~
scott_s
That's because the person fired has not been charged with a crime. Nor does it
seem anyone even suspects him of a crime. Strutt, who this article is about,
was the executive director of the lottery. Tipton, the security director, has
been _convicted_ of fraud. Tipton stole millions. There seems to be no
evidence that Strutt stole anything. (If there was, I assume they would have
also charged him.)

This is a typical "heads will roll" situation. Strutt was the leader, a
serious crime happened during his watch, and he's being replaced because of
it.

~~~
JoeAltmaier
Ok I see that now. But I wouldn't be so sure _nobody_ suspects him of a crime.
His good working buddy for years suddenly has millions of dollars, and he's
clueless?

~~~
scott_s
I have no idea what people suspect, but I'm confident in saying the
prosecutors don't have enough _evidence_. I also don't know if Tipton is "his
good working buddy for years". There are other possible narratives.

------
grandalf
_Experts aren 't entirely sure why "those who can least afford it play the
most," as German sociologists asked in a 2013 paper. The pessimistic, and
perhaps condescending, view is that the poor and less-educated don't have the
intellectual gifts to appraise the odds, but middle-class and rich people play
the lottery too._

This perspective is deeply flawed. If humans obeyed a risk adjusted rate of
return strategy and rationally discounted for the future, human behavior
across the board would be profoundly different. The lottery is only one
example of many.

Any portfolio of early stage startups is destined to perform worse than the
S&P500, as is any portfolio of series A startups. As is any portfolio of
lottery tickets... but there is always that winning ticket, that Facebook,
that Google.

There have been very few big homerun startups. The rest would fail to lift the
average above the S&P.

In an environment where the future seems fairly certain (poverty, affluence,
whatever) there is lots to be gained by rolling the dice and experiencing a
bit of risk. Lotto is less fun than a startup, but it scratches the same itch.
It lets you ride the emotional roller coaster and imagine the greatness that
will one day be yours.

Startups are a superior version of lotto because you get to be the CEO or the
CTO and someone invests their money to help you build a team and get traction,
etc. So your bet with destiny is being underwritten by others. You get
advisors, board members, and metrics, and essentially spread the thrill of the
tumbling balls across however long your runway lasts. The superiority of
startups is why young affluent people do them, and why poor people play lotto.

The urge to take on risk is what got humans onto ships, rockets, and
bathyspheres. It's the unique human ability to reason probabilistically and
take a leap, to undertake a calculated risk, and to engage in an exciting
dance with destiny.

For centuries and in pre-enlightenment times, people believed that all of life
was fated and that one's lot was destined from birth.

When we appreciate the emotional thrill of risk we start to see that it's part
of the glorious awakening of the human sprit birthed in the enlightenment.
When a dejected person puts his last quarter into a slot machine, we are not
seeing hopelessness, we are seeing hope in its most unfettered form. Even if
he loses that person will pick himself up and dust off and be ready to try
again, for fate is on his side. This stands in stark contrast with the
previous worldview in which the quarter would be saved and a prayer offered
up, which has far smaller odds of success than the slot machine.

~~~
tetraodonpuffer
I think it's more that if your life really sucks you are a lot more likely to
try to escape from it (even if the odds of it happening are pretty low), if
you have a comfortable middle class lifestyle you can debate pros/cons and
odds.

If you are on fire and there are a bunch of extinguishers for sale but only
one of them works, you are not going to debate the price/odds, you are going
to buy as many as you can afford to

~~~
mason240
I think the cause and effect are reversed. Having destructive financial habits
are going to cause you to have "life that sucks." Whether it's buying too many
lotto tickets, smoking, driving buzzed drunk on a regular basis, ect.

I grew up in low class area/family and saw that there is a pretty clear
difference between a lower class and middle class mindset.

~~~
mosquito242
I think it's reasonable to argue that it's less of an either/or and more of a
self-defeating cycle.

Lower class life -> desire to escape -> worse habits -> lower class life

and so on.

~~~
zardo
I think it has more to do with society being class segregated, and the habits
that could raise your class (or raise your chances of getting out anyways) are
not the social norms in the lower classes.

Then desire to escape step isn't even necessary.

------
ForHackernews
Counterpoint: The true value of a lotto ticket is dreaming about hitting the
jackpot. Bigger, less winnable jackpots increase the dream-value of the
tickets.

~~~
thearn4
This is true, for many people playing the lottery is a means to attach a
nonzero probability (no matter how small) to a fantasy.

For myself, I'm uncertain how much of a fantasy it would really be to suddenly
hold ~$1B (though I obviously wouldn't hesitate to try..). But have you ever
played a video game, then discover an exploit or cheat code to give you
everything you want, then realize how boring and pointless it became
relatively soon afterwards?

Part of me wonders if shuffling all the way across Maslow's hierarchy of needs
in the real world would have the same psychological effect. I think we crave a
certain comfortable level of struggle.

~~~
Retric
There is some research on this. Assuming you make ~75+k winning the lottery
would probably have minimal impact on your long term happiness. Sure, work is
a non issue, but you get a whole new set of concerns.

~~~
elif
I think that's probably true for most people, but not a given.

`Mo Money Mo Problems` is true if you use your money to buy things, celebrity,
social/political status. It's not true if you start an incubator with no
expected returns, start a charity, etc.

------
CIPHERSTONE
"Never tell me the odds!" -Han Solo

~~~
ctdonath
Odds are you're about 10x more likely to die while driving to buy the ticket
than you are of picking a winning one.

