I am a statistician and I buy lottery tickets • Hacker News Board

Re: I am a statistician and I buy lottery tickets

#11

Post by brianwillis » Sat, Oct 20, 2012, 8:20 AM UTC

Looking back, there seems to be a correlation between the times in my life when I've bought lottery tickets, and the times in my life when I've felt hopeless.

If I ever feel trapped by circumstances, depressed, lost, or I don't have optimism for the future, the less logical part of my brain will somehow rationalise the remote chance of winning millions as a perfectly justified excuse for buying a ticket. The author of this piece is right about how lottery tickets buy you a sense of hope, and prompt you to envision your life being better.

So these days I see it as a sign that something in my life needs to change when I take an active interest in this week's Powerball prizes. It's become a kind of signalling mechanism for my subconscious.

Re: I am a statistician and I buy lottery tickets

#12

Post by MichaelApproved » Sat, Oct 20, 2012, 8:22 AM UTC

dchest wrote: post #4

hdivider wrote: post #2

Nice calculation, but it doesn't contradict the 'rational' argument at all. Slightly disappointing: looking at the title and first paragraph I expected some weird statistical wizardry on why the calculation of expected values is fundamentally flawed somehow. (Which would be surprising, given that it's an important mathematical tool in quantum mechanics (even though the formalism there is different).) Also, why pay fo…

Exactly. I'm entertaining myself every time I release some software and imagine that I'll sell millions of copies :)

That's not >free< You probably spent many hours writing that software.

Re: I am a statistician and I buy lottery tickets

#13

Post by olalonde » Sat, Oct 20, 2012, 8:22 AM UTC

This boils down to "expected utility != expected value". His expected utility is positive despite the fact that buying lottery tickets does have a negative financial expected value. So yes, buying lottery tickets is perfectly rational for him.

Re: I am a statistician and I buy lottery tickets

#14

Post by shrikant » Sat, Oct 20, 2012, 8:23 AM UTC

vibrunazo wrote: post #10

I had a statistics professor at college who were addicted to gaming. There were stories about him losing a lot of money, car, job and wife because of his addiction. I thought it were just a joke, you know, statistics professor addicted to lottery? Duh, I wouldn't fall for that. Until one day, to demonstrate that a specific class of combinations were too rare, he challenged a girl in the first row that if she rolled a…

Interesting you should say that.

Richard Feynman on education in Brazil: http://v.cx/2010/04/feynman-brazil-education

..and the associated HN discussion: http://news.ycombinator.com/item?id=2483976

Re: I am a statistician and I buy lottery tickets

#15

Post by kryptiskt » Sat, Oct 20, 2012, 8:31 AM UTC

hdivider wrote: post #2

Nice calculation, but it doesn't contradict the 'rational' argument at all. Slightly disappointing: looking at the title and first paragraph I expected some weird statistical wizardry on why the calculation of expected values is fundamentally flawed somehow. (Which would be surprising, given that it's an important mathematical tool in quantum mechanics (even though the formalism there is different).) Also, why pay fo…

The expected value isn't flawed, but it's often not an useful guide to what action you should take. Imagine a lottery with an accumulated jackpot of $11 million, and there's one million $10 tickets (this isn't all that rare). Should you take all your savings and buy 1000 tickets? You have a positive expectation value, and 99.9% chance of ending up penniless. Is one that buys the tickets really a much more rational person than one who does it when the jackpot is $8 million? One can make just positive expectation bets and be certain to lose it all. The Kelly Criterion is a nice little formula for calculating the optimal bet size from the risk and the expectation.

Re: I am a statistician and I buy lottery tickets

#16

Post by paulsutter » Sat, Oct 20, 2012, 8:32 AM UTC

Insurance has an interesting comparison to lottery tickets. In a lottery ticket, the expected return is usually about 50%. Which is exactly the same as insurance (the premium is about double the expected payout).

Yet people regard insurance as prudent, and lottery tickets as foolish. Me included (as long as its a risk you cant easily cover).

But our explanation, that "Lottery tickets are foolish because they have a negative expected return" isn't exactly credible if we think insurance is a good deal.

Any thoughts?

Re: I am a statistician and I buy lottery tickets

#17

Post by jpdus » Sat, Oct 20, 2012, 8:38 AM UTC

The real rational reason for buying lottery Tickets is unfortunately not mentioned.. You may not think of expected return but of a Chance to move up a bracket reg "Standard of Life" which would not be possible by other means. You wont move down a bracket by buying lottery Tickets (prob not even on a long term) - which makes it perfectly rational to play the lottery for some Kind of people (in the "poorer bracket") in my opinion.

Re: I am a statistician and I buy lottery tickets

#18

Post by afhof » Sat, Oct 20, 2012, 8:41 AM UTC

paulsutter wrote: post #16

Insurance has an interesting comparison to lottery tickets. In a lottery ticket, the expected return is usually about 50%. Which is exactly the same as insurance (the premium is about double the expected payout). Yet people regard insurance as prudent, and lottery tickets as foolish. Me included (as long as its a risk you cant easily cover). But our explanation, that "Lottery tickets are foolish because they have a n…

Unless you can sustain a $100,000-$300,000 loss before you have have paid into the insurance pool more than that amount, it makes sense. If you had gobs of money, then it wouldn't make sense for you to have insurance. (preconditioned on insurance being a profitable business, etc.)

Re: I am a statistician and I buy lottery tickets

#19

Post by anonymouz » Sat, Oct 20, 2012, 8:43 AM UTC

vibrunazo wrote: post #10

I had a statistics professor at college who were addicted to gaming. There were stories about him losing a lot of money, car, job and wife because of his addiction. I thought it were just a joke, you know, statistics professor addicted to lottery? Duh, I wouldn't fall for that. Until one day, to demonstrate that a specific class of combinations were too rare, he challenged a girl in the first row that if she rolled a…

Unfortunately an addiction can rarely be battled by simple rationality. So even if he can calculate his chances of winning perfectly well, and theoretically understand that it is a poor use of his money, he may still have to give in to his addiction.

Re: I am a statistician and I buy lottery tickets

#20

Post by muppetman » Sat, Oct 20, 2012, 8:44 AM UTC

brianwillis wrote: post #11

Looking back, there seems to be a correlation between the times in my life when I've bought lottery tickets, and the times in my life when I've felt hopeless. If I ever feel trapped by circumstances, depressed, lost, or I don't have optimism for the future, the less logical part of my brain will somehow rationalise the remote chance of winning millions as a perfectly justified excuse for buying a ticket. The author o…

That's a very interesting view point/experience. For me, it's been the opposite. If I'm really happy, feel a bit like I'm on top of my fiances for this fortnight, I'll "splash out" and buy a Powerball ticket.

If I'm down, the idea of giving away money on such a silly endeavour seems stupid.

Anyway, here's hoping you don't buy too many powerball tickets in the immediate future!