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?"
What if you told the person this: "What if you flipped a coin and it had come up 3 heads in a row. Is it more likely that it'll come up heads again? Well, what if you waited a minute before you flipped it again? What about an hour? 20 years? Would the odds go back to 50/50 then? At what point does the coin 'forget' its previous flips?"
I think putting it that way would help illustrate the absurdity of that way of thinking.
As an aside, I think if I flipped a coin 100 times and it was heads all 100 times, I would be willing to make a big bet on the 101st flip being heads. The odds of getting 100 heads in a row is so much smaller than the odds that something is wrong with the system (the coin is weighted, there's some sleight of hand going on, etc).
This probably makes people very susceptible to ascribing properties to things that can't have them: "hot" slot machines, "lucky" dice, and so on.
"This technology is going to disrupt (really big co) and with only 1% of their market I'll be a zillionaire."
"The proprietary use of carefully designed magnetic fields on the water actually turn it into fuel which allows us to generate power too cheap to measure."
"I have done all the homework I need to do before the weekend is over."
(As long as you're working with infinite money, infinite time and you're playing against a casino willing to take bets approaching infinity)
Someone's gotta win! And if you don't buy the ticket, you are guaranteed not to win!
Fair disclosure: I buy lotto tickets :)
EG lottery profits go to support additional money for public schools.
This is all after a 16% operating / administrative cost, of course, which amounted to ~$4.83b in California alone in 2012 (2).
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.
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."
Part of my frustration with California's recent retroactive tax-raises, ostensibly for education, is borne out of examples like these.
(1) http://www.nytimes.com/1988/10/04/us/california-educators-as...
(2) http://www.calwatchdog.com/2012/09/27/ca-lottery-states-cash...
This is all after a 16% operating / administrative cost,
of course, which amounted to ~$4.83b in California alone
in 2012.
You can see their audited financial statements online.[1]
In 2012, the total lottery expense was $4.4B, into the following categories:
3.6% to operating / administrative, 1.7% to game costs, 6.8% to retailer costs, 58.6% to prizes, and 29.7% went to education.
That 3.6% represents $143mm in total cost (not $4.8B). Of that, $63mm went to salaries, $47mm went to advertising, $6.4mm went to PR and POS, $13mm to 'other professional services', $8mm to depreciation, and $5mm to G&A.
[1] Warning! - 10mb PDF - http://static.www.calottery.com/~/media/Publications/Financi...
The problem is that the state constitution and politics makes it easy to get rid of revenue, but really hard to get it back. For instance consider Arnold Schwarzenegger, one of whose original goals was to drop the vehicle licensing fee from 2% of a car's worth to 0.65%. He got in office when times were good, he reduced that tax. Then times turned bad, and it was impossible to reverse that even though the state really couldn't afford it any more. This is about a $6 billion/year hole in our budget. That's on par with the recent tax increases.
Except that the vehicle licensing fee was part of our budget for decades. It was stable and reliable. Our recent tax increases are temporary. What do we do in the long run?
As it is quite easy to start spending but not stop.
> What do we do in the long run?
Cut spending. Deal with the actual issue: pensions. The vehicle licensing fee 'problem' is just a red herring.
The problem isn't finding enough "revenue", it's simply spending within their means.
In Denmark the fee is 180% of the car's worth... (sorry for OT)
"School leaders have complained for years that the state engages in a shell game; for every extra dollar generated by the lottery that goes to schools, a dollar is taken out of the state’s general-fund allocation to districts across the state.
The shell game — difficult to prove in a multibillion-dollar state budget — was briefly exposed in late 2001 when Ohio added Powerball to the lottery. The state estimated $40 million would go to schools from the new game, so lawmakers promptly reduced general-fund money for schools by $40 million."
http://www.dispatch.com/content/stories/local/2012/07/19/edu...
I can't say I understand how anyone would be more or less upset about taxes due to the fact that lottery money goes to schools.
It's why I am very hesitant to donate to my alma mater. I want to, but I know no matter what I tell them I want done with my donation, a little wizardry on the books and they can send it wherever they please.
I just write a check directly to the organization... Or send pizza!
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.
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).
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.
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.
A charity approaches a bar with a box of tickets with the total of the ticket face value of X. The total prizes are in the range of X/4 to X/3. The bar buys the whole box for X/2 and keeps all of the proceeds.
Or, to put it another way:
There are 2000 tickets and each ticket costs $1. The bar buys the whole box for $1000, which goes directly to the charity. The total prizes in the box is $500. The bar sells the tickets out bringing in $2000, pays out $500 in winning tickets, recovers the $1000 paid to the charity and keeps the remaining $500 as profit. Then they call up the charity for another box.
