What is the boundary between investment and gambling? Part 3: Lottery Edition - Tokyo Institute of Comprehensive Research -

Hello everyone!

We are the Tokyo General Research Institute staff team!

This time, we would like to look at the lottery.

If you win first prize in the lottery, you gain billions of yen in wealth.

"I can buy anything I want"

"I can live a lifetime by just playing"

I think everyone dreams of such things when they buy a lottery ticket.

But in reality, the return rate of the lottery is extremely low.

astonishingly about 50% .....

The expected value of a 300-yen lottery ticket is 150 yen.

It is truly a loser’s game.

Let’s think about this terrible game using the example of a rock-paper-scissors tournament.

There are 40 students in your class.

The class leader spoke.

"Let's each contribute 1,000 yen to hold a rock-paper-scissors tournament. Pair up, play rock-paper-scissors, and give your remaining money to your opponent if you lose. Repeat this, and the last one remaining wins everything!"

Then the tournament is held, A-kun becomes first, and the class erupts in excitement.

Then the classroom door opens, and the feared homeroom teacher, the鬼 teacher, enters.

"Why are you playing such a game on your own? Did you get my permission? Well, I’ll forgive you this time. But give me half of A's prize money."

And from A-kun’s 40,000 yen, the鬼 teacher took 20,000 yen.

How was it?

The鬼 teacher is utterly unfair, isn’t it?

Everyone dreams of paying 1,000 yen and obtaining 40,000 yen.

Yet in reality, this game was a bad game that could only yield 20,000 yen.

This is the reality of the lottery.

There is a dream of striking it rich, but half goes to the house.

If you think calmly, there is probably no worse condition than this.

We looked at the lottery; how was it?

The lottery has a low payout rate, and winning is completely a matter of luck.

Therefore, it is considered to be the most gambling-like.

Anyone seriously considering asset management should absolutely not touch it.

That’s all for now.

Next time, we would like to look at stock investments.

Additionally,

the Tokyo General Research Institute representative, who has handled Forbes monthly’s investment column for five years,

is delivering this blog.

The knowledge of a 20-year active manager is condensed here!

If you’re bored with ordinary explanations, this is a must-see!