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Massachusetts Lottery Broken
wiredog sends in a story about how knowledge of lottery rules and statistics has allowed opportunistic players in Massachusetts to spend hundreds of thousands of dollars on tickets while being assured of a massive payoff. Quoting:
"Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods — 'rolldown weeks' in gambling parlance — a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. ... Srivastava calculated that a gambler who bought 200,000 Cash WinFall tickets during four rolldown weeks in a year would win enough to cover the $1.6 million investment and earn a profit of $240,000 to $1.4 million — without ever winning the jackpot."
I thought the lottery was for those who were bad at math?
Don't know something? Look it up. Still don't know? Then ask.
1. Buy $100,000+ in lottery tickets ...but for real.
2. ???
3. Profit!
is good for them!
Great minds think alike; fools seldom differ.
Guys, you were all laughing when I bought the lottery tickets from Dogbert 50% off. He assured me that the odds of winning are just one one millionth less, but the price was 50%, count them full fifty percent off. You guys were taunting me for buying the previous day's tickets. Ha! Who is laughing now?
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
I see now. So as long as people have bad ideas about statistics it is ok. Believing some numbers are lucky is ok. Ignorant people saying things like "I haven't won and I've been playing for years, I have to win soon" is ok. Having people believe that God told them to buy a lottery ticket is ok. But when one someone actually has a chance to be correct about having a chance to win and make a profit then it isn't ok. Why don't the governments stop pretending. The lottery is intended on a tax for those who can't do math. And most of those people can't do math because the government schools failed to teach them. The government wants to use a lottery so it can get extra money from poor, uneducated people while pretending to have a progressive tax system which doesn't hurt the poor.
I used to code slot machines, hence staying anonymous. At some point, a different point for each bank of slots, the pay tables will reach over 100% payout if the jackpot is large enough. It was well known that by that point, professional gamblers and their buddies would squat on each machine tied to the progressive payout and play them until one of them hit the jackpot. The casinos didn't care, nor should they, because the overall pay table was still 95% or 90%. In other words they still made their money on the masses. But if you as an individual watch closely enough, in the short term you can make money.
Somewhat unrelated, there are also video poker machines that if played "perfectly" will earn you about $8 / hour statistically, although you may have to put in considerable hours before seeing the profit. Again it all depends on how the pay table is structured.
I'm all for freedom to live your life the way you want and all that. But for the *state* to openly exploit its citizens with these parasitic lotteries makes my stomach turn. Rather than raise taxes, let's exploit out poorest and dumbest citizens! Yea!!!
Serves them right. Fucking vampires.
SJW: Someone who has run out of real oppression, and has to fake it.
The point of the lottery is simply to make money for the state. There isn't any reason that it must be impossible to make money off of it unless that keeps the state from making money on it.
As long as there is at least the appearance of fairness(even assuming long odds), everything is Ok.
When people start believing the game is rigged (whether true or false) they
refuse to play anymore.
I'd rather the state grab it and put it to good use, rather than crooks grabbing it and putting it to uses that only benefit themselves.
For an ironic twist, if I was a governor, I'd create a lottery and put the proceeds into education :)
15-87,5% profit. without risk.
they made an economical decision how to invest the 1.6M - and it is a very lucrative investion.
Is that the lottery officials know full well that it's broke but they don't care.
Standard Operating Procedure: To make money, you gotta spend money. And those with a lot of money tend to make more money.
If you've got the 1.6 million to invest, chances are that you're *already* smart enough to know how to make more money with that money.
Unless of course, you're investing in Chinese Shell Companies set up to win investment before they implode.
If telephones are outlawed, then only outlaws will have telephones.
uk fruit machines work like that and they cheat you as well.
The word "Broken" in the title refers to what the lottery is, not what happened to it.
Thats what we did in Florida. All lottery funds are used for education.
Unfortunately they've cut *all* other funding sources for education... so sure since the late 80s the lottery has given over 10 billion to education... and the first few years were gravy... but now the lottery is the *only* funding source for education ...
Don't blame me, I voted for Kodos
"Broken" would mean the state was losing money. Your definition of "broken" needs fixed, you are jealous savvy people with enough money to invest can win at certain times
"A lottery agent who sells tickets to the group said Tong’s Fortunelot invested $200,000 at his store in May and won $280,000."
The $200,000 investment would presumably be after tax money. The 280,000 dollars in winnings would be taxable. At the Bush Tax Cut marginal rate of 35% that would leave 182,000, for a net loss of $18,000. Presumably the bettors must also be finding a way to game the tax system as well.
