Why Don't the ultra-Rich Play the Lotto When the Payout Exceeds the Odds?

Can the Rich Get Richer from playing the lottery? Let's look at this together.

If there's a mega-lottery in your state, you've probably noticed that the state usually has no problem in updating you about how the lottery jackpot has risen. In the Mega Million Jackpot Game, for instance, we can quickly calculate the total number of possible odds:

The game is as follows. There are two barrels of 56 balls each (numbered 1-56). 5 are chosen (without replacement) from one barrel, and 1 from the other, called the Mega Ball. So technically, you can have a number output of 13,18,21,31,47 and Mega Ball 47. The total number of combinations possible is a shade over 175 Million. If you're an avid lottery player, you should understand that you will ALWAYS have less than 1/175,000,000 chance of winning, no matter what the payout is. The payout is independent of your odds of winning. However, there is a better chance of the winning combination being selected as the jackpot rises (because more people play).

The game costs $1 per ticket entry. Which brings us to an interesting question--why doesn't Bill Gates, Warren Buffet, Oprah, or even high earners with say, $300 Million in Cash play the lottery when the payout is over $175 Million? If the Jackpot reaches $200 Million, and you play all 175 Million Combinations, you are nearly guaranteed a $200 Million Payout, right?

Well, this would be a good case where statistical analysis seems to make sense, but it's the real-world analysis that brings such a pie-in-the-sky idea back down to earth. Even if a billionaire put up the numbers, it would be as impossible

1. It would be a Logistical Nightmare.

- Imagine trying to go and print 175 million ticket combinations. Let's say it takes 1 second to print 1 line of numbers. 175 Million seconds of consistent printing would be needed--2,025 days--that's if it prints 24 hours a day, 7 days a week.

- The lottery numbers are drawn every Tuesday and Saturday, so you will need to draw it down to less than three days. Which means say rich guy would need some help. A lot of it. You would probably need about 2,100 people (700 people, 3 shifts) to convince 700 lottery retailers to allow them 24-hr, dedicated access to their machines (with NO pesky other customers), and they could do it under three days. (You will have to pay them all of course).

- Plus, we haven't even counted all the time it takes to fill in all those bubble-in sheets (Quik-Pik won't work because you run the risk of selecting the same numbers twice).

2.They Better be the Only Winner. Getting past the near-impossible logistics of actually playing all the numbers in the alloted time period, the rich guy would have to win the entire jackpot. If there is even one other jackpot winner, your "potential benefit" becomes an guaranteed loss.

3. Uncle Sam Gets a Cut. Also, you must take into account taxes, Capitalism's Conscience. A $200 Million Jackpot will only net you about $69 Million after taxes according to this lottery tax calculator if you live in a state with 6% income tax. (This assumes a "middle class" tax bracket as well).

4. Most millionaires are too smart to play. If you're a self-made millionaire (and most are) chances are the lottery didn't get them to where they are. There are an estimated 2 - 8 millionaires in the US, and even controlling for Fortune 500 Execs, Professional Athletes, Actors, and Entertainers, and Lottery Winners, there are still Millions more who got there without having to have superior talent. You just have to be smart with your time and your money. Small businesses, regular investors, retirees, etc., are the ones who make up the bulk of the millionaire pie. And there's plenty of room for more.

I would encourage you not to stuff more than 1% (if any) of your income into lottery playing--and it should still be included into your regular "entertainment" spending.