The math geniuses who make guaranteed lottery profits

My 2020 book How to Spot Dishonest Arguments and keep your own thinking straight laments the absence of probability and statistics in high school curricula. I think all adults need to understand probability and statistics to a course 102 level to function in America.

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In my book, although not a P&S course per se, tries to give some highlights in the hope that the readers will seek out the whole course.

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One thing I did was explain expected value. I studied decision trees and decision theory on my own after college. Then I went to Harvard Business where that was part of the curriculum.

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Expected value was big in the FTX scandal which starred Sam Bankman-Fried (SBF). He loved expected value, although I accused him of missing the necessary complementary course in risk preference.

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Risk preference is about how percentage of your net worth fits in. A homeless person should not risk losing $1,000 regardless of the expected value of the bet; millionaires, like Star Trek’s Spock, should rely totally on expected value if the amount at risk is $1,000.

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One of the ways I explain expected value is thus: If you buy ALL of the tickets in a state lottery, you will win everything there is to win. And you will LOSE money overall.

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Very simply, states run those lotteries “for education” a.k.a. teachers unions. That means a percentage of the lottery income goes to teachers unions. Also, running a lottery costs money like selling potatoes. That cost is overhead. So winnings paid out, by definition, are the total revenue minus the teachers union cut and the cost of operating the lottery. According to Google AI, CA pays out 50% of lottery gross revenue to winners.

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So in CA, and probably every other state lottery, If you buy every single lottery ticket, you will win everything there is to win, AND, you will lose half the money you spent? That is the percentage that went to overhead and the teachers unions.

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If you just buy one ticket, your expected value is 50% of the ticket price. But if you ONLY buy one ticket, while 50% is the probability of how much you will win, the certainty is much lower.

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That is called the Law of Large Numbers which says that the larger the number of iterations, the greater the chances that the ACTUAL result will match the EXPECTED value.

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Wikipedia:

The Law of Large Numbers only applies to the average of the results obtained from repeated trials and claims that this average converges to the expected value.

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So the Asians and whites who understood all this frantically purchased as many numbers (players chose the numbers they wanted). They avoided super popular numbers like 12345.... and they knew that they might have to share the winnings with one or two other people who were just lucky on their one or two ticket bet.

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Thus does my book tell of the time in 2005 when the expected value of winning in the MA state lottery shot up to a profitable number. Suddenly, lottery officials noticed sales of tickets were skyrocketing in some Asian neighborhoods. Also, a ton of tickets were sold to MI at that time.

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Yeah, the guys whom Harvard discriminated against so they could do lots of black face in group photos.

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The Asian and U of MI guys were so smart that they saw the resulted unusually high expected value go positive because of one particular lottery getting out of synch because the pot kept getting bigger with no winners.

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So the Asians and whites who understood all this frantically purchased as many numbers (players chose the numbers they wanted). They avoided super popular numbers like 12345.... and the knew that they might have to share the winnings with one or two other people.

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It worked. They made a big profit.

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MA outlawed buying more than 90% of the tickets. I assumed that all lotteries took similar steps to prevent the discriminated-against by Harvard Asians and whites from ever doing that again.

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It is now a sort of glamorous card-counting, Thomas Crown Affair sort of entrepreneur activity. (In the first Steve McQueen Thomas Crown Affair movie, “Crown” was said to be a Harvard MBA.) Actually, there was another famous Harvard MBA how made a lot of money in casinos paying black jack and understanding the expected value law of Large Numbers from his Harvard undergrad studies.

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Google AI:

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Bill Kaplan, a Harvard MBA graduate, is known for founding and leading the MIT Blackjack Team in the 1980s, a group that famously used card counting techniques to win significant sums of money from casinos in Las Vegas. Kaplan initially delayed his Harvard Business School admission to focus on his blackjack team and generated a substantial return on investment in a short period. He later continued his studies while running the team as a sideline, according to Wikipedia.

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I believe he was banned from all casinos worldwide.

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Today’s WSJ tells of many such legal attacks on lotteries. See the front-page article “A Gambler Called ‘The Joker’ Took Down the Texas Lottery.”

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First, I object to the word “gambler.”People who do not understand this stuff are gamblers, a.k.a., idiots. The guys who do this in accordance with expected value and the Law of Large Numbers are simply legally taking advantage of incompetent lottery executives.

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The lottery bosses need to wise up. Otherwise, the public will stop buying lottery tickets and the wise guys will make a profit and the lotteries will always lose money. The public will stop buying the money losing tickets on the incorrectly drawn conclusion that the games are rigged by the Harvard skin-color rejects.

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The Tasmanian with the Eastern European name Zelijk Ranogajec made 57.8 million recently doing this on a recent Texas lottery. The money moved by a circuitous route and is now in the Isle of Man

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There are probably many such opportunities on planet earth for those who understand probability and statistics. I would suggest that they avoid publicity and accept smaller pay days.

I predict that this will be a major TV or theatrical release movie in the future.