How Lotteries Work

we had this thing called the Hope Grant. I think we still do. I think so. We're like, if you keep a B plus average or more uh in high school, if you graduate with the B plus average and you can maintain it through college, you get a free ride to a state school and it's funded by the lountry. Yeah. That came along after I was there. It was it was it started actually when I went to college. I

think it was the first year. UM, and they there have been tons and tons of studies done on who's going to college, and it's generally white, upper middle class kids who are benefiting from the Hope scholarship. And then it's poor minorities who are playing the lotto in effect putting um white kids through college who who whose parents could otherwise pay for it. Yeah. A lot of people have called the attacks on the poor and definitely the ant the anti robin hood take from the poor and

give to the rich. Should we talk about some stats? Should get that out of the way. Yeah, I've got a few for you, josh Um. There is one study in California where they have shown that the racial and household income lines match up with how how California is divided. So sure has that been disputed at all? Yeah? People are saying they're cooking the books. They'll last questions like have you played the lottery in the last month, But they don't say have you bought fifteen scratch off tickets

per day? Yeah, that's a good point, so they don't really dive in there. I was reading a story I think from CBS News Texas in two thousand and seven. They found that um blacks and Hispanics play the lottery twice as much as whites do, regardless of class. Yes, and scratch off tickets are apparently the crack cocaine of lottery in Texas is the first state to offer a fifty dollar scratch off ticket. Holy cow, you pay fifty bucks to buy this thing. Have you ever gone on

like a little scratch off bender? I have before, And when you get into the grips of it, you might as well be huffing ether. There's no way out. Well, it's Massachusetts. One third of the calls to the gambling Addiction hotline or from lottery players. Really, yeah, I don't play it. I'm surprised it's just a third. Actually. Yeah. It's like um, alcoholism and beer. You can buy beer, you can buy liquor, and in a lot of states you have to buy it from a state store. This

is the same thing. These are state run vice operations, basically, yeah, pretty much, and their people have a real problem with them. But you know, the states just making so much cash off of these things that they aren't really doing a whole lot about it. Yeah, and here's the other thing. Before we get on with just what the lottery is, we should talk about a little more mouthfeasance. Apparently not very much money at all is going to K through

twelve education. Oh yeah, most lotteries go towards education. That's how the college. Yeah, it's all going to college. They said that less than one percent in um, half of the states that played the lottery go to K to twelve. And the other hinky thing is they they sell it to you as a as a benefit for education, like all over the marketing, but the legislation now many states are starting to kind of use it for whatever they

want according to their budget, Like in Missouri. When it started, I think it was like was supposed to go towards education, and now it's like thirty and they use it for budget shortfalls and whatever they need, they'll just rewrite the Law's grim. That's really grim, especially when you consider all the people who are just blowing cash on scratch off tickets or lotto tickets and have like real gambling problems. Huh.

So that's the controversy. Uh. And actually this problem goes back pretty far, right to the sixteenth century, I believe Florence Ferenz. Yeah, that's where the lotto comes from. And I think the term lotto is based on lots, like drawing lots, game of chance, luck. Yes, right, um. And so the first lotto that anybody is aware of where there was a cash prize given out was the lotto deferenze you want to say, uh, And that was again

in the sixteenth century in Italy. Um and in the US we've always had something of a little bit of a fever for the lotto, haven't we. Yeah. Apparently the Colony of Virginia was founded by raise money from lotteries, and there were two hundred lotteries permitted between seventeen forty four and the Revolutionary War that funded Rhodes libraries, colleges, bridges, churches. Yeah, a lot of them were for civic projects, right, yeah, yeah. And Princeton and Columbia Universities were built on a lot

of money. Did you know that I did in Latin I can't remember what it's what it is in latin Um, but the crest for Princeton it translates to Daddy needs in New Parachutes. And there's some dice on this shield. I know. If you have fifteen grand you can go to eBay and buy a lottery ticket with George Washington

