Saturday, May 21, 2011

On the lottery

I am opposed to the lottery.

This perspective is rooted in both financial and moral reasons and, though my moral reasons are the stronger drivers, the financial ones are much easier to discuss. Sociologically and psychologically, I understand why the lottery exists – who wouldn’t turn down a chance to end all their money woes for a few bucks - but I also feel that the numbers aren't given nearly the attention they deserves.

Your personal finances lose
Lotteries are marketed towards the low-income demographics, and there’s a reason for it: they are for people who are bad at math. An education in statistics often dissuades an individual from playing the lottery – the odds of winning the Colorado Powerball are, as of today, 1 in 196 million. (That is, according to an article from the New York Times, about the same probability of being eaten by a shark and a tiger in the same day. Sounds ridiculous, right? I agree.) And yet we struggle to conceptualize those preposterous odds when buying our lottery tickets, because we fail to translate the odds into context we can understand. Even worse, though, are the folks who buy two tickets. Their new odds of winning? Essentially the same.

The lack of that statistics comprehension, combined with a state of economic desperation, makes the lottery seem like an easy bet. "I might not win" we challenge: "but for a dollar, just maybe I could get out of this trailer forever."

Consider this, though: our odds of not winning the lottery are almost 100%. So if you buy a lottery ticket once per week for 40 years (and I understand that many of us who “dabble” don’t do that, but there are also many, many people who do), you would end up spending $2,000 over that time for a 1 in 196 million chance at winning. If you put this in a savings account instead, you would absolutely have a balance of $4,000 at the end of those 40 years. Versus the very likely balance of $0.

Even the winners lose
When people discover they are the proud new owners of such large sums of money, they also have the unfortunate fate of having acquired it without first developing an understanding of it. Few of us would argue that managing our finances takes at least some basic skills – memory of our latest transactions, a quick guestimation of our account balance, some percentage calculations in determining tips, etc. – and many of us would likely agree that, when you increase the amount of money so dramatically in such a short period of time, it’s unlikely that your skill set will sufficiently evolve in the same timeframe.

The sad reality is that many lottery winners end up bankrupt for this reason – about one third file within a few years of winning.

The answer to all our problems and our ticket to happiness is not being handed a lump sum of more money than we can even wrap our mind around. Playing the lottery is more likely to instill in us feelings of desperation and disappointment over something that, statistically, was never meant to deliver on our hopes. In this sense, the lottery is more successful at cementing our economic and social state than facilitating our escape from it. It would behoove us to direct our mindspace at achieving our own means of transcending it than wallowing in turmoil over not winning the big one.

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