Mega Millions drawing tonight 3-3-2012 hits 640 MILLION dollars!!

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Andrew Jones
Investor · Los Angeles, CA · Member since 2011 · 242 posts · 61 votes
14y

I bought a ticket. If I win next years BP Summit is on me.

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  • Joel OwensBusiness Member
    Moderator
    OP
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    Typo should be 3-30-2012

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    About $275 million after taxes if you take it in a lump sum. That makes the payout about $1.50 per a dollar bet. Of course one (or more) people will collect all the winnings and everyone else will just lose their dollar. Nevertheless, its the first time I've ever seen a lottery be a positive expectation game.

    0Reply
  • Anson YoungBusiness Member
    Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
    14y

    I may throw $5 at it for fun. Or I might buy myself a beer.

    I'd easily give away $175mm and live off $100mm.

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  • John Hall
    Real Estate Investor · Denver, CO · Member since 2012 · 41 posts · 3 votes
    14y

    Guess in hopes of winning I should start drawing up some nice HML signs ;)

    Anyone need money for anything?! hahaha

    0Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    14y

    The hype over the dollar amount is funny. Goes right along with the presentation by Bruce Norris on what drives the economy of real estate. For some reason it is a better idea to buy a ticket when the amount is high than it is when the amount is low. Nothing has changed, the odds never change. But people get hyped up so everyone has to go out and buy a ticket because they think they may be missing out on something.

    0Reply
  • Christopher Brescia
    Rehabber · Vernon Rockville, CT · Member since 2011 · 18 posts · 3 votes
    14y

    Actually the Cash Option (which is already a net tax amount) is $462 M

    You could buy a brand new Lamborghini every day for the next 5 years before you used it all up. HAH.

    0Reply
  • Tim M.
    Rental Property Investor · Lake Hopatcong, NJ · Member since 2011 · 37 posts · 3 votes
    14y

    Agreed Rusty Thompson - in fact, the odds actually go down. More money = more people buying tickets. And yet, I still bought 5 tickets... at least it was with a pool of 30 people - 150 chances to win, albeit maybe a mere 7 mil instead of 200.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y
    Originally posted by Rusty Thompson:
    The hype over the dollar amount is funny. Goes right along with the presentation by Bruce Norris on what drives the economy of real estate. For some reason it is a better idea to buy a ticket when the amount is high than it is when the amount is low. Nothing has changed, the odds never change. But people get hyped up so everyone has to go out and buy a ticket because they think they may be missing out on something.

    Sorry Rusty Thompson, but the amount you can win absolutely does change whether or not its a good bet. In any betting situation, the odds and the potential win amount are multiplied together to determine a "expectation value". If you were betting a dollar on a coin flip and you win $2 if you guess correctly, the expectation value for your $1 bet would be $1.

    Probability of losing 0.50 (i.e., 50%), amount won $0 (i.e., you lose your $1) = $0
    Probability of winning 0.50, amount won $2 = $1.00
    total = $0 + $1.00 = $1.00

    That's called "true odds", which means the game pays out the same as the odds of winning.

    You almost never actually have that in any casino game. The one exception is the odds bet in craps, which really does pay out true odds. Most games have a house edge. To put a edge into this coin flip, we could make it pay out only, say, $1.90 if you win. Now it looks like:

    Lose probability 0.50, return $0 = $0
    Win probability 0.50, return $1.90 = $0.95
    Expectation value = $0 + $0.95 = $0.95

    That's equivalent to roulette where the wheel has 0 and 00 (common in the US). The odds of hitting a number are 1 in 38 but they only pay you 1 in 36. Play long enough and your money disappears.

    Now, if the coin flip game paid out $2.10, the outcome would be quite different:

    Lose probability 0.50, return $0 = $0
    Win probability 0.50, return $2.10 = $1.05
    Expectation value = $0 + $1.05 = $1.05

    If you could play this game, and you had enough bankroll to survive the inevitable losing streak, you could play forever and your pile of money would just get bigger. There are video poker machines in Vegas that are positive expectation. Trouble is, the denomination is low and the net return works out to about minimum wage.

    On Tuesday, the cash payout on megamillions was $260 million. After taxes thats about $156 million. So you get:

    Lose probability effectively 1.0 return $0 = $0
    Win probability 1 in 176 million, return 156 million = $0.886
    Expectation value = $0 + $0.886 = $0.886

    Negative expectation game

    With today's estimated cash payout of $462 million, giving you $277 million after taxes, the picture is much different

    Lose probability effectively 1.0 return $0 = $0
    Win probability 1 in 176 million, return 277 million = $1.57
    Expectation value = $0 + $1.57 = $1.57

    A positive expectation game. In fact, and incredibly positive expectation game. If there was a machine in Vegas that had that high of a payout, people would be killing each other to get at it.

