Wednesday, 2 February 2011

Breaking lotto

Scratch tickets are more regressive in IQ than I'd thought. I'd figured it was a transfer from lower IQ folks who liked to play scratch games to relatively higher IQ folks who otherwise were penalized by progressive income tax systems. Scratch games help reduce the overall progressivity of the tax system.

It didn't occur to me that the top of that distribution would just crack the code for picking winners.
After analyzing his results, Srivastava realized that the singleton trick worked about 90 percent of the time, allowing him to pick the winning tickets before they were scratched.

His next thought was utterly predictable: “I remember thinking, I’m gonna be rich! I’m gonna plunder the lottery!” he says. However, these grandiose dreams soon gave way to more practical concerns. “Once I worked out how much money I could make if this was my full-time job, I got a lot less excited,” Srivastava says. “I’d have to travel from store to store and spend 45 seconds cracking each card. I estimated that I could expect to make about $600 a day. That’s not bad. But to be honest, I make more as a consultant, and I find consulting to be a lot more interesting than scratch lottery tickets.”

Instead of secretly plundering the game, he decided to go to the Ontario Lottery and Gaming Corporation. Srivastava thought its top officials might want to know about his discovery. Who knows, maybe they’d even hire him to give them statistical advice. “People often assume that I must be some extremely moral person because I didn’t take advantage of the lottery,” he says. “I can assure you that that’s not the case. I’d simply done the math and concluded that beating the game wasn’t worth my time.”
The problem wasn't isolated to Ontario scratch cards either. How could you turn it into a paying venture?
I then ask Srivastava how a criminal organization might plunder the lottery. He lays out a surprisingly practical plan for what he would do: “At first glance, the whole problem with plundering is one of scale,” he says. “I probably couldn’t sort enough tickets while standing at the counter of the mini-mart. So I’d probably want to invent some sort of scanning device that could quickly sort the tickets for me.” Of course, Srivastava might look a little suspicious if he started bringing a scanner and his laptop into corner stores. But that may not be an insurmountable problem. “Lots of people buy lottery tickets in bulk to give away as prizes for contests,” he says. He asked several Toronto retailers if they would object to him buying tickets and then exchanging the unused, unscratched tickets. “Everybody said that would be totally fine. Nobody was even a tiny bit suspicious,” he says. “Why not? Because they all assumed the games are unbreakable. So what I would try to do is buy up lots of tickets, run them through my scanning machine, and then try to return the unscratched losers. Of course, you could also just find a retailer willing to cooperate or take a bribe. That might be easier.” The scam would involve getting access to opened but unsold books of tickets. A potential plunderer would need to sort through these tickets and selectively pick the winners. The losers would be sold to unwitting customers—or returned to the lottery after the game was taken off the market.
HT: Xavier Marquez.

1 comment:

  1. Blackjack, video poker, and even modern computerized slot machines have much the same dynamic. High-IQ people tend to play less than lower-IQ people but a few of the smartest apply winning strategies, winning largely at the expense of the losers.