The lottery is a nasty tax on poor people

Published in The Jamaica Gleaner on 30 May 2015 6 min read

On Thursday, some lucky Jamaican won the biggest Lotto jackpot ever — US$3.4 million.  Someone else clinched the US$1 million Super Lotto last week.  Huzzah — if they’re good with money, these two nouveau riche can buy their dream houses, his-and-hers German cars, extended vacations at Couples, set aside American-college tuition for all their children, and still have a tidy sum for the retirement fund.  Sadly, that fiscally-responsible utopia is unlikely to emerge, because when they had far less, the winners were already wasting money on lottery tickets.

It’s hard to see the folly through the blinding light of fortune, and you might be itching to scratch your favourite numbers at the corner vendor, entranced by the proximity of wealth.  Hey, those guys were struggling just like me, and now they’re filthy rich!  Maybe I’ll be next!  Don’t do it.  You’re a thousand times more likely to be murdered by Christmas than hit the Lotto jackpot.  Playing the lottery is a fool’s errand, and a fool and his money… well, you know the rest.

There are two tricks that underpin all lottos.  The first is mathematical — in a game of random chance, it’s hard to know what will happen next, but easy to know what will happen overall.  Flip a coin, and you have no way to tell how it will land.  Flip a hundred coins, however, and it’s child’s play to intuit that roughly half will be heads.  In the same way, Supreme Ventures (SVL) doesn’t know or care what happens in tomorrow’s Pick3 draw — they can predict almost exactly how many players will win over the next ten years, which allows them to tilt today’s prices and prizes in their favour.

The second trick is psychological, thanks to humans being born optimists.  Studies show that we badly overestimate our chances of success in marriage, in sports, in the workplace — in short, in life.  Why?  British neuroscientist Tali Sharot found that our brain is physically better at processing good news than bad news about the future, an evolutionary adaptation that keeps us smiling despite knowing we’ll die someday.  When people were asked to imagine their own tomorrows, she notes in her book ‘The Optimism Bias’, “even the most banal life events [took] a dramatic turn for the better.”

Two tricks underpin all lottos — one mathematical, the other psychological

Betting-and-gaming companies use their rational calculations and our irrational expectations to grow an orchard of poison apples — the slot machine, the blackjack table, the horse racecard, and the unfairest of them all, the lottery ticket — knowing that we can’t resist taking a bite, and then another, and then another.  For Supreme Ventures, that means gargantuan piles of money — J$41 billion last year alone — and an ever-expanding gambling kingdom, including the JustBet and Acropolis brands.

But why punish success?  After all, we need robust, profitable local companies to employ some of the 420,000 Jamaicans out of work.  If we don’t blame Bigga soft drinks for capitalizing on our weakness for sugar, why chastise Supreme Ventures for exploiting our weakness for hope?

Because everyone indulges their sweet tooth, but it’s usually the poor who play the lottery.  The wealthy don’t need bouncing ping-pong balls, having already won life’s sweepstakes through inheritance or ingenuity.  And middle class families are more likely to invest their earnings in the bank, the bungalow and the baby.  It’s low-income folks, without steady jobs, social mobility or statistics degrees, who are especially susceptible to dream merchants.  “Mi love Cash Pot.  It addictive like smoking,” says Sheron Ellis, mother and Fletcher’s Land resident.  “If mi win a money, we cook, and if mi gamble and lose, mi just bear [the hunger].”

That’s a brutal set of choices to be enabling.  If I walked through Fletcher’s Land selling fake property deeds for $100, I could be rightly jailed for taking advantage of lower-class illiteracy.  Supreme Ventures runs the same scheme at the same price, yet its executives are routinely venerated, despite exploiting the Jamaican people’s innumeracy.

Taking advantage of people’s illiteracy is illegal, but exploiting their innumeracy is richly rewarded

The math couldn’t be simpler.  In Cash Pot, the five-times-a-day colossus which accounts for two-thirds of SVL’s revenue (J$26 billion in 2014), participants pick a number between 1 and 36.  For a regular player to break even, then, the company would have to back every $1 wagered with $36 of potential reward (since you can’t win more than 1/36th of the time).  Instead, they offer a loss-making $26 multiplier, literally banking on the ignorance of its customers.  When your business model boils down to conning people without great CXC results, you’re at best unethical and at worst a criminal.  Supreme Ventures is perfectly aware of this, which is why they promote their token contributions to sports, health and education programmes so heavily, hoping a spritz of disinfectant will cover the rotten stench.

The truth is the lottery is a nasty business, the kind of enterprise that thrives in dark-paneled boardrooms, away from public scrutiny, where commerce can trump compassion.  Supreme Ventures co-founders Paul Hoo (company holdings worth US$7 million) and Ian Levy (US$10 million) owe their eye-watering wealth partly to their old Campion College and Jamaica College degrees, but more so their willingness to levy a tax on the innumerate and repackage it, Janus-faced, as a ticket to their dreams.  But if you’re good with money, there’s only one way to really win big — buy stock in Supreme Ventures instead.

A version of this article appeared in The Jamaica Gleaner online on 30 May 2015, and in print on 31 May 2015, on pages F1 and F8. The online version was then removed following a complaint from Supreme Ventures Ltd. An apology appeared in print on 1 Jun 2015, and again on 7 Jun 2015. The article may contain defamatory content.

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