
I am a statistician and I buy lottery tickets - olalonde
http://simplexify.net/blog/2012/5/6/i-am-a-statistician-and-i-buy-lottery-tickets.html
======
brianwillis
Looking back, there seems to be a correlation between the times in my life
when I've bought lottery tickets, and the times in my life when I've felt
hopeless.

If I ever feel trapped by circumstances, depressed, lost, or I don't have
optimism for the future, the less logical part of my brain will somehow
rationalise the remote chance of winning millions as a perfectly justified
excuse for buying a ticket. The author of this piece is right about how
lottery tickets buy you a sense of hope, and prompt you to envision your life
being better.

So these days I see it as a sign that something in my life needs to change
when I take an active interest in this week's Powerball prizes. It's become a
kind of signalling mechanism for my subconscious.

~~~
muppetman
That's a very interesting view point/experience. For me, it's been the
opposite. If I'm really happy, feel a bit like I'm on top of my fiances for
this fortnight, I'll "splash out" and buy a Powerball ticket.

If I'm down, the idea of giving away money on such a silly endeavour seems
stupid.

Anyway, here's hoping you don't buy too many powerball tickets in the
immediate future!

~~~
Evbn
Conspicuous consumption.

------
vibrunazo
I had a statistics professor at college who were addicted to gaming. There
were stories about him losing a lot of money, car, job and wife because of his
addiction. I thought it were just a joke, you know, statistics professor
addicted to lottery? Duh, I wouldn't fall for that. Until one day, to
demonstrate that a specific class of combinations were too rare, he challenged
a girl in the first row that if she rolled a dice x times she wouldn't get
that kind of result. He was so confident that he told us he would pass us all
in the test if she did. Well, she did. He did keep his word and passed us. Did
I mention he was a phd?

That thought me a huge lesson about argument of authority. And about the
quality of college graduates in Brazil.

~~~
shrikant
Interesting you should say that.

Richard Feynman on education in Brazil: <http://v.cx/2010/04/feynman-brazil-
education>

..and the associated HN discussion:
<http://news.ycombinator.com/item?id=2483976>

~~~
jere
I loved Surely You're Joking Mr. Feynman! But to be fair, it was written
nearly 30 years ago. I would hope things have gotten better since then.

~~~
outworlder
Not really, at least, not consistently.

"Thus, it must be possible for some people to work their way through the
system, bad as it is."

It is possible.

When my young brother asked me about how electrical generators worked (which
is, by itself, an unusual question), I had an idea. I hooked up a DC motor to
a LED and started cranking it, and he could see the LED lighting up, however
faintly. Only then I tried to explain roughly how it worked - that little
demonstration kept him interested. And he could explain it later, on his own
words.

He didn't grow up to be a scientist, but he thinks like one. I like to think
that those little 'scientific' experiments of our youth had something to do
with it.

------
lotto
I won the UK National Lottery jackpot as part of a syndicate. Two years later,
I won it again on my own.

The wins have had two effects on how I evaluate odds: first, so-called
'remote' probabilities I once found reassuring – _the odds of being hit by
lightning in your lifetime is 1 in 10,000_ or _the chances of being killed in
a train crash are 1 in 500,000_ – no longer have a calming effect. This can
make me both nervous and acutely risk-aware. Some people call this
introverted.

Second, the converse has also become true: so-called 'impossible' odds – the
chance of winning the National Lottery jackpot three times, for example – no
longer deter me from participating. This can make me both irrational and
actively risk-seeking. Some people call this extroverted.

Regardless of this dichotomy, the OP's point of view rings true for me: the
decision to play the lottery lies in entertainment value alone. It is unlikely
that I will win again. But it is hard to resist the questions hammered out in
lottery marketing campaigns. The ones designed to undermine rational
resistance to extraordinary odds: "What would you do if you _did_ win?" or,
more bluntly, "How would you spend it?"

It is harder still to resist simple cost-benefit analysis, which leaves the
same question I've had since the beginning: _is dreaming worth the cost of
entry?_ My answer is always the same:

You bet it is.

~~~
jrs235
Except the odds of you winning again are no less than any other person winning
since your previous wins are unrelated.

