After quiet giggles, I realized that there were actually two errors in the graph:
- Math: The simple mathematical error here is that this would only give each person $4.33.
- Financial Instrument: The meme shows a fundamental misunderstanding of the Lottery as a financial instrument, not capable of "creating money."
MATH ERROR
The math error here is pretty straight forward, in fact someone likely just used the wrong number of digits in one of the numbers when entering this in a calculator. The error doesn't actually bother me that much, arithmetic happens. In fact, there's a pretty good reason these types of errors occur: most people don't spend their days dividing numbers in the billions by numbers in the millions.Truth is, math errors are easy, and in the field that I'm in, I see these types of errors all the time. But what prevents these regular math errors from leading to larger societal breakdowns? Context. Analysts consider context when evaluating the results of their equations, and review for reasonableness. In this case, if you know anything about how the lottery works, you know that the results from the meme are unreasonable. Which brings me to a larger point on the context of the lottery...
LOTTERY AS FINANCIAL INSTRUMENT
The reason I knew the meme was wrong immediately wasn't because I did the math, it's because the way the lottery works. Effectively, the lottery in the United States is a money making (for states) gambling-based financial instrument. Here's a simplified primer:- People buy tickets totaling some initial revenue number paid to the lottery.
- The lottery splits that revenue amount among three categories:
- Cost/Overhead coverage (smallish %)
- "Profit to the State(s)"
- Money for prizes/jackpots
- After this step, the "game" is played, payouts are made.
- If no one won in step three, some games (like the Powerball) allow the jackpot to aggregate towards the next drawing, which is how we got to this 1.5 billion dollar jackpot.
- Eventually someone wins the jackpot, and the jackpot starts over from a lower number ($40 million in the case of Powerball)
The important part here is that there are no external inputs to the Powerball (meaning that no one -- government, private donor etc.-- is net infusing money outside of ticket sales) and the Powerball as financial instrument doesn't create money for ticket buyers (well, as an annuity, but that amount is just long-term investment returns, see below). In aggregate it loses money for buyers, as the State takes away a share of ticket sales.
But how does this relate back to our initial meme?
- For the lottery to be so large such that each American could take $4.3 million from it, it means that each American (on average) would have to each spend over $4.3 million in Powerball Tickets since someone last claimed the jackpot.
- There is something innately sad about people not realizing that in aggregate, the lottery is a net loss.
THAT ANNUITY THING
I should probably have ended this blog entry there, but there's one last *numbers* piece to lottery payouts that people should probably know. That $1.5 billion advertised does not equal how much money you would receive if you won today. In the end, you have two options in how to claim your lottery prize:- Lump sum. You get the full amount all at once.
- Structured Annuity: The lottery keeps your money, invests it, and pays it to you in 30 annual payments. Because of the investment over 30 years, you get an aggregate amount larger than the lump sum.
CONCLUSION
Obviously this post has deviated from the normal content of this blog somewhat substantially, however I think it makes a few key points:- In the age of calculators, arithmetic errors are usually merely data entry errors, which can be caught through analysis of the context of the data.
- More concerning about our initial meme, is that the error demonstrates a misunderstanding of the lottery as a financial instrument. Not realizing the source/mechanisms behind the lottery, can lead to irrational expectations of outcomes from playing the lottery, especially for under-educated populations.
- The lottery tends to overstate actual winnings by using aggregate annuitized winnings rather than the easier-to-understand lump sum payout.
Excellent analysis. Totally agree with the conclusions. People went crazy about that pot. The tweets with that "give every American $4.3 mln" are countless. I'll certainly share it with mine acquaintances who play Powerball online. Carry on!
ReplyDeleteGreat! Playing musical instrument should be concluded in the school option objects.
ReplyDeleteStill this calculation blunder has gone viral and could have deluded a lot user talking such posts for granted. I'm strongly support meaningful posts presenting objective data like yours and, in related though separate instance, Icelotto review
ReplyDelete
ReplyDeletePro Bowl 2017
Pro Bowl 2017 Live
Pro Bowl 2017 Live Stream
Pro Bowl 2017
Pro Bowl 2017 Live
Royal Rumble 2017
This is a fantastic website and I can not recommend you guys enough. Charity runs succeed in a number of unique ways to raise cash.Check A very awesome blog post.
ReplyDeleteA very awesome blog post. We are really grateful for This blog post. You will find a lot of approaches after visiting your post. I was exactly searching for Charity . Thanks for such post and please keep it up .Great work
ReplyDeleteGood posting and very nice article, and this site give a interesting information..thanks for sharing..online betting
ReplyDeleteAlthough, it's a destiny based game, still gives lots of hope to nurture your dreams. Several sources are there which are legal as well as illegal. Click Here
ReplyDeleteBecause of the sheer size of the US and the quantity of participants, prizes can come to the $100 million stamp. Be that as it may, how might you participate in these lotteries on the off chance that you aren't in the correct states or even in a similar nation? By purchasing your lottery ticket on the web. Be that as it may, to start with, how about we take a gander at two of the most mainstream lotteries in the U.S. buy powerball lottery tickets
ReplyDeleteThis represents the vast majority of lottery ticket sales. But, these players haven't done anything to improve their chances of winning the lottery. 4d prediction
ReplyDeleteAlthough there are a number of different reasons why you would want to create a blog website, the way that you go about doing it is generally the same. Here are some pointers to help you get started when you create a blog website. Lottery Extreme
ReplyDeleteThat's not to say there aren't some honest and ethical commission based advisors, but clearly this identifies a conflict of interest.cryptocurrency converter
ReplyDeleteYou have a decent point here!I absolutely concur with what you have said!!Thanks for sharing your views...hope more individuals will read this article!!! nd lottery powerball
ReplyDeleteBy the early 1800s in the U.S., lotteries were very popular (along with winning the lottery), but abuse by private citizens meant that the government was not getting the profit to which it believed that it was entitled, and attempts began to outlaw lotteries. Icelotto
ReplyDeleteProvide information and prices for 2475 сryptocurrencies: cryptocurrency converter
ReplyDeleteHi guys!