Most of the boxes come with displays that list out the various prizes and most places will cross out the big ones when they're paid out... mostly so they employees can keep track and buy out the box when there's a favorable amount of big tickets left.
By buying out the last portions of tickets it prevents much of the good will the event was supposed to generate.
Knowing this strategy I would not run an instant raffle, second if for case the raffle type was not under my control I would make it clear that such strategies by volunteers would nto be allowed. An Volunteer who went ahead with the strategy after being told that it reduced the potential gain of the event would not be worth retaining.
Further if the ruse is revealed the general sale of all charity lottery tickets will define because it could be assumed that it is rigged in favour of the house.
The tickets have recently been changed with a new feature a barcode which allows the ticket to be cashed at any store that sells lottery products.
One way the charity itself could do that is by using its own account to "buy" the rest of the tickets. If someone else does it from their own pocket, then they have a guaranteed winner on their hands, but they aren't stealing from the charity -- merely using insider information to get a better deal than the rest of the players, and not returning the profits from this information back to the charity.
Of course, in a way this is cheating. The lottery issuer has more information than the players. But if it's for a good cause, then I guess it's fine :)
http://www.nydailynews.com/news/crime/mit-students-scammed-m...
Gambling has a negative, random payoff.
Investing to me is more about mindset and the manner in which you deploy capital for a return, and how much you are relying upon luck, guesswork, and chance.
In general, over the long term, investing makes money.
In general, over the long term, gambling loses money.
In other words: a lottery that you at least have your money back.
>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.
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.
Of course, in many jurisdictions, the concert organisers probably would be liable for sales / income tax for the scratch cards, but perhaps they believed they had less risk of legal consequences for not counting this as income.
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%.
Any exponent of 1 is 1. So you wouldn't be able to win anything 'more' than that at all. Exponentially.
(And remember, any non-unitless quantity will be 1 in some units, nothing special about $1).
Instead, consider the $1 to be 100 cents. (Do you think 40 degrees is 'twice as hot' as 20 degrees?) A matter of scale and perspective.
But unless you're already rich enough to qualify as an 'accredited investor', there are legal barriers to investing in private companies
Such irrational paternalism is insane.
The risks of startup investment are murky and subject to manipulation. People can rip off other people. Some of the laws are there to protect people's retirement savings from investment scammers.
(Whether those laws are effective or not is a debate I'm not qualified to have.)
http://www.dailymail.co.uk/news/article-2023514/Joan-R-Ginth...
First off a lot of people have won once so you need to know how many winners there where and how much they spent to get odds of a second win. Total ticket sales are ~$78 billion assuming 1 winner per 50 million spent that's ~1,560 winners per year assuming they live another 40 years that's 62,000 people that have one once alive at any one time. So now you figure how many tickets do winners buy per year? Call it 5,000$ so now each year there is around 300 million spent by lotto winners on tickets. So, you would expect ~6 people to win a second time each year.
But, this is where behavior's may really get out of whack. Of those 6 you would expect people to think they where destined to win. Let's say 1 person per year now spends 1/3 of there money on the lotto. As the payouts tends to be ~1/2th of ticket sales (jackpot's are around 1/4 but I assume non jackpot wins are rolled back in). They would then have a ~1/6 chance of a third win and a 1/36 chance of a second win. Of course that's just looking at winners for one year so around once every 20 years someone should win 4 times in a row.
If it is, the variance at least (if not the expected return) could be different if the tickets were purchased in 100 different places.
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?
"the lottery is a tax for people bad at math." - some dude.
A common problem is that the people report only the good events and forget the bad strikes. Other problem is partial compensations: "I won +$50 and +$10$ and I only lost once -$30." really means "The firs week I won +$50. The second weak y lose -$40, but it not a lose because they come from the money I had won in the first weak. The third weak I won again +$10. I only was unlucky in the fourth weak because I lose -$30."
It's not voluntary lying. Lucky strikes are interesting anecdotes, unlucky strikes are expected and boring. And bad memory and "compensations" are normal human bias. So write down everything systematically, or it's not useful to make statistics.
Aside from the monetary loss this might not even be a good thing to dream about. Consider http://lesswrong.com/lw/hl/lotteries_a_waste_of_hope/.
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.
The upside is that this turned into a kind of state income tax on criminal income.
http://www.usatoday.com/story/news/2013/05/17/saturdays--550...
Skinner knows.
Its a cute diversion for most and one of those weird office group things.
http://www.investinged.com.nyud.net/100-invested-in-100-1-lo...
100 $1 lottery tickets = $100 bucks
scratching tickets = 15 mins
learning ROI and tending to a cramped hand = priceless
Would be interesting to see if the payouts lined up with the expected value as well.
It's Jonah Lehrer, but I doubt it's completely fabricated.
Also note that winning a $4 ticket will net you $6 :-) So the actual expected ROI is -64%