signature on it. Sweet, pretty cool, huh. Yeah. So I had no idea that lotteries were this entrenched in the founding of our country, all right, Well, they they kind of fell out of favor I imagine probably in part because of the temperance movement in the nineteenth century. Temperance uh, and then in the twentieth century. But the mid twentieth

century lotto fever could not be suppressed. The inoculations ran out and everybody was like, give me some tickets, and New Hampshire live the way in nineteen sixty four with its first state run lottery of the century. I mean, I don't play the lottery myself at all, but I definitely see the irresistible lure of a dollar winning you millions of dollars. I don't know, man, let's just get this out of the way. Would you want to win

the lottery honestly? Mm hmm. And if so, what's what's the minimum amount you would have to win to not just below it? You know, I'm gonna say now, I wouldn't want to either, because, uh, stress and anxiety and complications. I'm just I want to make my life, keep it as simple as possible, and that would do that would just complicate everything. Oh, it definitely wouldn't. And all kinds of jerks come out of the woodwork, and yeah, I think you're kind of like, I don't have an uncle

from Venezuela, right exactly. Well, I guess it's possible this guy wouldn't. He's saying it was my uncle. So I get here's some money I should invest in his coffee bean field, right exactly, or you know, get some Nigerian general out of trouble via email. Um So, Chuck, I would not necessarily want to win the lotto either, unless it was such a vast amount that I couldn't possibly run through it, and I'd probably go off and travel

or do whatever. Yeah. I'm also one of those jerk offs who thinks that like, working for your money is kind of the thing to do. Chuck works sid for his money. You know, I would feel like I think I'd be very unfulfilled if someone just gave me a polocash, right yeah. And that's an excellent point too, because if you think about it, Let's say you did win a million dollars. Let's say you one time million dollars, and we'll get into how that trickles down to almost nothing

by the time it gets into your pocket. But um, let's say you won ten million dollars and after a couple of years you've blown through it, right, Yeah, You've done nothing to earn that money, so therefore you could never get it back. It was just blind luck. If you make ten million dollars writing a book or writing a movie, or in business or in real estate, you

can make that back again. Actually if you if you blow it all right, because you've done something for it, You've used your own um wits and in skill, but with a lot of know it's just a trip to easy Street that turns out to be hell well, that's why it appeals to so many people, except for the hell part. Yeah, you know, and that's why it's people see it as attacks on the poor because it's like here, even the scratch off tickets, you know, just a chance

to win like a couple of hundred bucks. It's kind of sad. At the same time, though, you have to you have to add a little perspective to it. You and I don't really play the louder. Like I said, I've done some like scratch off benders here there, but nothing more than like five or ten bucks. Right, I've got an occasional powerball, occasional power I'll admit that, um, but rarely. But consider this. You and I are um, upper middle class white guys age eighteen to forty nine.

Pretty much the entire country is based on whatever we want. All of the focus groups, all the studies, all of the the pharmaceutical tests, they're based on us, right, Like, we have it so ridiculously easy that I think it's entirely possible that we're blinded to why people play the lottery. If you simply don't have a leg up, if there's nothing you can do, if you're being kept down economically, socially,

or whatever. Um, there is this promise of I could really use a couple extra million bucks, and I don't care if some jackass does come out of the wood work and says he's my uncle. Like, I think it's easy to criticize people who play the lottery as stupid, right, But at the same time, I think that reveals a misunderstanding of where somebody's coming from. And then, of course there are just some jackasses who play the lottery because they're bored or just have or people who do have

a gambling problem. But I think that there is some promise of a lottery, and I think that the state praise upon that through their lotteries. Yeah, I mean, it's easy for us to sit here and say, well, if you spend a year on scratch off tickets, if you had invested that in the rath I ra a, then you could potentially have a retirement account. And it's just just shut up. Yeah, I've been poor man, and I can tell you the poor mentality is tough to break out of. Yes, I was. I was poor at one

point myself. Yeah, it sucks. And I was a lottery scratch off fiend. Not true. Yeah, So all right, dude, we really usually our tirades come towards the end. For some reason, we front loaded this one with let's talk about how lotteries work. Yes, Josh, if you are playing a game with fifty balls, let's say fifty ping pong balls, and each one that says the number your odds of winning is about sixteen million to one, and if they just add one ball to that soft balls, it shoots