------
paulsutter
Insurance has an interesting comparison to lottery tickets. In a lottery
ticket, the expected return is usually about 50%. Which is exactly the same as
insurance (the premium is about double the expected payout).

Yet people regard insurance as prudent, and lottery tickets as foolish. Me
included (as long as its a risk you cant easily cover).

But our explanation, that "Lottery tickets are foolish because they have a
negative expected return" isn't exactly credible if we think insurance is a
good deal.

Any thoughts?

~~~
brazzy
The difference is that insurance is not about the expected return at all -
it's about managing risk. The "payout" from insurance is tied to events that
can happen _whether or not you have insurance_ , and which would ruin you
financially without it.

The expected payout from insurance is only relevant when the above does not
hold, i.e. you have enough liquid funds to cover the loss against which you're
insured. A good example are non-health-related travel insurances (e.g. against
cancellation expenses or baggage loss). Your argument is correct in these
cases - these insurances are a net loss and cover a risk that you could simply
bear. So you should not buy them.

~~~
aes256
Indeed. Also, most people are risk averse, so they are happy to purchase
insurance with an EV (expected value) equal to less than the premium simply to
avoid the gamble.

~~~
Evbn
Not indeed. Variance matters. Look at the hedge fund industry.

Expected return is insufficient if you can't recover from death to regress to
the mean. So yeah, zombies shouldn't buy insurance

------
jpdus
The real rational reason for buying lottery Tickets is unfortunately not
mentioned.. You may not think of expected return but of a Chance to move up a
bracket reg "Standard of Life" which would not be possible by other means. You
wont move down a bracket by buying lottery Tickets (prob not even on a long
term) - which makes it perfectly rational to play the lottery for some Kind of
people (in the "poorer bracket") in my opinion.

~~~
mrb
It does mention why he buys tickets: not for the expected return, but for the
pleasure of entertainment.

~~~
pbhjpbhj
Well it mentions why he 'says' he buys tickets.

> _The standard argument of people who think that lotto is for suckers is
> based on expected return. They are taught at school that a rational
> investment is one with an expected value greater than the price paid. I have
> some problems with this argument, but I’ve never really calculated it
> before, so let us consider the numbers._ //

This para to me says he's not really looked before at why he buys tickets,
he's certainly not calculated his expected returns even though - as he says -
he's a statistician. That seems a bit weird to me, like a mechanic that
doesn't check his own oil or something.

So I think he now has a reason to tell people why he buys tickets but that
perhaps before [and maybe still] there was some irrationality (humanity you
might call it) in there too.

> _I’ve also heard the belief that the lottery is a tax on poor people. I have
> a different view, that buying lottery tickets is perfectly rational for me._
> //

At the start he says this. And then, like others in this thread, says it's
about hope and dreams - that seems contradictory in some sense. It's about
hope beyond the mathematically expected financial return? The cost of doing
the lottery for me exceeds the entertainment value it provides but the draw of
the chance to "solve all my problems" is very strong.

Perhaps not a tax on the poor but a far less easily avoided irrational
expense?

Aside: I also like the way he presents his calculation of expected return as
if it's going to turn out that the lottery makes an ongoing loss and it's
going to show that he was acting rationally all along (although it wouldn't
show that of course because you have to have the argument first for the
behaviour to be rational, don't you; otherwise it just happens to be
coterminous with rational behaviour).

~~~
doesnt_know
You must not have got to the end of the article? He doesn't need to have ever
figured out the odds before when he was always just buying it for the
entertainment value.

 _> I think of it as a discretionary entertainment spend. I get literally
hours of enjoyment from fantasizing what I’d do if I won._

~~~
pbhjpbhj
> _You must not_ [...] //

I'm not sure which part you're responding to there.

If it's that he states the reason as you quote? A point being that he was
lured to buy tickets by some other more base desire, yes perhaps an irrational
feeling that he would win, but that for a person in his position the
admittance of that could be difficult, a personal cost of face.

Kinda like the old saying you buy Penthouse for the articles?

Pure speculation but then his side is self-promoted anecdote so I reckon it's
all even. Just shooting my mouth off though probably.

------
staunch
There is that Stanford math PhD that won four lotteries.
[http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-
the...](http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-the-luckiest-
woman-in-the-world/)

~~~
wilfra
That's really interesting. Seems pretty obvious she cheated in some way.

