EPTDo i want to know how you know that?
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Poland9250 Posts
Do i want to know how you know that? | ||
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GreenHorizons
United States23488 Posts
I know it has a sale price, but how much can you pay for it and it be a sound investment? Or how many would you have to get for $4 to make it better than a $4 bet for a card counter playing blackjack? | ||
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Simberto
Germany11639 Posts
I just looked at their web page, and it tells you that these are the win percentages. If we believe these numbers, that means that we can calculate the expected value by multiplying the percentage of each win with the amount of money that you win, and adding all of that up. You could also calculate the percentages on your own, because the system is clearly described. So to get 5 +1, you do have a chance of 1 in 25*70*69*68*67*66/5!, which fits with the numbers that they give you. So if we assume that they didn't fuck up high school maths there (I am too lazy to check all of the numbers, and you need to be careful with the calculations because some of the numbers overlap), the expected value of one Mega Millions ticket is: Jackpot/302575350 + 1000000$/12607306 + 10000$/931001 + 500$/38792 + 200$/14547 + 10$/606 + 10$/693 + 4$/89 + 2$/37 (1) For your Jackpot of 100.000.000, this equals about 58 cent. If we calculate further using the fact that you pay 2$ for it, this means that you pay 2$ for 58 cents, so the expected value of buying such a ticket is -1.42$. Or, the payout quota is about 29%. Basically any other type of gambling has a better return on investment. My guess would be that even playing the three hat game with the most shady of characters you can find has a better return on investment than buying mega millions tickets. Even more interesting, we can calculate how high the jackpot needs to be for it to be worth 2$. We simply solve the equation (1) = 2$ for Jackpot. Which leads to a jackpot of about 530 millions for the ticket to be worth it. There might be a provision that in case of multiple winners, the jackpot gets split, which still reduces the value of that ticket even further. As a sidenote: This lottery would not be legal in germany, as our lotteries have to have a payout quota of 50% by law. | ||
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Sbrubbles
Brazil5776 Posts
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Simberto
Germany11639 Posts
A quick google leads me to this page: http://www.megamillions.com/mega-millions-trivia And it clearly states that jackpots have been shared, which would mean that they will be shared among winning tickets. | ||
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Artisreal
Germany9235 Posts
If you ever farted in a sleeping bag or under the blanket and by accident moved the lower air up to your nose you'd know.  | ||
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Sbrubbles
Brazil5776 Posts
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JimmiC
Canada22817 Posts
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GreenHorizons
United States23488 Posts
On August 24 2018 20:35 Simberto wrote: For that, you would need to know about the win percentages. I just looked at their web page, and it tells you that these are the win percentages. If we believe these numbers, that means that we can calculate the expected value by multiplying the percentage of each win with the amount of money that you win, and adding all of that up. You could also calculate the percentages on your own, because the system is clearly described. So to get 5 +1, you do have a chance of 1 in 25*70*69*68*67*66/5!, which fits with the numbers that they give you. So if we assume that they didn't fuck up high school maths there (I am too lazy to check all of the numbers, and you need to be careful with the calculations because some of the numbers overlap), the expected value of one Mega Millions ticket is: Jackpot/302575350 + 1000000$/12607306 + 10000$/931001 + 500$/38792 + 200$/14547 + 10$/606 + 10$/693 + 4$/89 + 2$/37 (1) For your Jackpot of 100.000.000, this equals about 58 cent. If we calculate further using the fact that you pay 2$ for it, this means that you pay 2$ for 58 cents, so the expected value of buying such a ticket is -1.42$. Or, the payout quota is about 29%. Basically any other type of gambling has a better return on investment. My guess would be that even playing the three hat game with the most shady of characters you can find has a better return on investment than buying mega millions tickets. Even more interesting, we can calculate how high the jackpot needs to be for it to be worth 2$. We simply solve the equation (1) = 2$ for Jackpot. Which leads to a jackpot of about 530 millions for the ticket to be worth it. There might be a provision that in case of multiple winners, the jackpot gets split, which still reduces the value of that ticket even further. As a sidenote: This lottery would not be legal in germany, as our lotteries have to have a payout quota of 50% by law. I started to do the math once and got lazy and frustrated when I remembered the splitting part but confirmation that it's gotta be over 500m to be "worth it" in the ev sense is what I wanted. I'm also curious if there's a way to calculate for individual wealth. For instance, when developing an investment portfolio one looks at risk and potential, I'm not sure exactly how all that's calculated but I think there's a point of wealth where buying a ticket for every drawing would be a reasonable investment? | ||