up to about seventy six million to one. And the real reason I don't play that is a fantastic calculation. And you just did there. But and I don't mean to criticize you, a surprisingly simple one, actually, right, So, if you have six numbers that you have to pick out of fifty balls, your initial chance is uh fifty to six or it's like I think at eight point three to one, right, and you can go on down the line. After one ball is picked, do you have a forty nine to five chance? And so on and

so on. So if you take you to these and multiply them, that's where you get that sixteen million to one chance. Because they don't play lotteries with one ball if they If they did, then what would that be a one to one chance? Especially if it was just one number and they told you at a time the winning numbers is going to be six lottery? Um? So the yeah, you've also got power balls, right, which is

are multi state lotteries where everybody joins together. Um. And the most common one is you have to pick five numbers from a set of fifty balls. So use that calculation I just said, Um, But then you also have to pick one powerball number out of thirty six. Then you multiply that original calculation by thirty six, and you're up to seventies six point to seven, five million to one. Chance. Yeah, And like I said, that's why I don't play the

lottery for real. I just I would never ever, ever win it, so I'd rather spend that dollar on whatever, cigarettes, beef, jerky anything. Yeah, chuck, Josh, have you ever noticed that, UM, when you say win ten million dollars, what you actually end up with is like two point five million? Just tick y'all. Yeah, well, it depends you're talking about. UM. You can eat. You can choose either lumps on payment or pay me out over the next whatever twenty five years.

I think it usually is. Yeah, it looks like from from this article the best one to go with if your patient is the UM series of annual payments or annuity. I disagree. Okay, Well, I mean I would think you could make you get about a five pc interest return that way, and I think if you have half a brain, you can get a better return than that by investing that money. And also I think if you die, doesn't that it's not like they start paying your next of

ken or anything, right, No, they do everywhere. Oh yeah, it's been a lot of windfall. Becomes part of your estate. Okay. And actually, since you bring that up, there's a little bit of advice. If you ever do win a major lottery or any a lotto. Uh, the first thing you want to do is sign the ticket because it's a bearer instrument and whoever has it he turns it in is the winner. So you want to sign it. Uh. The next thing you want to do is go talk to a lawyer before you go into turn in your ticket.

Go get a lawyer. Yeah, you don't want to be standing on the stage with the big check without having like an accountant and a lawyer by your side, right, And the lawyer is gonna set set up a trust in a state all sorts of other stuff, and then you go in and you claim your winnings and the lawyer is gonna take a chunk. The lawyer is gonna take a chunk, but not as much as Uncle Sam. Huh. Yeah,

well that's just the case with everything. Uh. Of course, Uncle Sam's gonna take a time about twenty percent in federal taxes unless you win millions of dollars, and it's gonna shoot up to thirty nine percent, which is the highest tax bracket, and then add state and locals and you'll get about half of your money. And then if you choose a lumps some you get less anyway, So, like you said, a ten million dollar lumps on payment after taxes would be about two and a half a MILLI.

But you're done. That's the way I would want to do it. You are done with the annuitized payments, right you you're basically getting uh you start I think at what one percent? Yeah, and it goes up a little bit each each goes up a tenth of a percent each year. So you start off if you win ten million bucks, you start off with two fifty k, and then the last payment turns out to be five K,

and you get this check every year. UM. And the way that this is paid for there's the lottery is not just like we're sitting on this pile of cash. They couldn't do that. And what they do actually is they deal with UM bond agents, bond brokers, and they buy zero coupon bonds. Right, so like you have a set price that you're paying for him that day, and in one year or ten years or whatever, this thing

is going to be worth a specified amount of money. Right, So like in ten years, if you bought a two d and sixty dollar bond I'm sorry, twenty five years,

that would be about a thousand dollars. That's how that works, and what what the lotto does is they contact about usually seven bond dealers to find out who has the best rates, and they um, they purchase a package of twenty five bonds to cover your payout right, and then once the bond matures, they get the money, they transfer it to you and you get a check done done.

