# A \$640 Million Lottery Jackpot and a Lot of "Skewness"

The press and the streets in the U.S. are buzzing today about the world record \$640 million lottery jackpot that will be drawn tonight at 11pm in Atlanta, GA.

This excitement is an example of what economists call “skewness.” The odds of winning have been quoted as 175 million to 1 — yet all of us are hoping to be that one. We explained the irresistible appeal of skewness (and the lottery) in our Freakonomics Radio podcast “The No-Lose Lottery.” In that episode, we also introduced a new financial product called Prize-Linked Savings accounts — an idea that utilizes skewness to encourage saving. We also explained why lottery commissioners would probably hate it.

Stephen Dubner explained on CBS This Morning why we love the lottery so much:

#### win or lose ....

My husband keeps on bugging me about buying a ticket. I mean what are the odds of winning two different lottery's at once? Almost nil. so I guess we all should be a bit optimistic. Don't play these numbers 246810. Reminds me of an experience I had lately. Told a woman in a dressshop that I liked the dress that she was trying on and of course she immediately bought it.

#### Tony

I love how Dubner says, basically, don't play the lottery, and then they go into a long discussion about how to pick numbers.

#### That Guy

The video says \$540 Million, the blog post says \$640. Well...which is it?

#### Tony

It was estimated at \$540 Million at the time of the video and \$640 Million at the time of the blog post. They also give different odds.

#### Dana C.

If we abolish the penny, each hike in gasoline will be five cents.

Each hike in SALES TAX will be five cents. Do you really want to pay ten, fifteen, twenty cents in sales tax?

Each hike for stamps, five cents.

Each hike in natural gas therms, five cents.

And so it goes... Keep the penny. Change the metal from which it's made.

#### Larry Zamora

I don't play the lottery, mostly because of the lousy odds and because I don't actually need hundreds of thousands or millions of dollars to be happy. Don't get me wrong, if such a sum were to magically fall into my lap, I obviously wouldn't turn it down. On the other hand, I would buy a ticket every week if I knew that 10,000 people in my state were each going to win say, \$20,000. The odds are way better, and the potential windfall would make a significant and positive impact on my monthly budget. Could such a lottery be successful?

#### MW

I don't gamble on the lottery, but occasionally I play what I call 'inverse lottery'. It goes like this: Pick your lottery numbers. Do NOT buy a ticket. Watch the lottery draw. If your numbers come up, you just lost \$640 million (or whatever the prize would be.) If your numbers don't come up, you just won \$5 (or whatever the ticket would have cost.)

#### Dave D

I love how in the report, even after the evidence that it is massively unlikely to win, the reporters focus on eventualities of winning, like hiring a lawyer and a financial adviser, and picking numbers higher than 31 as a strategy. I think they missed the point.

#### Jeff light

If the odds are really 175 million to 1 with a payout of 640 million, I'm not sure this is an example of skew. One need only buy one ticket for each of the 175 million possible combinations to guarantee a return of \$465 million.

#### Nick

That's not really true if you consider the chances of splitting the jackpot with someone else, taxes, the reduced jackpot if you take a lump sum, or the time value of money if you take the annuity.

#### DrTocToc

Doesn't the ticket cost \$1? Given the odds, for someone who's not risk averse, playing the lottery when the jackpot is over 175 M\$ is rational?

#### Jeremy Willis

If the odds are 176 million to 1, what's to stop me from buying all of the combinations and tripling my money. If I had \$176 million that is.

#### kombizz

I have never played any of these sorts, perhaps because I feel I am not so lucky with money, at least in this life!

I see 3 people won it. Imagine that?! I wonder many piggy banks could be filled with the gross 213 mill they're each getting. Hope they got their heads screwed on right enough not to spend it all before the end of the year.

#### MLL

175 million to 1 means that if I play 175 million combinations (all possible ones) I'll win 600 million (or a fraction shared with other lucky people), besides the minor prizes?

Is this a guaranteed investment for people who needs to do some "money laundry"?

About viability... how long it will take to play all those combinations (supposing we can play the max numbers per ticket). Is this an accepted bet?

And if I play \$175M, is this value added on the jackpot or goes to the next one?

That's a good theme for the next movie.