A tax on stupid

I have often said that people who play the lottery are paying a voluntary tax on stupidity, but without much conviction. Today, after passing my second Powerball billboard I realized that playing the lottery is very stupid. Here is my undeniable proof:
Given the chance I believe that 99.9% of people would take $20k over a 1 in 146,107,962 chance at a big jackpot of, say, $100 million.
Given the historical return of the stock market of 10.3%, a $2 a week investment in an index fund for 30 years becomes $19,974.

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2 responses to this post.

  1. That all makes sense for a probability and economics argument. But, I still don’t think that playing the lotto is stupid. Consider two situations:
    1. I invest $2 a week in an index fund. 20 years later, I’ll have a little bit of extra cash, but really not enough to do anything life changing with, especially considering inflation, and how many commas there are in this sentance.
    2. I buy occassion lotto tickets. This allows to me to fantasize about winning. The odds are slim, I know. But, they are there. I can think of what I would do with a huge amount of cash, and how that would make my life sweet.
    Now, you are probably thinking it would be better for me to fantasize that I get hit by a rich mans car and can sue for money, as that is more likely than winning the lotto. But, really, it’s not as much fun.
    Long term, safe investments are the way to go. But, they are boring. So, I’d advise investing hundreds a week in good, long term investments, and a dollar or two now and then in a fantasy.
    Eric

  2. I agree Eric… What fun is investing $1 a week. Fantasizing with friends and about a big payoff is much more fun that fantasizing about the 20k you can have when you are fat and old. You are really buying a fantasy … Is $1 too expensive for a fantasy? Considering that … I have spent $104 (2*52) on so many things that give me way less excitement than 1 year supply of lottery tickets… I guess that one night at the bar should have been invested … oh well I enjoy being stupid.

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