Author Topic: Standing in line to give away money  (Read 7680 times)

Sarita

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Standing in line to give away money
« on: November 20, 2014, 07:36:38 AM »
I walked into a stationery store in Grand Central Terminal this morning, and was startled when I encountered several people hunched over lottery cards, scratching.  I then heard weird whirring sounds and turned the corner to see an entire bank of cashiers, with rows of people standing behind each waiting to get their own lottery numbers/cards.

I had a brief flash of 'hey, should I get my own... $70 million is on the line' and then quickly shook myself awake.  And felt terribly sad for those people who do this on a weekly and daily basis.

GuitarStv

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Re: Standing in line to give away money
« Reply #1 on: November 20, 2014, 08:37:15 AM »
Ah . . . must be the time of the season to pay the stupid tax.

Adventine

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Re: Standing in line to give away money
« Reply #2 on: November 20, 2014, 10:23:09 AM »
Whenever the national lottery reaches a nice fat round number, like 100 or 200 million pesos, I start thinking about buying a ticket... But the insanity quickly passes and I continue with my frugal ways :)

Beric01

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Re: Standing in line to give away money
« Reply #3 on: November 20, 2014, 12:39:54 PM »
Yup. I've already read a few articles on this. No matter how large the pot, when you factor in taxes and the possibility of multiple winners the expected value of a lottery ticket is always less than 1. So yes, it's just giving away money.

gimp

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Re: Standing in line to give away money
« Reply #4 on: November 20, 2014, 01:25:49 PM »
Yup. I've already read a few articles on this. No matter how large the pot, when you factor in taxes and the possibility of multiple winners the expected value of a lottery ticket is always less than 1. So yes, it's just giving away money.

Interestingly enough, there are exceptions to this. Certain games can be won in the long term, statistically. Some require knowledge of statistics due to faulty generating algorithms (eg, look at one of those scratchcards that list a bunch of numbers you're supposed to match, they might give hints as to what's under the scratch part); and some just with enough money (eg, if you buy 60% of the tickets, chances are you'll win over 60% of the pot considering various prize tiers.) The latter require very large purchases.

With that said, most of the exploitable ones get fixed relatively quickly (and also tend to require a degree in statistics to exploit); and most of the ones requiring bulk also get fixed to pay a little less. But it's been definitely known to happen with various state- and nation-run lotteries and games in the US and Canada.

Interestingly, I'm not aware of any casinos that have similar flaws in any of their games, unless you can count cards in blackjack. I dunno, maybe some have loss-leader penny slots where you can expect to win 50 cents a day on average, just to put more butts in chairs who then go buy a $10 meal or make the place look busier or whatever.

Now that we're done talking about that cool fact, yeah, you're on average not gonna win money in any lottery. Still, though, many people buy "the dream" of what they'll do with that $150 million post-tax chunk of change.

PS: If you're going to play a lottery where you pick numbers, try making many/most/all of your numbers above 30 or so. The winning numbers generated are fairly evenly distributed, but the numbers picked by people buying tickets tend to include things like birth dates (day of the month) and so on, so they're not evenly distributed. So if you ever happen to win, you're less likely to have to share your prize if you pick the less-often-picked numbers.

Gone Fishing

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Re: Standing in line to give away money
« Reply #5 on: November 20, 2014, 01:43:54 PM »
There is a lottery pool at the office.  Probably 4-5 people who buy every week.  Any small winnings get thrown back into more tickets.  I've never done it.  It would be interesting to know what the total amount spent was and what it would have been if it was invested in the S&P 500 instead. 

mak1277

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Re: Standing in line to give away money
« Reply #6 on: November 20, 2014, 03:05:00 PM »
Yup. I've already read a few articles on this. No matter how large the pot, when you factor in taxes and the possibility of multiple winners the expected value of a lottery ticket is always less than 1. So yes, it's just giving away money.

