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What Really Happens When You Win the Powerball

Orginally published on Tuesday, February 21, 2006 at 8:31 AM
by Todd Rhoades

LotteryThought this was interesting... HT to Jeff for the link to the Star Tribune...

Did you hope to win the recent huge Powerball drawing?

You need even more luck than before. The odds against winning the top prize have been growing.

Meanwhile, the gap has widened between the jackpot's "headline number" and the actual cash value of the prize.

Much of what many people think they know about Powerball is wrong. Start with the size of the jackpot.

You may have read that tonight's Powerball drawing will be for $300 million. Wrong. The cash amount -- the present-day value of the years of payments that a single winner would be entitled to, a number not shown on the billboards and ubiquitous window signs -- is less than half that.

"We don't hide that fact," said Don Feeney, Minnesota State Lottery director of research.

"Whether we should make it more prominent than the $300 million is subject to fair debate."

Tonight's drawing will be the 17th in a lottery with a jackpot that started at $15 million. The cash value of the game thus far -- $145.7 million -- is a better gauge of the size of the jackpot. And tax collectors would claim nearly half of that amount shortly after the check arrives.

The $300 million is the sum of the jackpot paid over 29 years. When Powerball was introduced, the winner got all his money within 19 years. Later, the payout was changed to 24 years, then to nearly three decades.

By stretching out the payments, Powerball officials magnified the "billboard" jackpot number and broadened the gap between the current value of the jackpot and the sum of the payouts over time. A dollar pocketed today is worth far more than a dollar in three decades, which, after all, is the reason loans carry interest.

But even the current cash value number may be high, says University of Minnesota statistician Charles Geyer.

With an estimated 80 million tickets sold since Saturday, the chance that more than one ticket will bear the winning combination has been climbing. That means what statisticians call the "expected value" of the jackpot is closer to $112 million, Geyer said.

But wait, there's more

But that's not all. To boost the headline number, Powerball organizers have fiddled with the odds over the years. Each time, those odds got longer.

Until August, the odds of winning a Powerball jackpot were 1 in 120 million. Today, they are 1 in 146 million.

When the game began in 1992 it was 1 in 55 million.

Yet people keep buying tickets.

"Obviously, people will focus on people who win," said John Allen Paulos, a Temple University mathematician. "All the same dumb sticks who did the same thing [and lost] are invisible."

Author of a bestselling book, "Innumeracy," Paulos says lotteries have always owed their appeal to people's loose grip of math.

Paulos recalled a line from Voltaire: "Lotteries are a tax on stupidity."

Paulos once tore up a Powerball ticket on the eve of a drawing in front of an audience. "They all gasped as if I just slashed the Mona Lisa," he said.

To a mathematician, the lottery is a game where those who don't play have essentially the same odds of winning as those who do -- none.

The Minnesota Lottery's Feeney counters that the appeal of the game is recreation, not investment. The states are the only sure winners, with Minnesota keeping about 33 cents of each ticket dollar for its general fund and various parks and environmental programs. (About 50 cents of each dollar goes to prizes and 17 cents is divvied up among retailers, the company that oversees the operation of lottery machines, lottery staff and overhead.)

"I know an awful lot of mathematicians who play, and I'm one of them," Feeney said. "I have a master's degree in statistics." He's not allowed to buy Powerball tickets in Minnesota, but he does when he's in other states that have the game.

Aldo Rustichini, a University of Minnesota economist who studies the interplay between financial choices and psychology, said he sees no paradox between the odds of winning a jackpot growing smaller and a rise in the number of tickets sold.

"For three days, you get the unreasonable hope of winning $145 million," he said. A dollar won't buy a cup of coffee, but the dream of instant riches has value, in Rustichini's view.

"If for $1, I get the opportunity of getting a shot at something big, why not?" he said.

The lottery's appeal more as dream than reality was confirmed last year, when Powerball sales dipped.

"Last year, we had a lot of winners," said Charles Strutt, executive director of the Multi-State Lottery Association. When that happens, overall sales fall.

"That would seem to counter logic," Strutt said. But winning means starting a new Powerball cycle, with the jackpot only in the tens of millions, when it's the really big jackpots that drive sales.

"Why not give $1 million prizes to 300 people?" Strutt asked. Because "nobody would buy" tickets.


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 TRACKBACKS: (0) There are 8 Comments:

  • Posted by

    Just for the record, I DID NOT WIN the POWERBALL. 
    Although, I did drive by the U-Stop in Lincoln, Nebraska within an hour of the winning ticket being sold there!
    Imagine if evryone who bought a ticket for a dollar put that same dollar in the offering plate on Sunday....  Hmmm?

  • Posted by

    Could a church purchase one ticket every drawing (104 per year) and trust God that if God wants the church to have 1 or 70 million dollars, He’ll provide the winning numbers???

    Think of it as a cheap “insurance” with somewhat higher odds.

  • Posted by

    By the title, I thought we were going to get suggestions such as ‘change your phone number, relocate without informing relatives, and don’t buy a car dealership with your buddy from high school.’

    Just last week I gave a speech at Toastmasters (public speaking club) about people who win the lottery and lose it all. About 80% of winners lose it all within five years.

    The reason is simple. Most people are accustomed to spending everything they make, so it just takes a little longer to spend millions.

    I even found a story about a lady who won a lottery twice, and blew it both times.

  • Posted by

    I heard on Clark Howard (Atlanta consumer radio guy -clarkhoward.com) that something like 1 in 9 people think that winning the lottery is THE way to provide for their future in terms of retirement. Yikes.

  • Posted by

    Only one question “Why are Christians Gambling?” Just a question.

  • Posted by

    Allen,

    God can’t bless you lavishly if you don’t play. (duh!)

  • Posted by Bernie Dehler

    Lotteries are so sad.  You never hear the stories of the destroyed lives by those who play it.  Where do you think all the money comes from? Hello?  It’s a very sanitized form of evil, like a white-washed tomb.  What a scourge on society!

    ...Bernie

  • Posted by

    Hey Bernie,

    How about you buy me a lottery ticket every week and when I win I’ll buy a house next to your buddy “TDJ” so you can come over and visit him regularly, plus I’ll TITHE on it to your ministry! How cool is that?

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