Many of us have fantasized about what we’d do if we won the lottery. Some dream of a luxury home and a world trip; others would pay off their mortgage or student loans, or put the winnings into a variety of savings and investments. Others may consider donating some to charity or paying for their children’s education. But whatever you do, a windfall amounts to nothing unless you manage it carefully.
Lotteries have a long history, and a rich one in the United States. In colonial-era America, they played a significant role in paving streets and building towns, and were used to fund the establishment of the first college buildings. In the nineteenth century, George Washington managed a lottery whose prizes included slaves, and the country’s leading universities owe their very existence to the profits of state-sponsored lotteries.
These days, all but six of the fifty states run lotteries. The six that don’t, Alabama, Utah, Mississippi, Louisiana, and Nevada (where gambling is legal), are either religiously opposed or lack the fiscal urgency that prompted other states to adopt them.
A lottery is any competition in which people pay to enter and a prize is awarded by chance. This definition includes not only the obvious game of chance but also any competition that requires skill, such as a sports tournament. It is a remarkable invention. And despite its long history, few understand how it works. A lottery’s business model is based on a base of regular players. It gets 70 to 80 percent of its revenue from the top ten percent of users. The other 90 to 100 percent must somehow be lured in.