Do you know what the break-even point would be for, say, Powerball?  Odds against winning are 175 million to 1, so I've always considered it a non-terrible decision to start playing when it gets over $400 million. 

ioseftavi

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Re: Standing in line to give away money
« Reply #7 on: November 20, 2014, 03:12:59 PM »
Interestingly enough, there are exceptions to this. Certain games can be won in the long term, statistically. Some require knowledge of statistics due to faulty generating algorithms (eg, look at one of those scratchcards that list a bunch of numbers you're supposed to match, they might give hints as to what's under the scratch part); and some just with enough money (eg, if you buy 60% of the tickets, chances are you'll win over 60% of the pot considering various prize tiers.) The latter require very large purchases.

Interestingly, I'm not aware of any casinos that have similar flaws in any of their games, unless you can count cards in blackjack. I dunno, maybe some have loss-leader penny slots where you can expect to win 50 cents a day on average, just to put more butts in chairs who then go buy a $10 meal or make the place look busier or whatever.

Now that we're done talking about that cool fact, yeah, you're on average not gonna win money in any lottery. Still, though, many people buy "the dream" of what they'll do with that $150 million post-tax chunk of change.

PS: If you're going to play a lottery where you pick numbers, try making many/most/all of your numbers above 30 or so. The winning numbers generated are fairly evenly distributed, but the numbers picked by people buying tickets tend to include things like birth dates (day of the month) and so on, so they're not evenly distributed. So if you ever happen to win, you're less likely to have to share your prize if you pick the less-often-picked numbers.

I've read some of those studies!  I believe there was a statistician who discovered a flaw and won two sizable prizes as a result. 

The only casino game I'm aware of where a player can have an actual positive outcome is poker, because in that situation you're not competing against the house - you're competing against other players. 

So, over a large enough number of hands (particularly in limit poker), 1 better-than-average player at a table of 9 will win more than 1/9th of the winnings (i.e. more than their statistically "fair" share.  If winnings were distributed at random, they'd each get 1/9th on average).  However, that better-than-the-table-average player will also have to contend with the "rake" - the %age of each pot that goes back to the Casino for hosting the games. 

I've heard that a disciplined poker can usually expect to earn a small profit per hour over the long haul as such, but it's frequently something along the lines of 1-2 big blinds per hour.  Attractive for playing cards, but it's still a grind, and you have to contend with variance (i.e. you will earn 1-2 big blinds per hour over the long haul, not every single hour).

Chicken

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Re: Standing in line to give away money
« Reply #8 on: November 20, 2014, 03:26:59 PM »
Yup. I've already read a few articles on this. No matter how large the pot, when you factor in taxes and the possibility of multiple winners the expected value of a lottery ticket is always less than 1. So yes, it's just giving away money.

Do you know what the break-even point would be for, say, Powerball?  Odds against winning are 175 million to 1, so I've always considered it a non-terrible decision to start playing when it gets over $400 million.

The cash value of the jackpot isn't $400 million when it's listed as $400 million, it's more like 60%ish of that so $240 million.  Then you have to pay income taxes in the highest bracket  39.6% now you're down to 145 million, and depending on where you live state taxes which could knock off another 10% or so. 

Plus powerball costs $2 so it's not 175 million to one dollar spent but two.  So to have break even odds you'd need a prize at the end of $350 million.  A jackpot of $400 million as shown above doesn't even get you half way there so it would have to be a jackpot much closer to a billion dollars. 

This isn't even considering that you could end up having to split the jackpot.

Progressive slot machines do eventually hit a point that even though the odds are bad it's better than break even, but the lottery is practically impossible to have that happen.

Beric01

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Re: Standing in line to give away money
« Reply #9 on: November 20, 2014, 03:40:57 PM »
Yup. I've already read a few articles on this. No matter how large the pot, when you factor in taxes and the possibility of multiple winners the expected value of a lottery ticket is always less than 1. So yes, it's just giving away money.

