If the lottery can accurately be called a “tax on the stupid”, does my playing it make me stupid? To understand (or perhaps rationalize) the answer, you need to understand the principles of Asymmetry.
As usually happens when the jackpot on PowerBall goes into the stratosphere (in this case it reached nearly $600 Million), someone here at TRC started a collection to play as a group. A pretty high percentage of our staff decided to play, even those with the most advanced degrees in statistics. So given the chances of winning are something like 1:175 million per ticket, why did we do it?
It certainly wasn’t that by buying so many tickets (nearly 50), the odds became anything near a slam dunk. In fact, they were easy enough to calculate (1:3,650,489.79) so there was no doubt in my mind that I wouldn’t win when I played and yet I still did.
The reason was simple. I had to choose to play or not to play and consider the likely outcome if we won or didn’t win:
- I play and lose (A small $6 loss and an outcome that my brain expected all along)
- I play and win (A massive win with my share being $10Million…despite expecting to lose, my brain is now elated)
- I don’t play and they lose (I have some very minor bragging rights, but ultimately I missed out on the fun and only saved $6)
- I don’t play and they win (Even as I console myself that the odds were with me, I feel like a complete idiot)
In other words, playing offered only upside and not playing only downside. That is exactly why we consider Asymmetric effects whenever we do analysis. Otherwise we may miss what really drives consumer decision making.