If something only happens once every 'quadrillion years' that's pretty much
evidence right there, but given all of the other suspicious things as
well...ya - I think there is basically no chance those were legit wins.

~~~
Evbn
There is a similar story of a Canadian or somewhere that cracked a weakness in
the mechanics of a scratch off game (Monty Hall paradox exploited in real
life!) for consistent average winnings.

And of course the famous MIT Blackjack team.

Of course, a lottery loves publicity, and they don't care which player wins,
so win-win.

------
WA
"The odds against winning the big prize are 45,379,619:1"

I have a hard time imagining how low these odds are but once my math professor
gave us an interesting analogy.

One person drives from Los Angeles to Las Vegas and throws a quarter out of
the window at any point in time.

You then follow this person along the same route. You win the grand price if
you manage to stop your car such that your front wheel stops at the exact same
position as the quarter (10cm tolerance).

This image made me never play the lottery.

~~~
gojomo
The imagery of this explanation adds to the lottery-aversion on a subconscious
level, as well: it reverses how a lottery is usually portrayed. Instead of
'only a dollar' entry cost and 'millions' if you win, this analogy associates
entry with a long and costly task (some or most of a cross-country drive) and
winning with a single quarter. Clever!

------
hdivider
Nice calculation, but it doesn't contradict the 'rational' argument at all.
Slightly disappointing: looking at the title and first paragraph I expected
some weird statistical wizardry on why the calculation of expected values is
fundamentally flawed somehow. (Which would be surprising, given that it's an
important mathematical tool in quantum mechanics (even though the formalism
there is different).)

Also, why pay for the privilege of imagining a better outcome? Imagination is
>free< and virtually unlimited, surely.

~~~
dchest
Exactly. I'm entertaining myself every time I release some software and
imagine that I'll sell millions of copies :)

~~~
MichaelApproved
That's not >free< You probably spent many hours writing that software.

~~~
dchest
No, the dreams are free, as I make software for a living anyway.

------
olalonde
This boils down to "expected utility != expected value". His expected utility
is positive despite the fact that buying lottery tickets does have a negative
financial expected value. So yes, buying lottery tickets is perfectly rational
_for him_.

~~~
aes256
Indeed, this is Von Neumann–Morgenstern rationality for anyone interested:
[http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern...](http://en.wikipedia.org/wiki/Von_Neumann%E2%80%93Morgenstern_utility_theorem)

~~~
olalonde
Thanks for the reference. I didn't know there was a specific term for that.

------
Ironballs
Kari Enqvist, a professor of cosmology, said something very insightful in an
interview about gambling in general:

"Insurances yield a peace of mind and lotteries yield dreams, the values of
which cannot be measured in mere terms of probabilities or money."

In my view, lottery tickets are not meant to be rationally justifiable, nor
should they be required to be. Yet, I don't fancy the idea of committing to
such vain pursuits comfortable at all, but I can understand people who act
upon their dreams, and will not berate those who do.

~~~
fcmk
Also, in Finland the state lottery redistributes the profit to good use. By
law the arts get 38.5%, sports 25%, science 17.5% and youth work 9%. 10% goes
to whatever the Ministry of Education decides that year. Whenever I play
lottery I think I'm partly giving money to charity and partly buying a dream.

~~~
Evbn
I bet you would be more effective donating directly to a worthwhile recipent
than running through layers of adminstrative overhead.

------
jimrandomh
Interesting that he claims this lottery has positive expected value, but I
don't think it's true. He forgot about income tax. This is one of the standard
tricks for making lotteries look better (or less bad) than they really are.
(The other common trick is paying an annuity instead of money, and advertising
its nominal value instead of its actual value, which is substantially greater.
This one doesn't seem to be doing that, though).

~~~
epo
In the UK, lottery winnings are tax-free and paid in a lump sum. It may be the
same in Australia.