Do you know what the break-even point would be for, say, Powerball?  Odds against winning are 175 million to 1, so I've always considered it a non-terrible decision to start playing when it gets over $400 million.

The cash value of the jackpot isn't $400 million when it's listed as $400 million, it's more like 60%ish of that so $240 million.  Then you have to pay income taxes in the highest bracket  39.6% now you're down to 145 million, and depending on where you live state taxes which could knock off another 10% or so. 

Plus powerball costs $2 so it's not 175 million to one dollar spent but two.  So to have break even odds you'd need a prize at the end of $350 million.  A jackpot of $400 million as shown above doesn't even get you half way there so it would have to be a jackpot much closer to a billion dollars. 

This isn't even considering that you could end up having to split the jackpot.

Progressive slot machines do eventually hit a point that even though the odds are bad it's better than break even, but the lottery is practically impossible to have that happen.

Yup - you got all the key points. Here's one article that goes into a bit more depth. Interestingly enough, due to taxes the annuity may actually be a better value. But then you have to factor the ROI in investing the lump sum. Regardless, due to taxes the EV will always be less than 1.

Zikoris

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Re: Standing in line to give away money
« Reply #10 on: November 20, 2014, 05:14:12 PM »
My department at work (small - seven people) buys group lottery tickets frequently. I think once a week, but I could be wrong. I've never done it, and frequently make fun of them.

My standard response is something like "I'd rather spend $2 on a really nice icy cold bottle of diet coke than an expensive slip of paper."

Funny thing happened last year - someone gave me a few tickets as a Christmas present. I had to get my boyfriend to show me how to check if I'd won since I had no clue.

Beric01

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Re: Standing in line to give away money
« Reply #11 on: November 20, 2014, 07:05:03 PM »
My department at work (small - seven people) buys group lottery tickets frequently. I think once a week, but I could be wrong. I've never done it, and frequently make fun of them.

My standard response is something like "I'd rather spend $2 on a really nice icy cold bottle of diet coke than an expensive slip of paper."

Funny thing happened last year - someone gave me a few tickets as a Christmas present. I had to get my boyfriend to show me how to check if I'd won since I had no clue.

Yeah, I actually got some as a Christmas gift last year from some people in my company. I could have had a 100 million ticket, but I never bothered to check. :P

FreeWheel

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Re: Standing in line to give away money
« Reply #12 on: November 25, 2014, 08:27:56 AM »
The cash value of the jackpot isn't $400 million when it's listed as $400 million, it's more like 60%ish of that so $240 million.  Then you have to pay income taxes in the highest bracket  39.6% now you're down to 145 million, and depending on where you live state taxes which could knock off another 10% or so. 

Is there really any difference between $400 million or $145 million? For most people I'm thinking there's not.

I never play lottery 'cause it's a big rip off. I once watched a lady spend $400 on scratch off tickets at one time. Yikes!

MrsPete

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Re: Standing in line to give away money
« Reply #13 on: November 25, 2014, 08:29:29 AM »
Ah . . . must be the time of the season to pay the stupid tax.
I've heard it called a tax on people who can't do math.

usmarine1975

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Re: Standing in line to give away money
« Reply #14 on: November 25, 2014, 08:42:37 AM »
I have on occasion spent a couple bucks on lottery tickets.  More frequently I have bought tear off's at the VA my family eats at.  For me the tear off's are more of a donation, if I Happen to win it's not a lot of money and the money I have spent isn't going to change my life.  I only spend my own cash on it.  For a time I kept track of my gambling habit and my returns.  I have since stopped as I don't really do it much.  Over a period of 2 to 3 years I gambled roughly $350.00.  My winnings put me at around $450.00.  So I was ahead.  I do not think this is the norm, I have family members that have spent a life time waiting for that big break and it never comes.