Pretty interesting and that usually ends up costing them this package of bonds about half of the jackpot, which is about what you get when you get a lump sum. So it doesn't really matter to them either way. Yeah, thin they said about the people choose the lumps some I can. I'm not surprised by that at all. Yeah. And Georgia, actually, I know there's other states too, has one of those win for life deals where there is

no lumps on. You get like fifty dollars a year for thirty years or something like that, and that's the prize. There's no like wiggle room and how you accept it. Yeah, other states give you a choice. No, no, No No, win for life is a specific game. Oh it is, okay, Yeah, so like if you play win for life, that that's your prize. Well, some states don't give you a choice.

They're like we give out lump sum or we give out a new attize or you can choose, but when you choose, you have to choose when you buy the lotto ticket. Yeah. I think New York you got to choose when you buy it, but most other states is like once you've won it, they let you choose. Pretty cool. Yeah, um, chuck, did you know that there's two types of lotto machines? I do now, Yeah, I didn't before. Yeah. I think all I've ever seen as the air mixed machines. Same here.

I think that's what they use on Channel two Action News. I know that dude, by the way, do you what's his name, John Crow? He's an old old friend of mine from TV production and he was picked as the lottery lottery guy and it looks really good and dress uh you mean dressed up. Yeah. Yeah, he's a nice guy. Yeah. And he's a nice guy using air mix machine. Right, And that is the one where you see the ping

pong balls floating around and the air it's yeah. And then they opened the little door and one at a time, the little ping pong ball slides up the shoot always visible. That's key. You can never have a ping pong ball go through a tube that you can't see through. That's bad news is it doesn't inspire confidence. And you'll also notice that all lot of drawings are live, which is kind of a big thing too, very important. I mean,

you suspect they're live. I guess if you don't believe that the moon landing was real, you probably aren't buying that the lot of drawings are live. Yeah, we should mention a couple of other security measures. Um and or again. It's actually overseen by the state police and the detect the attends each drawing. I thought that was pretty cool. Balls are usually weighed ahead of time. Why before and after? Why are we gonna talk about Pennsylvania? Let's do it

all right? The trimple six fix is what it's called. John Travolta in nineteen eighty John Travolta was it a movie? I can't remember. I think it was What You Got to Do with It? Then he was in a movie about it, Okay, but I think it was loosely based on the I don't think it was like a depiction of that. Yeah. Famously, in nineteen eighty, the Pennsylvania lottery was rigged by a masterminded not well because he got caught by a guy named Nick Perry, he was the

John Crow of Pennsylvania at the time. He was the announcer, and he got together with an art director and said, hey, dude, can you figure out a way to wait these balls except for three of them, I'm sorry, two of them four and six, And that way we know that only combinations of four six will come up. And I think there's eight combinations and a triple digit drawing. And they did it, but they, you know, they got greedy and got caught. Was the art director named Phoebe Buffet, No

she in the Trivalta movie. His name was Joseph Buck and he was pinched along with Perry and then some other people they had in on the scan that lingo. They basically they ended up that the cops were alerted to the fact that there was a very skewed amount of numbers bought for six and four and when it came up six six six, and they had all these people clamoring for winnings, they went, we should look into this.

I think that just the fact that it came up six six six alone should raised a few eyebrows, right, that's the number of the beast josh Uh and so he you know, they were. They were tried and convicted, and Perry I think some of the other guys sold him out and he went to jail just for a couple of years, then the Halfway house, and then he was on probation. So not a very big deal for him. I guess did he get to keep the money? No, No,

they got all that back. Okay, So yeah, they're using an air mixed machine, and since then, air mixed machines are still used. Obviously they use them. Your buddy uses it on the news. Um, but machine, Oh it isn't okay. Uh, he doesn't take it home and polish it at night before bed. No, but we could get a scam together with him. We should try it. Oh. Anyway, The other type of lotto machine that's generally used that's viewed as more secure, largely because of that scam, uh, is the

