Monday, 20 June 2011

How to win the lottery. Part 2: The Payout

Part 2 in a three part magnum opus - or possibly optimus prime - on how the lottery really works, and what you can do to make it work in your favour, if you can, which you can't. Or can you?
Mr Sucker lived a simple life. He loved his family and worked hard to support them. His one vice was his weekly lottery ticket. And the occasional line of cocaine. And the prostitutes, the many, many prostitutes.

But let's concentrate on the lottery, at least for this post.

In Part 1 we learnt that his lifetime chance of winning 1st division was approximately 1 in 262, and that he was guaranteed to win 4th, 5th and 6th division many times. But what I want to know now is how much money will he spend in total, and how much can he expect to win?

The total spend is easy: A standard quickpick each week for 50 years is approximately $20,400 at today's price ($7.85). Calculating the winnings is a bit of a pain in the arse, but here goes. There are two ways: The first is to calculate the average number of times he will win each division, using the odds calculated in part one, then multiply these by the average dollar amount paid out for each division. This sounds hard. Fortunately, there is an easier way. A much easier way. One might call it a piss-easier way. Tattersalls and the Victorian State Government have already done the work for us.

You see Australian lotteries are run on a system called parimutual betting, whereby winnings are paid as a proportion of the money taken in, rather than as a set amount. For Tattslotto, this is a government mandated 60%, not including the ticket sellers' commission. Each game costs 65 cents, of which 15 cents is commission, 20 cents gets divied up between the government and Tattersals, and 30 cents gets paid back to the punters. So the actual payout once commission is taken into account is actually 46%. What this means in real terms is that if you bought infinite tickets, you would end up "winning" exactly 46 cents for every dollar you paid out. Or to put it another way, you would lose 54 cents for every dollar you spent. Mr Sucker won't buy infinite tickets but he will buy a lot (2,600), so one could suppose that the odds will even out, and Mr Sucker will end up winning 46% of his outlay, or $9,200, leaving him with a total lifetime loss of $11,200.

Unfortunately, no.

Mr Sucker, alas, is one of the vast majority of people who will never win 1st or 2nd division prizes, so his winnings will be a lot less, because the lucky bastards who do win big will take way more than their fair share. How much less? Thanks Tattersalls, you've come through with the goods again! The percentage of the prize fund that goes to each division is the same every week:

Division 1: 28.0%
Division 2: 3.8%
Division 3: 8.2%
Division 4: 12.4%
Division 5: 20.8%
Division 6: 26.8%

Assuming that Mr Sucker wins his fair share of divisions 3-6, his total payback will be 68.2% of the 46% payout, which is 31.4%. Mr Sucker, then, is more than likely, after payingout $20,400 over his lifetime, to win approximately $6,300, leaving him out of pocket more than $14,000; that's a lot of coke and hookers. To rub it in further, even if he wins 2nd division once, he will still be out of pocket several thousand dollars, as 2nd division only pays about $10,000.

In essence, if you don't win 1st division, you will lose in the long run. Mr Sucker could, I suppose, make a profit by winning 2nd division twice, but the chance of that is ten times lower than the chance of winning 1st division once, so forget it.

But surely Mr Sucker could use some kind of system that increases his odds of winning, and besides, I hear you thinking, "this series is called how to win the lottery, not why everyone loses at the lottery, so when the hell are you going to throw me a bone here, crapman?"

In my next post I will show how to both markedly increase your odds of winning, and a foolproof way to guarantee 1st division*.

*Although you are going to be seriously pissed off with me when I do.

1 comment:

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