My opinion if you gamble for the fun and consider it to be entertainment in my mind it's no different than any other activity we spend money on.  But if you gamble just waiting for the big win, it's a problem.  I worked with Financial advisors that had planned out how they would invest their winnings if they hit the big one.  (yea didn't make sense to me)

In most cases the winners are better off to take the annuity, IMHO they already are at a disadvantage in not knowing how to handle money and the annuity gives them the money over time giving them a much better chance of keeping the money long term.  Yea we could do the long term if you invested the lump sum argument but most of these winners will not invest the proceeds.

slugline

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Re: Standing in line to give away money
« Reply #15 on: November 25, 2014, 09:01:13 AM »
For the sake of balanced reporting, I've long believed that every news story about a jackpot winner should also include information on the associated number of losers.

GuitarStv

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Re: Standing in line to give away money
« Reply #16 on: November 25, 2014, 09:09:35 AM »
For the sake of balanced reporting, I've long believed that every news story about a jackpot winner should also include information on the associated number of losers.

Agreed.  To drive home the point the reporting should be on a 1:1 basis.  So, you get 45 phone books of information with a single winner's story somewhere in the middle.

Gerard

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Re: Standing in line to give away money
« Reply #17 on: November 26, 2014, 08:47:26 PM »
Every time the prizes get big and the ads swamp the TV, I tell my kids how I won two bucks on the lottery last week. By not buying a ticket. Plus, I won ten minutes of free time by not having to go to the Hasty Market to buy the ticket.

Sometimes I share my winnings with them. That's popular.

hernandz

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Re: Standing in line to give away money
« Reply #18 on: November 29, 2014, 11:48:25 AM »
I once tore a dollar bill in half while describing to a coworker lottery odds. The horrified look was we'll worth the dollar. 






Yes, of course I taped it back. 

LennStar

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Re: Standing in line to give away money
« Reply #19 on: November 29, 2014, 12:14:30 PM »
I once tore a dollar bill in half while describing to a coworker lottery odds. The horrified look was we'll worth the dollar. 

Hahaha! Try burning the next time.
The faces are worth the little bill ;)

Also try this experiment: Give a 50$ note to somone.
Ask if they feel happy.
Then take it away and ask them again.
They will say no.

Why? They didnt lose anything in this 2 transactions.
But we overemphasize our loses over our winnings.

mjs111

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Re: Standing in line to give away money
« Reply #20 on: November 29, 2014, 09:27:25 PM »
My favorite explanation of the odds of winning a mega million lottery comes from Wait But Why's recent article on big numbers.  In the category of 10 to the eighth power:

108 (100 million) – Now we’re at the number of books ever published in human history (130 million), and at the top of this range, the estimated number of words a human being speaks in a lifetime (860 million). Also in this range are the odds of winning the really big lotteries. A recent Mega Millions lottery had 1-in-175,711,536 odds of winning. To put those chances in perspective, that’s about the number of seconds in six years. So it’s like knowing a hedgehog will sneeze once and only once in the next six years and putting your hard-earned money down on one particular second—say, the 36th second of 2:52am on March 19th, 2017—and only winning if the one sneeze happens exactly at that second. Don’t buy a Mega Millions ticket.

http://waitbutwhy.com/2014/11/1000000-grahams-number.html?doing_wp_cron=1417286415.4914491176605224609375

Mike

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Re: Standing in line to give away money
« Reply #21 on: November 30, 2014, 08:28:07 AM »
My opinion if you gamble for the fun and consider it to be entertainment in my mind it's no different than any other activity we spend money on.  But if you gamble just waiting for the big win, it's a problem.  I worked with Financial advisors that had planned out how they would invest their winnings if they hit the big one.  (yea didn't make sense to me)

I look at it the same way. The few times I've gone to a casino (less than 5 times in my life) I've looked at the $20-30 I spent as the entertainment cost. And a couple of those times were in Vegas, when we received more than what we spent, in free fancy drinks.