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Sbrubbles
Brazil5776 Posts
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Simberto
Germany11639 Posts
That also means that there is never a point when a lottery ticket would be a reasonable investment, unless you give value to the "hope" that it gives you. It actually means that the lottery ticket is worth even less. Because those millions of dollars have diminishing returns, while the 2$ you invest are worth a lot more to you in comparison to each of the dollars of the millions. And even without that calculation, lottery tickets are negative return on investment. That means that it is a much more reasonable investment to just put your cash in a box under your bed than to buy a lottery ticket. It is important to mention that even in the cases with a very high jackpot, the lottery still wins. Because the jackpot is only that large because no one won the jackpot in the previous weeks. | ||
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GreenHorizons
United States23488 Posts
On August 25 2018 04:00 Sbrubbles wrote: Not really, because there are other investment opportunities with higher expected return and zero risk (US treasury bills), making buying a lottery ticket strictly worse no matter what. Doesn't the whole potentially turning say $100,000 over a lifetime (presuming you stop playing if you win) into 100,000,000+ though unlikely make it "worth it" to say a billionaire? Perhaps not their best investment opportunity, but treasury bills would take a long time to turn 100k to 100m. So if one's desire was to amass as much cash as possible wouldn't putting 100k (spread over a lifetime) be at least a reasonable investment for a billionaire (as they would already have hundreds of millions in stuff like treasury bills, so what's a 100k for the perpetual shot at 10's or 100's of millions? I suppose the math would look something like turning down a sure million for a shot at 100x+ more. I'm not positive but I'm pretty sure there's calculations for that regarding investing that go beyond the straight statistical analysis. Something similar to investing in an internet startup. So while a risky investment in general, the potential upside means the risk is worth it. Not sure the chances of success are quite as abysmal for internet start-ups as it is for lotto tickets, nor the amount of influence on the outcome as controllable as an internet start-up, but I got the feeling there's a way for a lotto ticket to be a sensible (even if not ideal) investment/gamble for someone with expansive disposable income. | ||
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Simberto
Germany11639 Posts
The maths is very clear here. Buying lottery tickets is a bad idea, unless you put a lot of value into the "hope" and other intangibles. It is not an "investment". Because if i invest in an internet startup, i still only do that if i calculate a positive return on investment. This is true for risky investments, too. If you invest in an internet startup, and expect that there is a 90% chance of losing your money, you expect to gain at least 10x as much money as you invested if it doesn't fail. The expected value of a gamble needs to be positive. (Of course, this isn't as clear with investments, because the odds are only guessed beforehand. Risky investments need to have an even bigger payout to offset the risk. A lottery ticket, however, has a clear and known negative return value. And if you buy more of them, the situation becomes even worse, because the law of larger numbers starts to kick in, which means that your return will gravitate ever more closely to the expected value per item. If i buy 3 billion lottery tickets, i can expect to hit the jackpot 10 times, 1 million 300 times etc...However, for this i also had to pay 6 billion dollars. On average, i will only get 29% of that back. So less than 2 billion. This only gets worse as i buy more tickets. Lottery tickets are not an investment. They are not even a good gamble. If you are into gambling, play roulette. Way better return on investment with about 98% of what you initially paid. The bank still wins on average, but far less so than with a lottery, which really screws you over. If you want to invest, invest in stuff with a positive return on investment. There is a reason wallstreet managers don't buy billions of lottery tickets or go to vegas with their investors money. | ||
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Dangermousecatdog
United Kingdom7084 Posts
Even supposing the billionaire, over time, amongst all the other billionaires betting, the group as a whole will lose money. There's no actual monetary calculation that will make a lottery an investment. Emotions are a different matter, but that wasn't what you was talking about anyways. | ||
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GreenHorizons
United States23488 Posts
