Comments on: A picture is worth a thousand statistics

By: Bud Fox

Bud Fox — Mon, 05 May 2008 15:50:24 +0000

Nope - you are way off with that.. Wron on too many levels to count..

By: Jason

Jason — Sat, 03 May 2008 03:33:08 +0000

Jennifer, I think you’re right in saying that it isn’t rational to expect anything but a negative (long term) payout from a lottery ticket. To the extent that we embrace rationality (and there are indications that this may not be the best strategy), I think the question is, how ought I best to invest my money in order to obtain a maximum return? I believe a 1 in 17,000,000 chance of winning $15 million dollars is a much greater chance then most people would ordinarily have of making that much money.

To quote Lloyd from Dumb & Dumber “You’re saying I have a chance?”

The problem that can crop in thinking about aggregates is that from the individual perspective, I don’t care that it averages out to a negative value in the long run. I just care about my specific lottery ticket.

The lottery ticket is also egalitarian in a way that life is not: you don’t have to be exceptionally skilled or intelligent to win the lottery, something that isn’t true for business.

Really liking this blog, good luck with it.

By: Jennifer

Jennifer — Thu, 01 May 2008 01:27:53 +0000

Jason, I agree it isn’t necessarily “wrong” to buy a lottery ticket. The few times I did it I got much more than my dollar’s worth of daydreaming out of it, for example. But I would contend that odds of 1 in 17,000,000 are too low to rationally expect anything out of. Your second point is a good one; statistics are generally presented in whatever way will benefit the presenter, not us, and it takes work to figure out what they’re actually saying.

By: Buy To Let on The Finance World For News and Information Around The World On Finance » Blog Archive » A picture is worth a thousand statistics

Mon, 28 Apr 2008 22:14:59 +0000

[...] A picture is worth a thousand statistics …realm of personal finance–it’s important not to let this fallacy … is now a millionaire, but that doesn’t mean you should buy penny [...]

By: Jason

Jason — Mon, 28 Apr 2008 13:53:58 +0000

I agree with most of what you’re saying, but I want to make two quick points:

1) The lottery is often used as the prime example of irrationality (taxes for people who can’t do math/are stupid). I think this is wrong headed, there are few other ways for your average individual to obtain an option like payoff in a legal manner. To put it another way, it is not always strictly wrong to place money on a negative expectations bet.

2) There are studies that show the problem is not so much that we don’t have a good sense of statistics, but the way that they’re worded often messes up our intuition. But we don’t often have the time, inclination, or ability to reword everything.