gravity pick lotto machine. Right. How does that thing work? Well? It uses like kind of rubbery balls that are heavy with two paddles that spinning opposite directions that mix the balls. Right, there's no air involved, there's no ping pong balls, there's no waiting the balls, and other than that, it's virtually the same thing as an an air pick ball. This is an optical sensor, so it's high tech. And then bam, six numbers, one after the other, and if you want,

if you pick them you want. I imagine, like I said, I don't play, I don't even want to win, but I imagine that's a very surreal moment when you look down at your ticket, because there's all those numbers. It would just I bet it's really difficult for your brain to really see that and except that that's what it's seeing. Yeah, we used to when I worked at in New Jersey at the restaurant, we used to pull That's really the

only time I ever played that much. We'd pull our money, the waiters would, and we'd buy like a hundred tickets. You know, you're throwing five dollars and I'll agree to split it and you know, buy the restaurant and burn it down if we want that kind of thing. Was Kelly, uh No, no, No No, this is a New Jersey at the store. Did Yeah, that's it. Well, if you want to read about lottos, and we also have an article called how to Play the Lottery, Tips and Guidelines, it's

pretty in depth, didn't it. I didn't read that one. Did you really in depth? Other tips? Yeah? What what kind of tips could there be? Well, there's like wheeling tracking, like basically paying attention to numbers. How different people doing pooling is is one thing. How many members there should be in a pool if it's a private pool, and then more than fifteen. If it's a largely commercial pool, no more than a hundred. Make sure that you're the

people who are organizing it are reputable, etcetera, etcetera. I bet that could get messy. Look at these spreadsheets. Yeah. So, if you are interested in playing the lotto and you want some tips and tricks, we won't judge. You know, you can type in lotteries on how stuff Works dot Com in the handy search bar, and there you will also find, in my experience, the first time I've ever seen the phrase hotter than a two dollar pistol used

in an article on the site. You'll find that by typing lottery in the handy search bar how stuffworks dot Com, which brings us, of course, to listener mail this indeed, herr Clark, Uh, this is I'm just gonna call this UM. I can't believe this happened. Email. This is from Ben and Megan, and they said this. My wife and I married in Las Vegas recently and one of those amazing Las Vegas chapels. It wasn't a tequila inspired spur of

the moment sort of thing. We planned it for several months and you guys actually played a part in our evening. Oh yeah, you remember this one. I can't believe this. Uh to explain, before we left, I had crafted a perfect wedding night playlist of my iPod. I've also added several of your podcast to listen to on the flight. Because he's a big, tall guy and he hates to fly, so apparently we helped that. After the ceremony, What what

is he being tall had to do with hating to fly? Well, he says he gets really uncomfortable in the seat in our podcast forget, So he's not afraid of flying because he's taller, and I'm just grant. So after the ceremony and dinner, we retreated to our lux sweet in the Trump Hotel, ordered a bottle of champa, queued up the playlist on my iPod, and plugged into the room stereo and slipped into the inn room. JACUZI first up Al Green, then Solomon Burke, Cat Power, Elvis Costello, and then Chosh

and Chuck introducing the Stuff you Should Know podcasts. It's not any worse than Cat Power, that's true. I hadn't realized the shuffle feature would shuffle everything on the iPod, not only the songs. Just in case you're wondering, we actually let it play. And that's a story of how you two took part in our wedding night. I believe that makes us your official Stuff you Should Know podcast

newlyweds ps. Was it good for you? That's awesome. The only way that story could be better is if they conceived during one of our podcasts and it was the show on like Lobotomies. Yeah, in Utah, we'd have legal claim on that. Baby. If you have an awesome wedding nights story, now, actually, you guys just keep that to yourself. Ag. Yeah.

If you have a story about winning the lottery and how it either uplifted your life, ruined your life, or made you cognizant of the phrase hotter than a two dollar pistol, put in an email and send it to Stuffed podcast at how Stuff Works dot on for more on this and thousands of other topics. Visit how stuff works dot com. Want more how stuff works, check out our blogs on the house. Stuff works dot Com home page brought to you by the reinvented two thousand twelve camera. It's ready, are you