Hooray, we're figuring out all of the tricks to push people into "thinking myopically" and buying what we want them to buy.
Here are the triggers; here's how people make mistakes in buying decisions, and how to exploit that. Here's how to frame your sell (Get them to focus on loss! Remind them of their poverty!), here's how to get them to buy more tickets instead of just one.
Lottery tickets aren't too bad; they're harmless for most people buying them, there's a fun little kick of "what if...?", but (as the article points out) as revenue for the state, they are a regressive tax; poor people pay a much larger percentage of their income into lottery schemes than people who are better off, and of course some of them pay enough to really harm themselves, going for the "Hail Mary" solution to their money woes but just bleeding themselves slowly instead.
Winning isn't actually a positive result, either -- the article doesn't get into stats on attempted suicide, etc. for lottery winners, but they're not good.
Is there anyone out there using this kind of research to actually help people? Or to let people who're just playing a fun game, play it; but still protect the people who are grabbing at a false life preserver?
I wonder if the government could use some of the same marketing for income taxes to feel like they are fun and interesting rather than being such a negative experience. Something like 100 people each year never have to pay taxes again.
"Swedish National Society for Road Safety created a “speed camera lottery” in Stockholm. At select traffic spots, drivers would see a digital display of their speed, as measured by radar, and a camera would snap a picture of their license plate. If they were over the speed limit, they got a ticket in the mail. However, drivers who were at or under the limit were automatically entered into a lottery to win money at the end of each month. The amount of money depended on the speeders – their fines went into the prize fund. The results were impressive. Over three days (24,857 cars photographed), the average car’s drive-by speed went down from 32 kilometers an hour to 25 – a 22 percent reduction."
That's a great idea! Each year, they could choose some number of winners from everyone who gets their return in on time, with no corrections required.
They'd have to sort it carefully enough that it wouldn't be a loophole for abuse (e.g., if you win, could you be hired by a major corporation who will somehow funnel their entire worldwide revenue though you?), and to be sure a Zuck-level taxpayer doesn't win it, but then that'd be a huge motivation for people who do pay taxes to get their paperwork together in time.
Of course, simplifying US tax law would be even better -- "filing your tax" return could be trivial for most people, but it isn't -- but that's proved a hard nut to crack.
“It’s not an investment. It’s entertainment. For a very small amount of money you might change your life. For $2 you can spend the day dreaming about what you would do with half a billion dollars—half a billion dollars!”
You're not making a bet with negative expected value, you're purchasing an entertaining daydream to help you through your miserable day.
This is precisely the reason why I play. I play when I know the jackpot is very high, over $100 million. Maybe around 10 times in an entire year. That's $20. How much does pizza cost? or movies? $20 is not much, and when I buy, I day dream the fuck out of it, and not just for a day. I keep the ticket for a month long or so before I look at it.
Because although you can, you won't - probably because there's not 'news' every week about a billionaire randomly giving a person half his fortune. The lottery win happens to somebody, while the billionaire scenario doesn't.
If someone established a reality TV version of something like The Millionaire [http://en.wikipedia.org/wiki/The_Millionaire_(TV_series)] then I bet people would start having that sort of daydream. Perhaps such a show would even lead to a decline in lottery ticket purchases, since the get-rich daydream would be available from another source.
I think an important piece missing is the active vs passive decision making. When you purchase a ticket your are actively triggering the thought process.
In your scenario there would be a passive trigger that would dull the entertainment affect.
I wouldn't discount the little piece of paper with numbers on it.
My buddy Bob dreams and doesn't buy a ticket. His rationale: his chances of the winning ticket blowing down the street and into his open hand are microscopically different from his chance of buying the winning ticket.
Honestly, that could be it. Signalling isn't always about showing off -- many times it's just about signalling a willingness to belong. Even signalling a willingness to belong to an objectively undesirable group.
So it could be signalling that you're not "puttin on airs" by acting superior to those around you who play. Or it could be signalling that you legitimately like to belong to the group around you who play. Or it could be simply signalling that you don't take yourself (or $2) that seriously.
Pretty much. I hate it whenever someone calls the lottery an idiot tax, citing the odds of winning and ranting about how someone doesn't understand math. Yes, the odds are fantastically low, but so is the opportunity cost, and a lot of that cost ends up going to help fund schools and other good things.
When someone tells me they play the lottery for entertainment, I lose a serious amount of respect for them. There's being irrational, and then there's understanding exactly how your irrationality is being exploited and just going along with it!
The negative expected value in dollars is enough by itself, but the "how happy will I be?" calculations are even more depressingly bad. The utility of money is usually measured on a log scale, because your first thousand dollars does a lot more for your happiness than your first ten thousand. By that measure going from ten thousand dollars in the bank to ten million wouldn't make you a thousand times happier, it would make you twice as happy. At least until you get used to it (see: Hedonic treadmill [1]). There's a surprising number of bankruptcies caused by lottery winniners, too [1]. Also the whole stressed friendship thing.