    For megamillions, the break even number is about $406 million. If you take the cash and pay the taxes, you're left with right at $176 million, giving you true odds on your bet. As soon as it didn't hit on Tuesday, and the projected jackpot went over $400 million, it became a whole new ballgame. And that's why its now rocketed up from $260 million on Tuesday to $640 million today.

    You are correct that you will most likely lose because of the very long odds. But the payback is good enough that its a good bet to make.

    2Reply
  • Tim M.
    Rental Property Investor · Lake Hopatcong, NJ · Member since 2011 · 37 posts · 3 votes
    14y

    Jon Holdman Wow - your lotto analysis is as comprehensive as your great RE analysis! Just curious - where does the 176 mil win probability come from? Wouldn't the win probability be based on the number of participants?

    0Reply
  • David Wedemire
    Real Estate Investor · Bellingham, WA · Member since 2008 · 407 posts · 90 votes
    14y

    The odds are promoted as the chance of the one combination winning based on all combinations. If more people buy tickets that just means a greater chance of duplicate winners. Your individual ticket number odds remain the same.

    0Reply
  • Jeff S.
    Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
    14y

    There was a mathematician on NPR last night discussing some tips.

    If you want to be a guaranteed winner, you’ll have to buy every combination of numbers (about 176 milion of them). Unfortunately, you could end up sharing the jackpot with someone who bought just one ticket.

    According to this person, most people play number they are familiar with and birthdays are a very popular source. He also said that most of us will randomly select odd numbers. Thus, according to this expert (who is still working, by the way) always even select numbers greater than 31 when you play the lottery. The probability of any one ticket winning won’t change, but there will be fewer winners sharing the pot if your numbers hit.

    0Reply
  • Tim M.
    Rental Property Investor · Lake Hopatcong, NJ · Member since 2011 · 37 posts · 3 votes
    14y

    I see - after thinking about it I saw my error. Although, more participants COULD mean less payout (more winners) which then could affect your expectation value, correct? Regardless of how you look it, we all have a better chance of contracting a rare flesh eating virus, or getting struck by lightning twice...

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    The 176 million is just the number of different possible combinations for for the tickets.

    If you could manage to buy all 176 million possible tickets, and could be guaranted of being the only winner, you win the $462 million. That's about a $300 million gain, so taxes would be about $120 million. Leaving you with a gain of $180 million on your $176 million investment. That's certainly an investment any of us would make.

    Trouble is none of these analysis accounts for multiple winners. My guess would be there will be multiple winners tonight.

    1Reply
  • James Hiddle
    Altus, OK · Member since 2008 · 2k+ posts · 690 votes
    14y
    Originally posted by Jon Holdman:
    Originally posted by Rusty Thompson:
    The hype over the dollar amount is funny. Goes right along with the presentation by Bruce Norris on what drives the economy of real estate. For some reason it is a better idea to buy a ticket when the amount is high than it is when the amount is low. Nothing has changed, the odds never change. But people get hyped up so everyone has to go out and buy a ticket because they think they may be missing out on something.

    Sorry Rusty Thompson, but the amount you can win absolutely does change whether or not its a good bet. In any betting situation, the odds and the potential win amount are multiplied together to determine a "expectation value". If you were betting a dollar on a coin flip and you win $2 if you guess correctly, the expectation value for your $1 bet would be $1.

    Probability of losing 0.50 (i.e., 50%), amount won $0 (i.e., you lose your $1) = $0
    Probability of winning 0.50, amount won $2 = $1.00
    total = $0 + $1.00 = $1.00

    That's called "true odds", which means the game pays out the same as the odds of winning.

    You almost never actually have that in any casino game. The one exception is the odds bet in craps, which really does pay out true odds. Most games have a house edge. To put a edge into this coin flip, we could make it pay out only, say, $1.90 if you win. Now it looks like:

    Lose probability 0.50, return $0 = $0
    Win probability 0.50, return $1.90 = $0.95
    Expectation value = $0 + $0.95 = $0.95

    That's equivalent to roulette where the wheel has 0 and 00 (common in the US). The odds of hitting a number are 1 in 38 but they only pay you 1 in 36. Play long enough and your money disappears.

    Now, if the coin flip game paid out $2.10, the outcome would be quite different:

    Lose probability 0.50, return $0 = $0
    Win probability 0.50, return $2.10 = $1.05
    Expectation value = $0 + $1.05 = $1.05

    If you could play this game, and you had enough bankroll to survive the inevitable losing streak, you could play forever and your pile of money would just get bigger. There are video poker machines in Vegas that are positive expectation. Trouble is, the denomination is low and the net return works out to about minimum wage.