------
andrevan
Funny that he started the article seeming like he was going to show using math
that the lottery was a good investment idea, when in fact it isn't according
to his own estimation.

As to the entertainment value of dreaming that you've won the lottery,
obviously nobody should be told they CAN'T enter. But what some call a dream I
call self-delusion. We have a pervasive idea in this country that we're all
going to become rich eventually and it's simply not true.

------
rvkennedy
The main thing to be learned from this post is that the “Super 7’s Oz Lotto”
is clearly a badly run lottery. If the expected return for a ticket is greater
than the price, this lottery is _losing money_ for the organizers.

Perhaps this explains the glum-looking face on their logo:
[https://media.tatts.com/images/lotto/tattersalls/site-
logo-t...](https://media.tatts.com/images/lotto/tattersalls/site-logo-
tattersalls.png)

~~~
megablast
The money is so big because it has rolled over, it has not been won for a
while.

------
andreasvc
It's fine to say I play the lottery because I like to be irrational, but in
that case it's a complete red herring to play the I-am-a-statistician card.

------
barefoot
I also have a background in statistics (to a degree) and gamble but prefer
deep OTM puts to powerball.

------
danmaz74
With cumulative jackpots, it is indeed possible that the expected returns on
some plays are a net positive. But if you just consider lotteries for what
they are - a form of entertainment - that doesn't make so much difference...

------
WalterBright
I would think it would be easier to calculate the payout ratio simply by
looking at how much the government kept of the lottery revenue, rather than by
calculating the odds.

------
EzGraphs
A mathematically friend who gambles a bit expressed it this way:

"Chances of winning - 1 in <some ridiculously high number> ...I'll play anyway
- somebody's got to win."

------
dennisgorelik
He forgot that lottery can be rigged.

He also forgot about paying taxes in case of winning lottery.

Not sure why he cannot dream about getting rich without playing lottery.

------
dhechols
> So why do I still buy lottery tickets? Definitely not for the expected
> monetary return on investment. I think of it as a discretionary
> entertainment spend. I get literally hours of enjoyment from fantasizing
> what I’d do if I won.

Why not spend it on hookers and blow instead? THINK OF ALL THE FUN YOU'LL
HAVE. :|

~~~
saraid216
...because hookers and blow are expensive and have a lower money-to-fun ratio?

And, honestly, I wouldn't actually have fun with hookers and blow. But that's
just me.

------
dimitar
An honest question: Why don't hedge funds buy lottery tickets?

~~~
gvb
Hedge funds are hedging against (sort of) specific bad things happening. To do
this, they buy into an investment that (hopefully ;-) has a [edit] positive
correlation to the "bad thing" they are hedging against so that, if the bad
thing messes up your primary investment, the hedge investment gains compensate
(some of) your losses.

Example: [http://money.stackexchange.com/questions/6473/where-
should-i...](http://money.stackexchange.com/questions/6473/where-should-i-
invest-to-hedge-against-the-stock-market-going-down)

Since winning the lottery is not correlated at all with something bad
happening to an investment firm's investments, it is a very poor hedge against
their investments failing to come through.

------
wilfra
Cliffs: he doesn't mind lighting money on fire because he thinks imagining
winning the lottery is fun.

~~~
MichaelApproved
He doesn't _think_ imagining winning the lottery is fun, it _actually is_ fun
for him. He's actually entertained and is comfortable spending money for a
little imaging and escapism.

What's wrong with that?

~~~
wilfra
Nothing is wrong with that. When I go to Las Vegas, I play craps for the same
reason. But I didn't make a massive blog post that implied I could beat craps,
get it on page 1 of HN and after 20,000 words and numerous graphs and tables
announce to the World that it's ok that I donate some money to Bellagio once a
year because it's my money and the waitresses are hot and it's fun. I wouldn't
do that because no amount of eloquent prose and statistical evidence is going
to change the fact that I just stated the blatantly obvious. That's why
everybody gambles.

~~~
saraid216
> get it on page 1 of HN

True fact: not all submissions to HN are by their authors.

------
JonnieCache
This is some really sophisticated trolling. Hats off.

/me grabs popcorn.