So... yeah, playing the lottery gets you negative respect from me and I think that's justified.
When someone gets entertainment value from playing the lottery, is it really about the chance of winning multiplied by the amount of happiness the money would bring? Or does it have more to do with the excitement that comes with each drawing? (Similar to how I can enjoy watching a football season even if my team doesn't win the Super Bowl.)
I think it's more likely the latter, though I don't personally see the entertainment value of playing the lottery. I wouldn't lose respect for someone for having a hobby I don't share or understand, though.
You misunderstand what "play the lottery for entertainment" means. It very clearly does not mean play for the entertainment winning the lottery would bring. It means play for the entertainment of playing the lottery. Many people enjoy playing the lottery, though I am not one of them.
Putting down money and expecting to get less money back is irrational, unless you're rationally pursuing some higher goal (in the case of lotteries' education funds, more efficiently obtained by writing checks to the appropriate agencies as donations.)
Of course, there are worse things in life than being irrational, and a variety of human beings' irrational instincts form incredibly useful heuristics for long-term value maximization (on both individual and societal levels) which might otherwise be difficult to attain, given the limitations of the rational brain: love, patriotism, et cetera.
It sounds like the unpredictability of the results is something you value, perhaps because it's exciting. That's a pretty irrational thing to value, but not intrinsically harmful in small doses; people put down money for plenty of ridiculous forms of entertainment.
> Putting down money and expecting to get less money back is irrational, unless you're rationally pursuing some higher goal
Actually, economists assume that most people are not pursuing to maximize money, but to maximize their utility function instead. Granted, they also assume that most people are risk-averse as opposed to risk-loving, i.e. most would not risk 1 for a 50% chance of winning 2.0001. On the other hand, the economics of the lottery are such that the amount you pay (even if you play every day for your whole life) is quite negligible compared to all the money you will earn during your life; if you win, you will practically maximize the utility of a few very important things in life (earning more, and working less). I think it's rational to play the lottery.
From everything I see, money does not scale all that well with happiness. Thus, those dollars you spend now are almost certainly going to be more valuable to you (buck for buck) then the dollars you have when you are rich. So its not just the chance that is low, but the payoff is even lower.
My grandparents consider going to a casino entertainment, and expect to lose the money they go in with. It's fun, and sometimes they fund their next few trips there with the winnings.
Irrationality by definition is a big part of fun by the way.
It can be irrational if you're playing for fun!
I think there's some kind of a mistaken association between irrationality and "goodness" - like anything irrational is not good. That is what you are trying to argue against!
I think that you're misunderstanding the motives of some players.
I fully concede that some people play because they think they're going to win. They had a dream or some charlatan has convinced them that this is their lucky day to play. That kind of thinking is not rational.
People like me, exchange money for entertainment. It's no different than paying to see a movie or to listen to a streaming music service.
It's entertainment, not investment and it's not irrational.
The message isn't for people like you or me(I play too when the jackpot is some crazy value). It's for the poor & uneducated who think that by spending half of their month's salary on 350 lottery tickets gives them a better chance at winning.
I think you need to learn whether lottery is a vice in of itself, or a substitute for other vices. I know that in NYC, the lottery basically put the corner numbers rackets (and associated street crime) out of business.
I'm curious if the stereotypical old person wasn't spending a day a month at the casino, would they be drinking more? Sitting around not talking to anyone? Abusing drugs?
We also need to consider the reality of the situation... Is the lotto makin s material impact. People have vices... Sports betting is illegal in most places in the United States, but sports betting is pervasive.
I totally agree.
A more evident case is with the insurances: We also know that the expected value of buying insurance is negative for us; but we pay for reducing the variance of the money we lose.
In lottery, we pay to increase the variance of the money we win.
In fact, as mentioned, why not just keep an eye out for winning lottery tickets on the ground? Because you have an ~epsilon chance of getting a winning lottery ticket, and you also have an ~epsilon chance of finding a winning lottery ticket on the ground.
When the expected value is so definitively against you I guess it's implied that you're playing for variance. Maybe you also feel that you're playing for the entertainment value, which isn't subject to the same mathematical rationality.
I get that. When I play poker for 5 hours and come out even at the end of the night or slightly behind, I consider it worthwhile because I had fun for 5 hours.
If the utility function of money was superlinear (has a steeper slope the more you have) this would make sense.
But since you're a human being, I'm fairly confident that your utility function is sublinear (has a shallower slope the more you have). Playing for variance doesn't make sense in this case.