------
kaonashi
They did this so that the lottery overall was less of a regressive tax on the
poor. It's not a rip-off at all, it's actually much fairer. We desperately
need something similar with our tax code as a whole.

~~~
placeybordeaux
What do you mean?

~~~
theobon
My guess is that as the pot increases people of a higher income get
interested. I can see an argument that if the pot increases from $1M to $10M
in likelihood of someone that makes $100k/y buys a ticket will increase by
more than 10 times while someone that makes $10k/y wont. Part of it is the
hype and part the impact to your life being large enough to override reason.

It would be interesting to see if there are any studies that show that trend
and where it cuts off.

------
sleepychu
How on earth have they arrived at odds which aren't an integer result for a
lottery? [http://www.trbimg.com/img-56954025/turbine/la-fi-mh-
powerbal...](http://www.trbimg.com/img-56954025/turbine/la-fi-mh-powerball-
rules-were-tweaked-20160112-002/750/750x422)

~~~
scottmsul
Not only do you have match n numbers, you must also not match n+1, n+2, etc.,
otherwise you win a different prize.

------
bnegreve
> _Experts aren 't entirely sure why "those who can least afford it play the
> most,_

Is this that irrational?

With 1000 trials, probability of winning at least one time is 3*10^-6 which is
low.

But what are the odds of becoming a billionaire given that your annual income
is below $10,000?

~~~
pdabbadabba
Assuming that one's goal is to become a billionaire, _maybe_ Powerball is
rational for people with low incomes. But is that a rational goal to have?
Wouldn't a person be better off prioritizing more modest improvements to one's
finances through other strategies with a high probability of success?

That being said, not everything in life must be rational. If there are people
out there who get a lot out of dreaming of becoming a billionaire and playing
Powerball, I have no problem with it.

But I _do_ have a problem with governments praying on these aspirations to
raise money.

------
ck2
By the way, as of Wednesday morning, Powerball reports "only" 85% of all
number combinations have been sold.

So still a 15% chance no-one wins.

------
emehrkay
I spent almost 300k in that simulator and only won ~7k. I thought I'd hit big.
I still put up 2 bucks for tonight though :(

Anyway, the cheeky FAQ on the PowerBall site is worth money down the drain
[http://www.powerball.com/pb_contact.asp#odds](http://www.powerball.com/pb_contact.asp#odds)

------
georgecmu
Off-topic question:

Here's a past (yesterday's) submission:
[https://news.ycombinator.com/item?id=10891465](https://news.ycombinator.com/item?id=10891465)

Linked URLs are identical, so how did it pass the 'previously submitted'
filter?

------
mcintyre1994
This is interesting because the UK lottery made a very similar change, with
the same effect - higher odds of winning any prize, lower odds of winning.
They also doubled the entry price to £2.

They changed the numbers to choose from 1-49 to 1-59, and added a prize for
matching any 2 (apparently 1 in 10.3 odds) of a free lucky dip (ie another
play).

It'd be interesting to know the distribution of people's picks now - I know
that my parents use the same numbers they always have, all in the 1-49 range.
Obviously lucky dips are more fair, I'm not sure which is more common though.

------
jdmichal
It's mentioned that some states were looking at dropping Powerball because the
jackpots were won _too_ often and didn't grow big enough to generate
excitement. Maybe this points to the fact that people are playing -- and
paying -- for the excitement? After all, if your goal was to actually win the
jackpot, it seems like you'd be one of the ones playing every week. But there
obviously weren't enough of those people to keep the game going.

------
jfoutz
There will likely be a winner, or multiple winners today. If not, it'll be +EV
to play in the next drawing, and might be already.

It's $2 * 292M, $584M minimum payout, for the odds to be in your favor.
Expected payout is now up to $930 * (1 - 0.395), so $562M after federal taxes.
Depends on state taxes, and if the estimate is a little low, only about $20M
short this morning.

~~~
auntienomen
It's never positive EV, once you account for taxes and the odds of multiple
winners.

It may, of course, have positive utility.

~~~
jfoutz
Ah, the split. Yeah. seems like the jackpot went up $400M, so i'll guess
around that many tickets sold. each number has been sold around 1.4 times,
blowing the odds.

~~~
toast0
The ticket price is $2, so there's more room than you think.

------
mikestew
If someone finally wins, the best part will be a temporary moratorium on
people who think themselves clever telling me how I won't win. Yes, the odds
are clearly published and I can do basic math, but I bought a few tickets
anyway. Now shut up about it. Even NPR isn't immune, as evidenced while I
listened on the ride to work yesterday. YES, I KNOW!

------
tgb
So why didn't they decrease the odds even further? The change of a factor of
two or so doesn't seem like much and I don't see a real downside until it
actually gets to the point where everyone 'knows' that winning is actually
impossible since no one does it.

------
tribune
Larger jackpots will sell more tickets. When half the country is buying
tickets for a historic jackpot, Powerball (and therefore the States) will take
in much more money than if this same jackpot was split over several drawings.

------
corbinpage
Personally, I see the lottery as an opt-in tax on hope geared towards the
poor.

~~~
dmerrick
I've always thought of it as a tax on people who are bad at math.

