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Powerball math - a sure thing ?
Old 01-12-2016, 10:26 AM   #1
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Powerball math - a sure thing ?

So the odds of winning powerball are approx 300 million to one ... Does that imply there are 300 million combinations of numbers and one of those combos is the winning number?

If yes... And at $2 per draw does it make sense to be able to buy a ticket for one of every combination ? It would cost 600M?

Can one (theory of course ) just borrow 600m from, say Buffett or Gates for a possible return of 1.5B?

The cost of gambling tickets could presumably be deducted as business or gambling expense of winning the award... and the only risk is then having to possibly share the jackpot with others?

Seems like a risky but plausible corporate venture. Downside being bankruptcy ... Losing 600M but upside being 1.5B ?

What do the tax accounting and math majors have to say about this please ?
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Old 01-12-2016, 10:29 AM   #2
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Problem with that math is that you might have to share the $1.4 billion with one or more others, which destroys your economics of buying every number.
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Old 01-12-2016, 10:31 AM   #3
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I went through the same reasoning process 30 years back. The jackpot had gotten high enough that I figured my chances of winning were worth more than the price of the ticket. I went down and bought ten dollars worth.

The next morning, I learned the flaw in my logic. There were 5 winners, so my chances were only worth a fifth of what I'd calculated.

Those were the first and last lottery tickets I ever bought. (I did not win, by the way.)
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Old 01-12-2016, 10:31 AM   #4
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Originally Posted by papadad111 View Post
What do the tax accounting and math majors have to say about this please ?
Okay I'll chime in - yes, you could "borrow" $300M and buy one of every ticket, if it was feasible.

However, you need to be aware that with this big of a payoff, there is a non-zero probability of two winning numbers and tax implications that need to be taken into account. There was a pretty good write up on this on yahoo finance last week I think I posted a link in another thread. Edit: I found it.



http://finance.yahoo.com/news/one-ti...151318079.html
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Old 01-12-2016, 10:33 AM   #5
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In addition to sharing, There is also the tax thing. And actually acquiring the tickets would require many people in many locations.

There was an Australian company that did something similar a few years ago and it worked out.

Group Invests $5 Million To Hedge Bets in Lottery - NYTimes.com
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Old 01-12-2016, 10:45 AM   #6
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The taxes are not the issue because as you said, you can deduct gambling losses up to gambling winnings if you itemize (you would need to find about $14,000 of other deductions to make it worthwhile to itemize).
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Old 01-12-2016, 10:53 AM   #7
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Barring the "two or more got the same Number" ...

So are the odds of 2 people getting the right numbers the same as one person getting the right numbers?

Or is it 300m:1 X 300m:1 ? Making the odds worth the 600m bet ?

Taxes are irrelevant here because of the ability to deduct the expenses against the earnings.

So the 1.5b annuities payout less 600m investment (and assuming some carry over for the next X years to consume the gambling expenses). makes for a nice annuity of 900m over 29 years.

Even a lump sum deal seems like a positive 200-300M bet. Surely there is some bookmaker willing to gamble that they will hold the only golden ticket.

Willy Wonka anyone ?
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Old 01-12-2016, 11:02 AM   #8
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It isn't even $600M to buy every ticket. In order to cover all possibilities, you will need to have every one of the 26 powerball numbers. One of those numbers is going to win you double your money.

So you can buy every combination for about $550M and put the remaining on a Visa card since you know you will get it back immediately.

There are also the $1M guaranteed prizes, so that is $25M more you will absolutely win (put that amount on your Amex).

So really all you need to come up with is $525M

If you are the only winner, you win $900M lump sum, leaving you a profit of $375M
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Old 01-12-2016, 11:05 AM   #9
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Thanks. Entirely mental exercise but there is some smart rich guy or government thinking along these lines I am sure. King Saud perhaps ??
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Old 01-12-2016, 11:06 AM   #10
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Most (all?) Powerball sellers only take cash, so first you need to haul $600m worth of dead presidents to your local 24-hour Sem-Leven.

Then, if your Sem-Leven clerk is really proficient you can buy tickets at the rate of 10 per second, never missing any possible number combination by mistake of course, and after about 347 days you'll have your 300m tickets.
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Old 01-12-2016, 11:11 AM   #11
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My Quickie Mart has 2 lotto machines. And the clerks work faster when they get a commission on the winnings. (Insert side to side head boggle here).

