Wednesday, September 12, 2018

Why playing the Lotto is the worst bet you can make

The South African Powerball and Lotto draws always entice players to win millions of rands in prize money – but despite promising a big win to the lucky few, the odds of actually winning the lottery are incredibly slim, with the return on spend being the worst in the gambling industry.
When BusinessTech tackled the odds of winning the Lottery six years ago, we found that you had a 1 in 13,983,816 chance of winning, with any one player needing to spend almost R49 million for a guaranteed win (buying 14 million tickets at R3.50 a pop).
Since then, the odds have become even worse.
The national Lottery has included a number of new games (including Powerball and Powerball Plus), and shifted the odds for the Lotto by increasing the number of ball from 49 to 52 in 2017.
According to the National Lotto website, this means that there are now 20,358,520 different combinations that one can play when choosing 6 out of 52 numbers.
With the cost of a single play now at R5, this means you would have to spend R101,792,600 for a guaranteed chance of winning.
Naturally these odds decrease if you are not aiming to win the jackpot, but even the best odds (a match of three ball excluding the bonus) are 1 in 71.7 – and the payout for a guaranteed win (R50) doesn’t even come close to what you’d need to spend to get it (R360).

While your odds of winning the Lotto are incredibly slim, you are even worse off if you are hoping to win the Powerball draw.
As per the Lotto, a single Powerball play will cost you R5,00. However there are 42,375,200 different combinations that one can play when choosing 5 out of 50 numbers and 1 out of 20 numbers.
This means that you can expect to pay R211,876,000 for a guaranteed chance of winning.
The National Lottery does not include the odds of winning lesser prizes in the Powerball in its FAQs, but instead breaks down how the winnings are calculated.

Why the Lotto is a really bad bet
The Lotto and Powerball prize pools are calculated at 50% and 48% of total sales, respectively – which means for every R1 you spend on the game, you have a chance to get 50 cents and 48 cents back.
This effective 50%/52% loss on what you pay is referred to as the ‘house edge’ in most casino games, which shows how much the casino – or in this case the Lotto – is guaranteed to make on your spending over time. Effectively, the profit made per bet.
For games like roulette, the house edge is much lower, around 5% – while games like blackjack and craps can be under 1%. Slot machines carry a wide range, but can be as low as 5% and as high as 20%, depending on the machine and game type.
While betting on everything to score a win is not a good tactic in any gambling venture, with state lotteries, it is particularly egregious.
State lotteries are money-making ventures, and the South African Lotto is no exception. The FAQ says that the Lotto generates revenue that goes to various charities which assist the poor. Ironically, however, it is largely the poor who spend money on tickets, trying to escape poverty.
No matter which way you look at it, it’s just a bad bet – and it’s been that way for hundreds of years.
Adam Smith best summed up the nature of a lottery in his 1776 book called ‘An Inquiry into the Nature and Causes of the Wealth of Nations’.
The world neither ever saw, nor ever will see, a perfectly fair lottery; or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it.
In the state lotteries the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent.
The vain hope of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining ten or twenty thousand pounds; though they know that even that small sum is perhaps twenty or thirty per cent more than the chance is worth.
In order to have a better chance for some of the great prizes, some people purchase several tickets, and others, small shares in a still greater number.
There is not, however, a more certain proposition in mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets the nearer you approach to this certainty.

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