The Anti-Lottery Mentality

A single $2 ticket in South Carolina turned into $1,537,000,000. That’s three commas worth of life changing magic. And yet, lotteries are a funny thing – and not just in the stories about “what do you actually do if you win?” Playing the lottery despite impossibly low odds is still really popular. Americans are very much OK with never seeing that money again. So why do people play at all?

While we in the finance profession normally obsess on the “return on investment” (i.e. the growth of $2 into $1.5 billion), we should instead focus on what Seth Godin calls “the return on dopamine.” We can see this very easily in other domains. When we’re deciding to diet, exercise, or invest for our future, we’re basing that decision on something that feels abstract because the outcome looks really far away, and therefore, wouldn’t it be amazing if we found a shortcut?

This balancing act between the desired yet distant outcome and the near-term impending misery is exactly the reason the lottery is so successful – it’s the ultimate hope-filled shortcut. It requires minimal effort, allows us a brief respite for optimistic day dreaming, and it comes at a relatively low cost. The near-term reward of dopamine replaces the otherwise “ugh”-inducing factor that comes with eating broccoli, doing push-ups, or remembering to call HR and increase that contribution. There is no long-term except the desire to buy the next ticket and experience the illusion of a shortcut all over again.

The next time we see someone mentally wrestling with the meaning of some distant future abstraction, help them to pause and remember why there is no shortcut. Whether it’s retirement or interpreting social security benefits or their kids’ education, the signal to abandon hope or look for a shortcut is really a signal that something actually matters. Now is the time to really dig in. Those simple encouragements can go a long way. These are the cases where we don’t lose the value of the lottery ticket, and there’s a real reward at the end. We can all use a boost from a coach or peer from time to time.

So, remember: Maximize the return on investment, minimize the return on dopamine. The world needs more of us to think this way, and less of us to throw another $2 away.