How can I not buy some tickets in the MegaMillions lottery for the drawing this Friday? This game is in 42 states plus the District of Columbia. (It is not in Alabama, Alaska, Florida, Hawaii, Mississippi, Nevada, Utah, and Wyoming, so if you are in one of those places, call a friend in another state — a friend you trust — to buy a ticket for you.)
I admit it: I wasted $20 on yesterday’s drawing, when the jackpot was a paltry $363 million, understanding that lottery tickets are basically a tax on stupidity. Actually, I wasted $17, because one of my twenty lines of numbers included the “MegaBall” and one of the other numbers — a combination worth $3. Apparently 1.3 million other gamblers also won back $3 of their hard-earned money. Forty-seven people won the $250,000 price received for getting all 5 regular numbers, but not the MegaBall. Sooooooo close!
Despite the odds of losing all or nearly all of your wager, at some point it becomes what a friend calls a “utility bet,” using the word “utility” in its economic sense. In other words, the possibility, almost no matter how vanishingly small, of winning such an enormous prize makes it worth taking a flier with some modest amount of money.
And the odds of winning are indeed long, at about 175,711,536 to one.
But by the time the next numbers are drawn, on Friday evening, the grand prize will be over half a billion dollars; over $600 million would not be a surprise to see. (If you take the money all at once, you’ll get a little over 70% of the published amount.) The previous record, in 2007, was $390 million (which was split by two winners.)
Again, don’t you have to buy a ticket, even knowing you’re extremely likely to lose your money?
This reminds me of a question the above-mentioned friend likes to ask, and which I’ll ask you. There is no right answer; it’s just a reflection of your personality.
Imagine you’re given the opportunity to bet on a coin flip. You can take any real, government-issued coin out of your pocket for the bet, so you know that the coin is fair. You can bet any amount you want to bet. If the coin comes up heads, you lose your bet. If the coin comes up tails, you win ten times your bet. In other words, risk $1 to try to win $10, or risk $100 to try to win $1,000, etc. And you can only play once. How much would you bet?
I hope I don’t sound too much like Mitt Romney when I say that at ten-to-one, I’d probably bet $10,000. And I don’t have anything like Romney money…it would really bum me out to lose $10,000. But the chance to win $100,000 would probably be worth the risk.
An interesting thought experiment is to see how your answer, or your friends’ answers, change as you change the multiplier. In other words, what would your answer be if you could only win twice what you bet, and what if you would win 50 times what you bet? I know I would bet much less, probably not even one tenth as much, if the multiplier dropped to 2, and would probably only double my bet if the multiplier went to 50 because I just wouldn’t feel like I could afford to lose more.
I’d love to hear your answers…again, there’s no right answer; it’s a personality question, not a math question.
I guess I’ll be heading back to the shop at the gas station to waste another $20 on Friday’s MegaMillions drawing…
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