$425 MILLION! With no winner last night, the Powerball lottery went to $425 million. Since the goal of this blog is to get money for free (or at least at a discount), we’re naturally thinking about whether or not it’s worth it to buy a few tickets.
Obviously, lotteries and other games of chance are, generally speaking, for suckers. They’re a tax on the poor, the math-deficient, and those with a short time horizon. The most famous exception is card counting in blackjack, and of course it’s possible to do okay in poker if you know what you’re doing. But even lotteries are not immune to the skilled. Last year, for example, Wired magazine ran an article about a man in Ontario who cracked the code of a scratch lottery game. This year it was revealed that some bright folks at MIT have been gaming the Massachusetts state lottery for years. And long ago, an Australian syndicate saw an opportunity and pounced on the Virginia State lottery.
All of which is to say, lotteries are meant to separate people from their money, but they are not 100% successful in doing so, which is why math geeks are known to take an interest in them from time to time. The next Powerball lottery will supposedly be worth $425 million, and the cash payout on that would be maybe two-thirds of that, say $280 million. If you lose a third to taxes, that leaves you with around $185 million. Your odds of winning on a $2 ticket are 1 in 176 million. Worth it?
Well, we still have more to consider. There are other prizes besides the grand prize, and you have to take these into account in determining the payout ratio. If, as some contend, certain numbers are more likely to be drawn, that can increase your odds of picking the right number. On the other hand, if you do win, you may not be the only winner. Bigger jackpots are more likely to have multiple winners, so that will reduce the expected value of a ticket.
Of course, you also have to consider the entertainment value of the ticket, not to mention the fact that regardless of how poor the odds are, this is as close as most of us will ever get to being centimillionaires.
In conclusion: though lotteries are to be shunned in almost all cases, massive jackpots like this change the odds sufficiently that you can at least consider buying a ticket or two without feeling too bad about burning your cash. As with an other aspect of personal finance, your mileage may vary.
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