The big boys do this on the stock exchanges...
But that the game is fixed: the banks always win.
I just came here to post this. I'll. just post a link instead: Bright Futures
The best thing about UDP jokes is I don't care if you get them or not
Spoken like a true statist.
You can find statistical holes in casino games, too. The difference is, the state doesn't kick you out if you win too much.
While playing the lottery is for people bad at math, designing the lottery is for people good at math and if you are very good you let it be rigged in a non-obvious statistical sense. A very serious look needs to be had at those who designed this system.
So would we, the citizens of Massachusetts. Instead, the lottery commission has created thousands of high-paying, do-little jobs for government insiders. Payouts to the cities and towns aren't nearly what they should be. In other words, the state is the crook.
That's what was promised to happen in California. And it did. But within 2 years the state pulled back equal amounts of general funding that used to go to the schools.
Peter predicted that you would "deliberately forget" creation 2000 years ago...
15-87,5% profit. without risk.
they made an economical decision how to invest the 1.6M - and it is a very lucrative investion.
It is not without risk. If someone wins the jackpot for that drawing, they win exactly zero dollars. According to the article, that has happened once before. Additionally, the article mentions that if you buy $100,000 in tickets you have a 72% chance of winning more than $100,000. It is not guaranteed.
Do they get to keep it, or do they get it all taken back in Federal and state taxes? It has been pretty obvious that these games that accumulate value based on lack of previous winners will pay out larger amounts, but the taxes on the win and the chances of having to split the jackpot have to be taken into account when considering when to play. It is interesting that Mass came up with a way to increase the value of the lesser prizes, that seems a flawed design that would keep those prizes higher as long as the jackpot remains unclaimed. So poor a design that one wanders if it wasn't intentional to let the game designers have a chance to skim off some of the money.
I'm an American. I love this country and the freedoms that we used to have.
I was in one of the last high school classes in Florida to get Bright Futures, a scholarship that gives either 75% or 100% towards tuition in Florida schools.
They're cutting education, because, pffft, who needs it, right?
I found it interesting that the article states that there is "almost no chance of losing" if you buy enough tickets, but that's not a 100% guarantee. It will just be a matter of time before someone plays the odds and that unlikely event of losing money happens.
The state always makes money. It's just that there's a second player here who knows the system and has a good chance of winning too.
http://www.smbc-comics.com/index.php?db=comics&id=2320
It'd only be broken if the state lost money. Which it doesn't. Total payout is never more than the state collects. The only thing being trickled down is what it would dole out in winnings. As the article says, these people spending hundreds of thousands of dollars lost their shirts when one of the bulk sales happened to hit the jackpot and it wasn't them, starving the lower winnings of their cash.
Every jackpotting lottery reaches a point at which there is positive expectation in playing. Of couse in practice they it might never happen, but if the jackpot doesn't go off for long the payout starts to beat the odds.
The strange "pay the jackpot out on non-jackpot prizes instead of increasing forever" rule here makes it happen more often.
Though note this isn't a lock, they can lose money if too many people end up with winning tickets. Either because someone else actually hit the jackpot or because lots of people tried the buy hundreds of thousands of tickets at the same time.
Same here. What they don't tell you, however (at least in Michigan), is that those proceeds just offset what *would have* come from the general fund. In other words, the net gain for education is zero, and now your government has another $x to spend/waste from the general fund.
No, they win reduced amounts on their 3, 4, and 5 number tickets. The rollover weeks push the amounts OVER what they spend.
To scan 200,000 lottery tickets and sort out the winners.
This is only slightly different than playing PowerBall when the grand prize pool goes over $195,249,054. When the grand prize pool goes over that amount (based on the odds), your expected value for a $1 ticket goes over $1. Now, granted, even if you invested $100,000, you wouldn't be guaranteed of winning the grand prize and that's the difference with this game; the odds improve if the grand prize isn't won.
So essentially, I'm going to look for situations where my expected value is higher than the price of the ticket and place my bets when that happens.
If I used a sig over again, would anyone notice?
I'm all for freedom to live your life the way you want and all that. But for the *state* to openly exploit its citizens with these parasitic lotteries makes my stomach turn.
I'm all for the state allowing its citizens (and those from neighboring states) to voluntarily donate their money to pay for state services on the off-chance that those citizens will get a good payout, rather than have the state take money by force from everyone to pay for things that not everyone wants or uses.