I'd say that utility of money is a sublinear functions only for small amounts of money. When you get into the range of "never having to work again" or "can build my own rocket company", then the utility of money can quickly become superlinear (c.f. the productivity of the team is more than the sum of productivity of individuals).
So...maybe I'm being nitpicky here, but I mention it b/c maybe I just don't understand...
They state in the article:
You will have to plunk down your $2 at least 86 million times. Williams...could have simply said the odds of winning ... were 1 in 175 million
It might cost you > $172MM, but aren't the odds 1 in 86 million? Or am I being obtuse?
There's a catch to that that not many consider: the likely number of winners, which divides the jackpot and reduces the expected value per-play. The number of likely winners increases with the number of tickets sold, which increases (dramatically) with the jackpot beyond a certain threshold.
It's exactly the same as going to the cinema and enjoying the cost of the movie tickets and popcorn there. Why would anyone go to the cinema?
Pro-tip: When a telemarketer calls saying "We've got a great offer to save you money on your snarfleblarg bills!" just tell them you enjoy you enjoy spending as much money as possible on your snarfleblarg. It goes so far off their script that i've never had one of them provide a decent response to it. At which point you hang up.
That's a funny way to put it. Exchanging money for entertainment has been a common and accepted practice for a very long time. Technically, when you buy something you lose the money, but it's weird to highlight the losing part over the buying part.
Most of this makes sense, but I have a problem with the often-repeated assertion that humans can't handle large numbers. We might not have an intuitive sense of astronomical odds, but that's why we developed mathematics. We have the ability to compensate for our lack of numeracy by thinking through problems with structured languages. We can do much stranger things than calculate whether we should play the lottery. With math, we can calculate what it would be like to navigate in four-dimensional space.
When I hear that people act irrationally when it comes to probability, I feel like it should be replaced with the assertion that people tend to act irrationally when they have not been trained to think methodically in a particular situation or because of circumstances rely on primitive approximations. The first assertion sounds like an immutable property of human nature, when it is more of a cultural and educational issue.
> The first assertion sounds like an immutable property of human nature
If you are not reading a formal thesis, you should not interpret statements formally. Doing so will only lead to a lifetime of frustration. The author probably agrees with you. The vast majority of the audience probably understands that the author is simply being brief and does not have the "audience attention span" budget to more formally describe the assertion that you take issue with.
My interpretation of the author's intent with the statement "humans can't handle large numbers" is "Large numbers of humans have been presented with large numbers of problems involving large numbers. In practice, the vast majority of them fail. Thus, humanity at large does not handle large numbers well." I.e. "humans" refers to the current mass of humanity, not the theoretical possibilities of an individual.
You might be right, but I have seen this trend before without mention that people tend to handle these things badly because of the environments they live in. Most people seem to have pretty poor training when it comes to probability, but the reason for this is presented as an evolutionary trait. I'm sure evolution plays a part, but I think it's mostly in terms of initial, untrained states. When people talk about how people do things because they evolved to do them that way, it sounds like something insurmountable. Humans have been bad at probability for hundreds of thousands of years, so of course they are now. But people are constantly the victim of marketers trying to confuse them with numbers. The lottery is just one of many ways this happens. It's no wonder that people are bad with numbers when there's so much obvious manipulation to try to get people to make irrational purchases. This isn't avoided by the article, but I feel like any mention of a trait people have inherited by evolution needs to be accompanied by an analysis of just how immutable it is. For example, desire for sex or food are pretty difficult to train out of, though not impossible. Poor aptitude with probability is pretty easily remedied. The fact is, not many organizations are motivated to fix it, and lots are more than willing to exploit it.
Its not about how we think; its about how we feel. Some people feel safe without wearing a bicycle helmet or seatbelt, because they perceive the chances of an accident to be small or zero. The decision is made without thinking; get in the car, skip the seatbelt 'just this once, I'm not going far' and never consider the odds analytically at all.
I can definitely see feelings overriding an opportunity for thought. Personally, I have never bought a lottery ticket. I always wear a bike helmet or a seatbelt. I don't really feel anything about these issues. It just makes sense to do or not do them. I could see myself buying lottery tickets if there was a mathematical argument for doing so, as is the case in some lotteries where if you buy a certain number of tickets you are pretty much guaranteed a win, but not in any other case.
If I'm picking something to eat, however, there's definitely an emotional component in addition to the nutrition. I won't just optimize for nutrition. Maybe I'm just the same as the lottery ticket people, but I have different priorities. An emotional attachment to making rational decisions maybe. If that's the case, could a person override irrational emotions with more powerful emotional impulses toward rationality? It would come back to a cultural issue in that case.
Most lottery games these days are state-owned lotteries, fundraisers for the government which also spend a lot of money on their own logistics and advertising.
