Last week, it seemed the entire country was abuzz about the lottery drawing that had reached over half $1 billion. While most of us understand the extreme odds necessary to win, millions participate with the belief made famous in their advertising campaigns – “you have to be in it, to win it”. Hopefully the two winners will be able to manage their instantaneous wealth unlike so many others in the past.
The odds of winning the lottery are stunning. But just how bad are the odds of any single ticket winning the big prize? Try 1 in 175,223,510, to be precise — less than the odds of someone becoming president of the United States or being born with an extra finger or toe. As the jackpot continued to grow the normal news stories of how preposterous your chances of winning also continued to grow.
The one that caught my eye in particular was the chance of dying from a bee or a hornet sting. As I am highly allergic to both of those insects, this one had what seemed reasonable odds compared to the lottery. The odds of dying from a hornet, wasp or bee sting are 1 in 79,842, according to National Safety Council. So remember that the next time you are having a picnic in the great outdoors, you should watch out for buzzing insects.
However, the stories that are more fascinating than the odds of people who die from lightning strikes (one in 135,000), or die from a shark attack (one in 11 1/2 million), are the stories of the so-called experts who can “predict” the winning numbers. Apparently there is a cottage industry of people who actually claim that they can determine the numbers that will be randomly selected by the machine, and charge a fee for this ability. The fact that someone has won multiple times has suddenly made this person an expert in deciphering the randomness associated with the number picking.
But instead of classifying the good fortune merely as luck, the media has tried to classify the success of having winning tickets as having been achieved through having a special insight and/or special ability to determine what numbers the machine would select. People actually write books on the subject of selecting randomly picked numbers. Does this remind you of money managers of active funds trying to select the winners in the stock market? After a couple years of success, the same media is always quick to anoint them as having a special gift to select stock winners.
With the overwhelming chance that the person will turn out to have just been lucky for awhile and not skilled, one can negatively impact their overall lifetime investment performance by following these “skilled” money managers. For your investment portfolio, one should create an investment portfolio that has more to do with diversifying the portfolio to capture the overall asset class return and not spending your time and money trying to locate this “stock-picking” skill which at best is unique and certainly hard to identify before 2 to 3 decades worth of investment returns are known.
As for your lottery ‘selection’, one should just pick numbers that have a personal meaning such as a wedding anniversary or birthday dates or just have the machine select the numbers for you. This will give you the same chance as the ‘skilled’ selection of lottery numbers – without the added cost.