It is hard to call someone doing something totally voluntarily as "being exploited", since all they would need to do to stop being exploited is ... not do it.
If you call this "exploitation", then you must also view the voluntary exchange of money for sex ("prostitution") as a serious crime, since you can argue that one side is exploiting the other.
In addition to the other ways in which you failed, here is how marginal tax rates work - aka progressive tax, aka tax brackets. If they filed as people instead of as companies, it would be about $50k taxes on $280k.
They didn't even make it into the 35% bracket, which starts at over $300k.
http://www.bargaineering.com/articles/federal-income-irs-tax-brackets.html
Yep, Ohio did the same thing, the first tight budget the state senate wrote a bill which automatically offset the money going into the education budget from the general fund by the amount being contributed by the lottery. Basically sell the population on the lottery as being good for education and then through accounting tricks use it as a slush fund for whatever projects they wanted to fund (money is fungible!)
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
"For an ironic twist, if I was a governor, I'd create a lottery and put the proceeds into education :)"
That's how it's sold (initially) in, like, all states. Yes, "for the children" does get a lot of evil legislation passed.
We know where leadership by an anti-intellectual "strongman" who scapegoats minorities and likes boisterous rallies goes
Unlike taxes, nobody forces anyone to play the lottery, OR to spend any specific amount of money doing so!
Your pessimistic view could just as easily be reversed to say, "The government wants to use a lottery so it can get additional funding without resorting to raising taxes to do so." The people most interested in having a (albeit very SMALL) shot at instant wealth are most likely the ones who have very little money to begin with, so obviously yes, you see more of the poor and the uneducated playing lotteries. At least it puts the ball squarely in THEIR court to decide how much money they wish to spend on such a thing, vs. having govt. come along and forcibly take money from their paychecks every week.
It is a bit different. The expected return relies on the laws of large numbers while this requires just a few hundred thousand spent to essentially guarantee a profit. The median return matters too...
And some high paying "jobs" for the few people or institutions that can afford to spend $100,000. Hey, maybe the Mass Gov should get in on that action. I bet they can afford $100,000.
This happened early in the days of the Irish national lottery, though it wasn't simply due to a roll-over and the people who purchased all of the tickets they could had to win the jackpot to turn a profit. I believe they succeeded though I can't remember the details!
while those who can't afford to risk several hundred thousand dollars get poorer. The lottery is already a regressive tax (e.g. it's more likely to take money from those who earn less, and it takes a higher percentage of their income) without such manipulation. Now, those who can risk several hundred thousand dollars are almost (but not quite) guaranteed a significant net gain 4x a year. Good job at once again screwing the masses Massachusetts lawmakers.
make imaginary.friends COUNT=100 VISIBLE=false
250 years ago, in France, Voltaire got rich.
Not from his massively popular plays and books, but by joining in with a lottery pool. They combined their cash, bought every number, and took advantage of the fact that the French national lottery was structured to pay out at greater than even odds.
Yep, most states have figured out that loophole by now, so ironically much of US public education is funded by the gullible and mathematically challenged.
Average payout per ticket is prize_fund/(ticket_price*tickets_sold). If the prize fund is larger than ticket_price*tickets_sold then on average everyone will gain. Sounds that these people have just worked out a way to make sure that they have a decent coverage so they eliminate the risk.
In this case, buy 39 thousand $2 tickets. Statistically one of them will win win the match 5 prize making you $19507. 48 will match 4 numbers winning you $800 each ($38400). and 823 will win you $26 for 3 numbers ($21407). This comes to $79314 winnings already from a stake of $78000. You then get a load of free games next week for matching 2 numbers, many of which will win $5. The problem is there's a non-trivial risk that none of those 39000 tickets will match 5 numbers (there's also a reasonable chance that 2 might match) so you need to increase your coverage. Presumably there's an amount you can buy so that you can be sure that a known number will match 5 whatever six numbers come up, but on average, all players make a profit.
So you only have to hit 5 numbers out of 6 to get the payout once it gets over 2M... But that means in order to have all combinations, don't you have to buy 46*45*44*43*42 = 164,490,480 different tickets? Then I suppose if you get lucky, you hit the other number that you picked as well... But it also depends on how many other people did the same thing, doesn't it?
How do you buy 100000 lottery tickets anyway?
Sorry, but gray text on gray background is making my eyes bleed.