Theory. Just a theory.
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Old 01-12-2016, 11:13 AM   #12
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Originally Posted by papadad111 View Post
Barring the "two or more got the same Number" ...

So are the odds of 2 people getting the right numbers the same as one person getting the right numbers?
I'm not sure it applies, but this math might fit into the "Birthday Paradox" (google it for more). The odds of two people in a group sharing a birthday are much higher than they might seem, since 'the birthday' is not a fixed number.


Quote:
Or is it 300m:1 X 300m:1 ? Making the odds worth the 600m bet ?
No, that would only apply if you pointed to a specific person, and said 'what are the odds that person and me will win'?

You have to look at the odds that any of all the other (unique?) numbers picked having a 1/300M chance. Or something like that!

-ERD50
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Old 01-12-2016, 11:21 AM   #13
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I'm not sure it applies, but this math might fit into the "Birthday Paradox" (google it for more). The odds of two people in a group sharing a birthday are much higher than they might seem, since 'the birthday' is not a fixed number.



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yes, there is a 50% chance that a random group of 23 people have the same birthday
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Old 01-12-2016, 11:25 AM   #14
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To have a chance of making it work you would probably need to form a kickstarter company and use social networking.

If 200,000 people participated and were given a computer generated set of numbers to buy, then each would need to fill out 1500 slips with those numbers and come up with $3000.

Isn't the money just insane? Even with 200,000 people running out and buying mass tickets, it is still $3,000 per person.

Really makes you wonder how Bill can even spend $70B. Even if he took a crop duster and dumped out $20 bills every day, he still would not be able to make a serious dent.
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Old 01-12-2016, 11:30 AM   #15
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Ok. Funny we discussed this. CNBC just posted an article stating this same discussion


Is there any way you can guarantee a Powerball win? http://www.cnbc.com/id/103296093
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Old 01-12-2016, 11:46 AM   #16
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If 200,000 people participated and were given a computer generated set of numbers to buy, then each would need to fill out 1500 slips with those numbers and come up with $3000.
Is there an app for that yet? An app could track all number combos already selected by others --who accurately entered their purchases into the app-- then generate a not-previously-used combo just for you. This is sort of practical because it behooves ticket purchasers to enter the numbers into the app so that others don't duplicate their winning pick.
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Old 01-12-2016, 11:47 AM   #17
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I think there is about a 63% chance that someone will win if 300M quick picks are bought
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Old 01-12-2016, 11:57 AM   #18
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Buying all combinations, or attempting to do so? I guess people here have shorter memory than I do, as that has been done before in the US. However, it was not for something as large as the Powerball, only a state lottery with fewer combinations. None of any lottery ever allowed bulk purchase, so every single ticket had to be filled in with the ordering slips, and printed out. Then, one must sort through the tickets by hand to get the winning ones, as you want to get all the secondary prizes, not just the jackpot.

I searched the Web, and rediscovered that it was in 1992 that a syndicate attempted to buy all 7 million combinations of the Virginia state lottery that had a 27-million jackpot.

They set up a streamlined process to work with multiple vendors, and reached a reported speed of 2,400 tickets/hour at each terminal, or 1.5 sec/ticket. That's still 2900 hours-terminal to print 7 million tickets, and if you have 100 printing terminals going, it still takes 29 hours.

To try printing 292 million tickets in a few days? Lemme see...

That would take 122,000 hours of printing. If you want to do it in 3 days running non-stop 24 hours, you need to set up 1700 terminals. And you would better have all the slips filled out before hand to feed to the terminals.

See: Group Invests $5 Million To Hedge Bets in Lottery - NYTimes.com.
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Old 01-12-2016, 08:48 PM   #19
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I think there is about a 63% chance that someone will win if 300M quick picks are bought
And in that case, the odds of two people picking the winning number is

0.63 ⋅ 0.63 = 0.3969

so about 40%.

and three people might win, that's still a 25% chance.

0.63 ⋅ 0.63 ⋅ 0.63 = 0.250047

So trying to buy all numbers, even if it could be done, is far from a sure bet.

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