On August 25 2018 04:35 Simberto wrote: But in those cases, you usually go for average positive return on investment. Sure, if your exact goal is to make 100 million, then it might be reasonable. (Edit: As in: 100 million+ = value, anything less than 100 million = 0 value) But even then, if you "invest" 100k into those tickets, you only have a 50000/302000000 chance of success. Meaning even with that investment of 100k, your chance of hitting the jackpot is about a measly 1 in 60000. The maths is very clear here. Buying lottery tickets is a bad idea, unless you put a lot of value into the "hope" and other intangibles. It is not an "investment". Because if i invest in an internet startup, i still only do that if i calculate a positive return on investment. This is true for risky investments, too. If you invest in an internet startup, and expect that there is a 90% chance of losing your money, you expect to gain at least 10x as much money as you invested if it doesn't fail. The expected value of a gamble needs to be positive. (Of course, this isn't as clear with investments, because the odds are only guessed beforehand. Risky investments need to have an even bigger payout to offset the risk. A lottery ticket, however, has a clear and known negative return value. And if you buy more of them, the situation becomes even worse, because the law of larger numbers starts to kick in, which means that your return will gravitate ever more closely to the expected value per item. If i buy 3 billion lottery tickets, i can expect to hit the jackpot 10 times, 1 million 300 times etc...However, for this i also had to pay 6 billion dollars. On average, i will only get 29% of that back. So less than 2 billion. This only gets worse as i buy more tickets. Lottery tickets are not an investment. They are not even a good gamble. If you are into gambling, play roulette. Way better return on investment with about 98% of what you initially paid. The bank still wins on average, but far less so than with a lottery, which really screws you over. If you want to invest, invest in stuff with a positive return on investment. There is a reason wallstreet managers don't buy billions of lottery tickets or go to vegas with their investors money. Makes sense, and I avoid lotto tickets like the plague, but was curious how that worked out. I have a feeling a lot of statistics profs like to use the lotto for the reasons mentioned and how it conflicts with emotional assessments of playing the lotto. That said, if I had a billion dollars I would totally (emotionally) think investing $1,000,000 in a fund where a portion of it's interest is used to make sure I'm in every mega millions drawing with 100,000,000+ prize opportunity was "worth" it. I would keep the 1m I initially invested, have a shot at much more, and only lose 100k or so (presumably would win some of it back) of the interest over my entire life (which i guess could potentially compound to more). From a emotional perspective it sounds like a bulletproof idea with no tangible downside. Basically that the potential $100k (+interest) loss is nothing in comparison to the chance (albeit miniscule) that this completely effortless and thoughtless thing might make you many lifetimes of typical income, damn the maths! I guess from the perspective that it's more like entertainment that you can get paid for (like gambling in general) it's reasonable but from an "investment" perspective the maths will never be in it's favor. ________________________________________________________________________________________________ Some may have heard of the phrase "Win if you can, lose if you must, but always cheat!", in that vein I wonder how much influence on the outcome would it take to get the EV closer to the purchase price (or exceeding it slightly). So if I could control the outcome exactly of 1 ball would that be enough? 2 balls? What if I could narrow down the range to 3 potential numbers per ball? I'm vaguely familiar with the math but I presume the more statistically oriented folks might be able to provide some insight on how much influence one would need on the outcome in order to 'game the system' so to speak. | ||
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Uldridge
Belgium4966 Posts
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GreenHorizons
United States23488 Posts
On August 25 2018 05:12 Uldridge wrote: I'm just wondering why you would ever even want to give money to an organization like that. They're duping saps and what do they do with their profit? Who's in on it? The individual states, it's why it's sometimes referred to as "the idiot tax", it's used to fund state budgets that people prefer not to be taxed for, namely education. However if other states are like mine it's dumped into a general fund and used to makeup the gaps in revenue resulting from favorable tax agreements with large businesses. That's probably all I should say on that though. | ||
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JimmiC
Canada22817 Posts
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Dangermousecatdog
United Kingdom7084 Posts
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GreenHorizons
United States23488 Posts
On August 25 2018 06:20 Dangermousecatdog wrote: A lottery will never have the prize higher than the odds. That's not how a lottery works. A lottery is not the same as a card game. They both might be a form of gambling, but they operate totally different rules. Pretty sure this one does if you count pre-tax and I understood Simberto's math enough. It's even more rare than someone winning 2x though. More to my curiosity though, if you could influence the outcome (without outright controlling it's entirety) you could get it there as well I think. | ||
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