"Srivastava calculated that a gambler who bought 200,000 Cash WinFall tickets during four rolldown weeks in a year would win enough to cover the $1.6 million investment and earn a profit of $240,000 to $1.4 million — without ever winning the jackpot.""
Srivastava has his own /. story on breaking the lotto, " the ticket could be cracked if you figured out the secret code"
http://science.slashdot.org/story/11/02/02/2345225/Statistician-Cracks-Code-For-Lottery-Tickets
Think this article also points out that a lot of store owners are multi-winners as they had
figured out the code for the game being played.
Is it ironic, or is it a built-in perverse incentive for the teachers to focus on... other areas of teaching, shall we say?
Man who leaps off cliff jumps to conclusion.
It isn't quite as simple as you put it for Powerball expected values. See: http://glodime.posterous.com/48001751
The article mentions that $1.6 million needs to be invested to guarantee a win.
No, that's for people who are bad at geography.
Seems to me the success of these groups/people is more just a function of having access to the amount of funds one needs in order to make this a profitable endeavor. Except for the primary discoverer of the game's quirk, it is just people with money/funds taking advantage. Much like any almost sure thing investment that requires a large amount of capital. Only those with the means can benefit. Similar to say investing in stocks, bonds, real estate (assuming a rising market and modicum of investment sense.) Joe Anybody might know of a "sure" thing, but unless he has the money or can convince someone to invest the money to his benefit, he won't be able to take advantage.
I based that on the per year numbers ages ago so obviously not very accurate, but not completely made up.
Oh, wow, the Lotto has changed a lot in the last 20 years: bi-weekly drawings, additional numbers. It looks like the odds are about even now!:
2000/(2003-1959)=45.45/year
(963-27)/( 2009-1988 )=44.57/year
I wonder how many of those 27 unclaimed tickets belonged to people struck by lightning. ;)
27 people with the Teela Brown luck gene, except it has the large magnitude but lacks a stable direction.
Thats what we did in Florida. All lottery funds are used for education.
ALL of them? So the people running the lottery don't even draw salaries? What do they do, use volunteer labor?
I'm all for freedom to live your life the way you want and all that. But for the *state* to openly exploit its citizens with these parasitic lotteries makes my stomach turn. Rather than raise taxes, let's exploit out poorest and dumbest citizens! Yea!!!
Still, it's worth noting that people do get rich with lottery. Of course it may actually ruin the life of some people who can't handle it (and nobody knows that beforehand), but that's beside the point.
The lottery isn't about making a profit. It's about either losing a negligible amount of money while using negligible amount of time, or winning a life-changing amount of money. And doing all this while getting entertained by the excitement. Any other methods of getting rich when poor aren't risk-free, they generally require risking what you have to get capital for starting a business, and of course require person to be business-savvy and lucky and ready to put in long hours at least untill the business takes off, which most people aren't.
There is a really big difference between risk and fucking stupid. Risk is investing in a business that you believe in, that you have written a business plan for, that you have good reason to believe will succeed, that you have realistic goals for, etc. Fucking stupid is "investing" in a lottery where the odds of you winning are statistically indistinguishable from the odds of you finding a suitcase full on money sitting on your front porch one day.
SJW: Someone who has run out of real oppression, and has to fake it.
Well (the case of the TFA notwithstanding), I agree that investing in lottery is about as wise as investing in beer (meaning the substance, not the business), except lottery probably has less risk of having adverse effects on one's life, than beer. Which reminds me, I think I'm all out of beer :-(
My interpretation of the article is that the presence of other players affects the expected value calculation.
If I used a sig over again, would anyone notice?
Absolutely correct. Also if you start buying a large amount of tickets you can significantly change the expected value calculation. So you are stuck with few opportunities to invest in a high variance investment with a positive expected value that you can expect never to reach in several lifetimes. There are also better returns for available (with lower variance) for people willing and able to invest enough money to see a payoff from Powerball. Also, I don't recall taxes being considered in the paper's analysis. That would only make the expected value worse.
After reading this, I have decided only to play when the Jackpot is over $350 Million (i.e. less than $5 dollars per year). Before, I played when it was at $200 Million or more using the same logic you were using.
My favorite quote from the article: "This would require hundreds of billions of dollars (which we don’t have) and hundreds of billions of opportunities to play Powerball when the jackpot is high. Even if we buy hundreds or thousands or even millions of tickets when the expectation is positive, we will probably die long before we are ahead." ...and you would still have a 1 in 20 (5%) chance of a negative return.