Sunday, January 10, 2016

Who Wants to Be a Billionaire?

It's time to play everyone's favourite game, Who Wants to Be a MBillionaire?

Yes, that's correct. Billionaire. With a "B". Billion. If you're the Koch brothers it might just be enough money to buy an election. It's enough money to give 999 people you know a million dollars and still have a million left for yourself.

It's a lot of money.

Of course, I'm talking about the upcoming Powerball lottery jackpot of $1.3 Billion. That's annuitized, though, which means that you would receive thirty equal payments starting with one this year and then for the next twenty-nine consecutive years. I did the math. The day you cashed in your ticket you would receive a cheque for $43,333,333.33. The last space tourist paid $40,000,000 for a trip to space. This means you could buy a spot on a Russian rocket and spend a week on the International Space Station once a year every year from now until 2044 and still have more than three million dollars a year left over to have some actual fun with, you know, in case a week in space every year isn't rocking your socks.

NASA took this photo

But is it worth it to buy a ticket?

Well, the odds are what the odds are and every draw they're the same, whether you play every week or once every ten years. In the case of Powerball, the odds are astronomical. I don't throw that word around lightly, either. I studied a lot of astrophysics when I was in university, so I understand the concept of astronomical. Time and space are mind-bogglingly huge, and the Powerball odds meet the definition of astronomical. To put it the simplest terms possible, you're not going to win.

But someone is going to win it eventually, right?

Yes. Someone is going to win, eventually, and they will be the luckiest son of a bitch since Billy Joel married Christie Brinkley.

AP Photo/Ron Frehm

I use a bit of simplified poker math to help me make my decision. In poker, there are a couple ratios that you factor in when you're playing: pot odds and pot equity.

Pot odds are easy because you simply figure out how much you put in and compare it to how much you get out if you win. If I need to call a bet of $10 and the pot I'll win is $1000 then my pot odds are 1:100 (winning a hundred times more than I'm betting). In the case of Powerball, you put in $2 and you stand a chance at winning $1,300,000,000. So your "pot odds" are 1:675,000,000. These are great pot odds. Matthew McConaughey would love this much pot.

Now in poker, pot equity gets a little more complicated. It's simply defined as how much you "own" the pot based on the cards you have and the cards that are still available. For the Powerball lottery simple probably math gives us our chances. In every Powerball draw, a single ticket has a 1 in 292,201,338 chance of winning. This is terrible pot equity.

To put that in perspective a lot of people like to use the "hit by lightning" analogy. I prefer to use something a little more personal, so to put this into perspective let me say that your chances of becoming President of the United States (assuming you are actually American and not someone like Ted Cruz) are one in ten million. Which means you are 29 times more likely to hold the Twitter handle @POTUS at some point in your life than you are to win the Powerball lottery.

POTUS on Twitter

Anyhoo... now that you've got your two numbers you can figure out if you should play or not. In poker, this helps determine if you should fold, or chase that card you need for a winning hand. You decide by comparing your pot odds with your pot equity. If your pot odds are better than your pot equity, then go for it.

So, for Powerball, our pot odds are better than our equity (by 3 to 1) and I'll be buying a single ticket (and not holding my breath). It's a small price to pay for a potentially massive return. I treat it as entertainment. It's fun, for however short a time, to have a non-zero chance at winning a billion dollars.

Plus, if you don't play your chances of winning are guaranteed to be zero, and that pot equity is as bad as it gets.

~ Andrew

P.S. I'm Canadian, so I'm going to have to get one of my friends in MA, RI, or CT to buy me a ticket before Wednesday's draw. I'll see you next week when I'm in town and give you 1% of my winnings ;)

2 comments:

  1. Can't win if not playing, or so all the sayings go, in some other wording - it all means the same thing. Every winner bought a ticket. All kinds of people who usually never participate are participating now.

    I took another of those train rides, and was starting to get that familiar feeling, but this time it was because of a storm brewing (in someone else). Before I had the chance to freak out, I had to attend to someone else's freak-out. Go read it on my blog! (But make sure you're not eating at the time.)

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    1. Thanks for reading, Grapes. I happily handed my two bucks (USD) to the folks in one of our U.S. offices. It was fun!

      I'm glad you were there for the train traveler (as I'm sure he is as well).

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