Most lotteries are not 1 in 175 million.. using the hardest-to-win lottery skews this article a bit..
I don't really understand the point of this article. Is he trying to expose the "morons" who play the lottery for being just that? Maybe the $2 or so bucks means nothing to people playing. Maybe the excitement of the lead-up to the drawing and the checking of the numbers is more fun than $2 in my pocket. You can barely even buy a soda with $2 now.
If those jackpots swell over $200M, betting $1 to win against 1:175M odds is a good bet. If I could bet $1 to win $15 and I had a 1 in 10 chance of winning, I'd do it every time.
In the end, the lottery funds go towards the city/state, and usually education. It's a fun form of charity.
- you also have to account for the highly likely probability that the jackpot will be split between multiple winners.
- even after that accounting, lotteries do sometimes have an expected value higher than the ticket price. The expected value of purchasing N tickets for the N lotteries that led up to and include the big lottery is still the standard 40-50%, but the N-1 previous paid out much less than expected, so the one with the big jackpot pays out more than expected.
Most lotteries have multiple winners of varying amounts, depending on how many of your numbers match and how many other people happened to pick the winning set of numbers. I suspect that in order to get a 50% chance of winning the jackpot, you would have to invest into considerably more than 86 million tickets.
Many lotteries make it hard to buy that many tickets. They may say tickets filled out by machines are invalid. Some limit how many tickets a retailer can sell in a day (for example if you know your busiest kiosk sells 2,000 tickets a day, flags are raised if someone starts selling 20,000 tickets per day).
I guess it's not fun for the regular players (who are the bread and butter of the lotteries) if a syndicate swoops in and takes the massive jackpots when the odds are in their favour.
You're not missing anything. It is technically possible to design and build a business focused solely on buying lottery tickets for profit (i.e.: buy enough to ensure good enough odds to win) But there are a number of risks. The list below isn't exhaustive:
* sharing the winning number with someone else
* do you buy every single ticket or enough to "virtually guarantee" a win? (and the fewer tickets you buy, the more risky it becomes)
* the logistics of purchasing that many tickets
I have even read stories of people trying this before - but haven't been able to find the link. The story I remember best is one man hiring a bunch of people to buy lottery tickets on his behalf.
Anyway. I'd love to see someone make a go of doing this "professionally", but when you have 172 million or more, the incentive isn't really there anymore.
But this assumes consistent buying in the past, while the original poster's statement assumed one-time buying binge once the jackpot hits the level to make it worthwhile.
However, with many forms of insurance the expected value is very nearly 1. Term life, for example, pays out 90%+ of premiums as death benefits. You are unlikely to get any of that money, as most policies do not pay out; but the low probability of a payout multiplied by a comparably high death benefit results in E(X) not to far from 1.
Another reason we keep paying for insurance even with bad expected values (e.g., title insurance) is because we have no choice about the matter. If I want a mortgage, I need title insurance, even though only a small fraction of the premiums are actually paid out as claims.
This was/is key to why I play:
"For many poor people, he adds, there is “no scenario they can come up with in which they are suddenly going to get very rich.” To them, the lottery may be a low probability event—but so is getting a job that pays six figures."
Even in the case of you making six figures a year, 100,000 dollars, a $2 million dollar win is still 20 years of your life earnings all at once.
Of cause people don't react to the statistics that proclaim that they won't win, because someone won the last time.
It doesn't matter that the chances are 1 to 175 million, because someone did win, that's all that counts. The only guaranteed result is not to play, that will ensure that you do not win 100% of the time.
I enjoy playing Virginia's New Year's Millionaire Raffle lottery which sells a finite number of tickets. They cost a decent amount (I think $20) but it brings me excitement on the day they release the numbers.
The "postcode" lottery is interesting. I'm glad that it doesn't exist in the US, because I expect it would get even more people who can't actually afford it to play.
Hooray, we're figuring out all of the tricks to push people into "thinking myopically" and buying what we want them to buy.
Here are the triggers; here's how people make mistakes in buying decisions, and how to exploit that. Here's how to frame your sell (Get them to focus on loss! Remind them of their poverty!), here's how to get them to buy more tickets instead of just one.
Lottery tickets aren't too bad; they're harmless for most people buying them, there's a fun little kick of "what if...?", but (as the article points out) as revenue for the state, they are a regressive tax; poor people pay a much larger percentage of their income into lottery schemes than people who are better off, and of course some of them pay enough to really harm themselves, going for the "Hail Mary" solution to their money woes but just bleeding themselves slowly instead.
Winning isn't actually a positive result, either -- the article doesn't get into stats on attempted suicide, etc. for lottery winners, but they're not good.
Is there anyone out there using this kind of research to actually help people? Or to let people who're just playing a fun game, play it; but still protect the people who are grabbing at a false life preserver?