ReplyDeleteDid you provide information about http://localotto.com/powerball Powerball results USA ? I need to find more information about this lottery. Do you have any idea how I can find more information?
you got a very excellent website, Sword lily I found it through yahoo. kerala lotteries
ReplyDeleteI’m going to read this. I’ll be sure to come back. thanks for sharing. and also This article gives the light in which we can observe the reality. this is very nice one and gives indepth information. thanks for this nice article... kerala lottery result.com
ReplyDeleteThere are various type of data scientist available in the marketplace, however the finding of best data scientist is not easy for you because you don't about the info related problem and its solution, you could check here www.activewizards.com the variety of different data handling expert who can help you to solve your all kind of data related problems.
ReplyDeleteThis comment has been removed by the author.
ReplyDeletefundamental capacity of the finances is in the fulfillment of the general population's demands; the subjects of practical exercises of any sort (firms, additionally state organs of each level) are coordinated towards satisfying this essential capacity.Chuck Roberts
ReplyDeleteA luxurious blog, truth be told. Appreciated every tiny bit of this amazing thing.
ReplyDeleterichards lotterysecretsreview.com
This is such a great resource that you are providing and you give it away for free. I love seeing blog that understand the value of providing a quality resource for free. Latest Thai Lottery King Tips
ReplyDeleteIt's a great job that has been accomplished.
ReplyDeleteI say "transaction" because that's what commission based financial advisors do - they facilitate TRANSACTIONS. Once the transaction is over, you may be lucky to hear from them again because they've already earned the bulk of whatever commission they were going to earn.site
ReplyDeleteNice post, keep up with this interesting work. It really is good to know that this topic is being covered also on this web site so cheers for taking time to discuss this! north dakota lottery
ReplyDeleteHey, you used to write wonderful, but the last few posts have been kinda boring… I miss your tremendous writings. Past few posts are just a little out of track! come on! lottery winning numbers
ReplyDeleteThis comment has been removed by the author.
ReplyDeletehigh-quality to be touring your weblog anew, it has been months for me. properly this article that ive been waited for as a result lengthy. i ache this newsletter to finish my mission in the execution, and it has same subject matter collectively taking into consideration than than your article. thanks, first-class element. payday lenders only
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteWith both the bank and the adviser taking a cut for every product sold to you,https://mailchi.mp/cc08635ff53e/solopreneursguide that inevitably reduces your savings.
ReplyDeleteExcellent read, Positive site, where did u come up with the information on this posting?I have read a few of the articles on your website now, and I really like your style. Thanks a million and please keep up the effective work. Project Financially Free
ReplyDeleteThe blog is clear demonstration of the fact that, you can’t compromise with the quality. 스포츠토토
ReplyDeleteDominoQiu
ReplyDeleteLink ALternatif DominoQiu
However, there are additionally a few things which you find in online slot games which are absent in land-based games. Play slots
ReplyDeleteJohn W. Keller, an American, incorporated Scheneck's principles for attract poker his own book, The Game of Draw Poker, distributed in 1887.IPokerDomino
ReplyDeleteTook me time to read all the comments, but I really enjoyed the article. It proved to be Very helpful to me and I am sure to all the commenters here! It’s always nice when you can not only be informed, but also entertained! unicc
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteSentimentality: I love this game for some reasons. I played it for quite a while, yet never truly turned into a specialist - in any case, it was the first since forever game I figured out how to replicate utilizing Basic on my ZX81 - I even sold around 50 duplicates in Germany! c9betwin official site
ReplyDeleteI'll cover well known online poker rooms in a future article in more detail, yet at the very least, there's gold in them there slopes and the cases have been marked by the market chiefs, who are rounding up fortunes offering their refined online support organizations to a great many anxious players around the world.
ReplyDelete홀덤
Debt management is something many people need, but are to ashamed to ask for. The road to debt freedom is long, winding, and treacherous, but you can drive down it safely with just a little help of Financial planner.
ReplyDeleteOnline casinos have provided a convenient way of entertainment for casino enthusiasts while enjoying the comfort and privacy of their own homes เครดิตฟรีไม่ต้องฝากไม่ต้องแชร์2021
ReplyDeleteIf you set out to make me think today; mission accomplished! I really like your writing style and how you express your ideas. Thank you. 리니지프리서버
ReplyDeleteBy the mid 1800s in the U.S., lotteries were well known (alongside winning the lottery), however maltreatment by private residents implied that the public authority was not getting the benefit to which it accepted that it was entitled, and endeavors started to prohibit lotteries. casino online
ReplyDeleteI admire what you have done here. I like the part where you say you are doing this to give back but I would assume by all the comments that this is working for you as well. 먹튀폴리스
ReplyDeleteBut alas, there are literally hundreds of poker sites on the Internet.slot online
ReplyDelete