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|Subject: Re: Quote from MadCapitalist's Profile||Date: 12/30/2002 2:37 AM|
|Author: SeattlePioneer||Number: 88122 of 709606|
<<. I bought $4 worth of tickets to the $315 Million Powerball Jackpot. I guess that makes me a risk taker. If I ever hit it, it'll be big. If I don't? People blow money on all kinds of stupid stuff, tobacco, drugs, liquor, cars, boats, fishing, hunting, travel, etc. What difference does it make in the end how one spends their discretionary money? Who am I to judge someone on what they find interesting and fun? It all pans out in the end. As long as I have a warm bed to sleep in and food to eat, I figure I'm doing all right.
Well, Art, you pretty much make the classic arguments of the lotto player. The Washington State Lottery Commission makes the additional argument that "You can't Win If You Don't Play."
My training in statistics leads me to conclude that this is a lie. The truth is that if lotteries advetized their wares honestly, the advertizing slogan would be "The Only Way to Win Is Not to Play."
With any form of pure gambling against the house where the statistical odds favor the house, you are guaranteed to lose all your money if you play long enough. The more you play, the more certain you are to be a loser. Even if you win $100 million, if you keep playing big enough and long enough, YOU WILL LOSE IT ALL.
The only way to win is not to play.
Just the opposite is true when the statistical odds favor you, as they can in investing if you invest reasonably and prudently. You may take hits short term, but you are just about guaranteed to win if you keep investing.
Now, I'm not telling you what to do with your money. If you want to spend $4 on a lottery ticket, help yourself. But as for me, I spend my extra $4 or whatever on my extra monthly DRIP stock purchases, or whatever investments look good at any particular time.
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