Why do Poor People Always Win The Lottery?

I got to thinking about this today after reading Hot Air’s post about how they had to pull a lottery game in the UK because the goal of the game was in reference to temperature; more specifically, negative numbers.  People were supposed to scratch the ticket and find if they had a lower number than the ticket number.  Once the numbers started getting into the negatives, people got confused:

“The Cool Cash game – launched on Monday – was taken out of shops yesterday after some players failed to grasp whether or not they had won.To qualify for a prize, users had to scratch away a window to reveal a temperature lower than the figure displayed on each card. As the game had a winter theme, the temperature was usually below freezing.

But the concept of comparing negative numbers proved too difficult for some. Camelot received dozens of complaints on the first day from players who could not understand how, for example, -5 is higher than -6.

The story quotes player Tina Farrell, 23:

I phoned Camelot and they fobbed me off with some story that -6 is higher – not lower – than -8 but I’m not having it.I think Camelot are giving people the wrong impression – the card doesn’t say to look for a colder or warmer temperature, it says to look for a higher or lower number. Six is a lower number than 8. Imagine how many people have been misled.

It’s slightly alarming to learn the average person on the street has difficulties with something as simple as negative numbers, though with 15.1m with poor numeracy perhaps Camelot is at fault for making it too complicated.”

Absolutely astonishing, but there is a story to be learned from it – clearly you’re not investing your money when playing the lottery and it’s not as much of a no brainer as you’d think it would be:

“In a 1999 survey by the Consumer Federation of America and financial services firm Primerica, 40% of Americans with incomes between $25,000 and $35,000 — and nearly one-half of respondents with an income of $15,000 to $25,000 — thought winning the lottery would give them their retirement nest egg. Overall, 27% of respondents said that their best chance to gain $500,000 in their lifetime is via a sweepstakes or lottery win, the survey said.”

That’s pretty sad considering that the chance of winning the Powerball is something like 1 in 140,000,000.  That is 0.0000007143% chance of winning, and think of it this way, if you buy 10,000 tickets, what does that improve your chances?  Well, move the decimal 4 places to the left and you’re now a hefty 0.0071428571% chance to strike it rich!  Buy $1,000,000 worth of tickets and you’re ALMOST to a 1% chance of winning (0.71428571%) – but you better make sure the pot is really big because it sure would be a waste of money if you had to dump $1,000,000 in lottery tickets, and it sure would be a shame to have to share that baby!

The DilbertBlog I ran across also made an interesting post about it also:

“I don’t want to accuse the Powerball people of fixing these lotteries. But I notice that the people who win are coincidentally the people who would be best for marketing future Powerball lotteries.”

Isn’t that how it is supposed to be?  It’s just called “marketing”.  What kind of chump is going to play the lottery if the only people that win it are rich people?  They’d accuse them of fixing it the OTHER way then.  Either way, I think it’s a pretty bad investment.  You’d be better off day-trading because then at least you have some chance of learning something.  In the lottery, it is 100% luck that your numbers get picked, and if you’re part of the 78% of the people that play the same family members birthdays each time, your odds of winning it all are dropping at the same rate you’re dropping the $1 per day to win the lottery.

Just as a point, instead of starting gambling at 18, if you want a nest egg, take that $1 per day and invest it instead, get 10% on your return per year, and retire like the long haul trucker at 64 with $262,000 you’ve built by NOT buying a lotto ticket…

Filed Under: Investing • Net Worth • Retirement • Uncategorized • advice • financial education