By now you are likely sick of all the chatter about tonight’s astounding $1.5 billion Powerball lottery drawing. I have been quite critical of lotteries in the past. They are a classic grab for the free lunch, a desire for the benefits of wealth without the sweat and hard labor.
This is no small issue: As a nation, our lottery habit is truly stupendous:
Americans spent more than $70 billion on state-run lotteries. To put that into context, that’s more money than Americans spent on sports tickets, books, video games, movie tickets and music plus all of the apps, games and programs bought from Apple’s iTunes App Store — combined.
That's a ridiculous amount of money.
I have long believed that what you get for your $2 Powerball ticket is the opportunity to fantasize what you would do with your newly acquired hundreds of millions of dollars. (Disclosure: I bought $20 of tickets for tonight’s drawing). As my Bloomberg View colleague Matt Levine explained:
For me, being two bucks poorer would not impact my quality of life at all, while being $1.4 billion richer (with probability .000 [lotta 0s]1, and yes I know there are taxes and a lump-sum haircut) would impact my quality of life really quite a whole lot.
For most people, that’s exactly right. The two bucks won’t hurt you, while the upside is a game changer.
However, you are not most people. If you are reading this, you most likely are not looking for a way out of poverty or despair. Lottery tickets, scratch-offs and other such unlikely long shots are primarily the province of the poorest citizens. This probably is who Mark Twain (or maybe Samuel Johnson) had in mind when he observed that gambling is a tax on stupidity.
The pushback to idea that gambling is a tax on the feeble- minded is the notion that investing is little different from buying lottery tickets. It’s a big capitalist casino, with sky- high odds that put almost everyone at a disadvantage.
So here's the question: Is investing like gambling?