    On Tuesday, the cash payout on megamillions was $260 million. After taxes thats about $156 million. So you get:

    Lose probability effectively 1.0 return $0 = $0
    Win probability 1 in 176 million, return 156 million = $0.886
    Expectation value = $0 + $0.886 = $0.886

    Negative expectation game

    With today's estimated cash payout of $462 million, giving you $277 million after taxes, the picture is much different

    Lose probability effectively 1.0 return $0 = $0
    Win probability 1 in 176 million, return 277 million = $1.57
    Expectation value = $0 + $1.57 = $1.57

    A positive expectation game. In fact, and incredibly positive expectation game. If there was a machine in Vegas that had that high of a payout, people would be killing each other to get at it.

    For megamillions, the break even number is about $406 million. If you take the cash and pay the taxes, you're left with right at $176 million, giving you true odds on your bet. As soon as it didn't hit on Tuesday, and the projected jackpot went over $400 million, it became a whole new ballgame. And that's why its now rocketed up from $260 million on Tuesday to $640 million today.

    You are correct that you will most likely lose because of the very long odds. But the payback is good enough that its a good bet to make.

    The thing is that people don't see things that clearly. They don't pay attention to statistics or odds. They don't bother analyzing things they just see the whole picture and not the sum of its parts.

    That's why some faill REI. They don't properly analyze anything they just see potential profit and cross their fingers hoping that they can make huge returns.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Well, I've NEVER bought any lotto ticket before....NEVER! If I were to gamble I'd play black-jack, at least I can count cards!

    But, my GF has talked me into buying the winning ticket....so I guess I'll use some of it and start a mortgage company just for investors, flippers, and get some of you birddogs going with some closing funds! If someone has a decent deal I'd just fund it for ya! How's that?

    I'll let ya all know.....LOL

    0Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    14y

    I understand where your coming from Jon Holdman. And I appreciate where your saying.
    I was more referring to psychology of playing the lottery & your personal odds of winning, not your odds of loosing over the long haul. In my experience the lottery is rarely under 10m, the cost of playing is always the same. Very few of us have the money to buy all the tickets.

    Why, if your only going to buy one ticket, is it better to buy one at 10m as apposed to 500m. Your personal odds don't change. The payout is always huge compared to what a normal person makes.

    The hype is what causes rational people to buy in a "over heated" market. It applies across the board, with any "investment". The personal perception is what is really important.

    Jeff S if I was going to play the lottery. I would run a random number generator once and play those numbers for ever. Maybe cross reference with the most common # combinations. It may not increase my odds of winning, but it will increase my odds of not having to share the pot if I ever did.

    0Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    14y

    Not a small # would be the amount you won (if you played every ticket) in no jackpot winners.
    29,939,120

    I guess you could use it to pay some of the taxes :-)

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by Jon Holdman:
    ...its the first time I've ever seen a lottery be a positive expectation game.

    I've read articles about this happening in the past, and where teams of people -- at the direction of a rich investor -- attempt to buy every combination of ticket. Assuming there are no duplicate winners, its positive expectation. The example i can think of, they only were able to buy about 60% of the tickets before time ran out, but still got the winning combination.

    I'll see if I can dig up the article...

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    Investor seeks hard money loan for $40M non-recourse, non-secured.
    Contact me at my contact info below.
    :)
    :)
    :)

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    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by J Scott:
    Originally posted by Jon Holdman:
    ...its the first time I've ever seen a lottery be a positive expectation game.

    I've read articles about this happening in the past, and where teams of people -- at the direction of a rich investor -- attempt to buy every combination of ticket. Assuming there are no duplicate winners, its positive expectation. The example i can think of, they only were able to buy about 60% of the tickets before time ran out, but still got the winning combination.

    I'll see if I can dig up the article...

    Here's one example:

    http://www.nytimes.com/1992/02/25/us/group-invests-5-million-to-hedge-bets-in-lottery.html?pagewanted=all&src=pm

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    0Reply
  • Patrick Parry
    Involved In Real Estate · Dana Point, CA · Member since 2012 · 2 posts · 1 vote
    14y

    Winning this would make investing real fun.

    1Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    Not sure how many spaces there are on each playslip for megamillions. Even if its 10, that's 17.6 million playslips. I know the maximum plays on each ticket is 10, so, there would be 17.6 million tickets. For regular paper that would be a stack a mile high, and lottery ticket paper is thicker than ordinary paper.

    Funny how those officials claim its unfair to do these mass purchases.

    0Reply
  • Michael D.
    Investor · San Jose, CA · Member since 2011 · 355 posts · 90 votes
    14y

    This is most likely not positive expectation. The chance that you would split if you win increases as more people climb on.

    0Reply
  • Andrew Jones
    Investor · Los Angeles, CA · Member since 2011 · 242 posts · 61 votes
    14y

    I bought a ticket. If I win next years BP Summit is on me.

    3Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    What to do if you win the jackpot

    0Reply
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