Friday, March 30, 2012

Voltaire recommends playing Mega Millions

In 1728, the finance minister to French King Louis XV declared by royal decree a new lottery to promote Parisian municipal bonds. Only bond holders were allowed to purchase tickets for the state run lottery.

The lottery went on for two years, when Voltaire noticed that the French government had accidentally created a lottery where the prize money was significantly larger than the cost of all the tickets. Voltaire along with his friend Charles-Marie de La Condamine and others formed a syndicate and bought all the tickets they could. They won over 1 million francs. While Voltaire was from a wealthy family, his lottery winnings made him extraordinarily wealthy.

Normally, U.S. state lotteries are the worst possible return on investment one can make, with less than 50¢ returned on each dollar paid. That is why only the poor and the elderly play. But with today's Mega Millions jackpot of possibly up to $640,000,000, the lottery becomes just like the one in 18th century France.

Your chance of winning is less than 1 in 175 million, so you are about 8,000 times more likely to be murdered and about 20,000 times more likely to die in a car crash. However, if you survive, even with the take-home lump sum amount being considerably less, and income taxes reducing the amount further, you still have an expected return of more than the $1 purchase price.

Like Voltaire, gather some friends and buy all the numbers possible. You will be a big winner…perhaps!

The problem comes if a couple other people share the winning number with you. Then it would have been wiser not to play at all.

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