Robert Williams, a professor of Health Sciences at the University of Lethbridge, Alberta, offers the following scenario to illustrate how unlikely it was that Gloria C. MacKenzie (an 84-year old Florida widow) would have won $590 million in the Powerball lottery. You will only need to do it in about 10 seconds. You will need to spend 12 hours per day filling out tickets for the next 55 year to get your chance at winning. It will be costly. It will cost you $2 to invest at least 86,000,000 times.
Williams, who studies lotteries could simply have said that the odds of winning $590 million were 1 in 175 millions. That wouldn’t have registered. Williams states that “people just aren’t able to grasp 1 out 175 million.” It’s beyond our experience. We have no intellectual architecture or evolutionary history that can prepare us for this. Play. A total of 232,000,000 Powerball tickets were purchased by 43 states for the MacKenzie lottery. The lottery is so popular in America that spending on it during recessions has been steady. This is still true. According to a Gallup survey, 57% of Americans said they bought tickets within the past 12 months. According to the North American Association of State and Provincial Lotteries, U.S. lottery sales reached $78 billion for the 2012 fiscal year.
Although it may seem obvious, we continue to play. One famous slogan for lottery players is “Hey, You Never Know.” Someone has to win. To understand why so many people play a game that they will never win and have serious social consequences, one must suspend logic and look at it through a different set of rules. These rules are written by economists, sociologists, and social psychologists. The odds of success are often so small that it is difficult to comprehend, we see the risk as less about the outcome than how fearful or hopeful we feel when making a decision. It also has to do with how we organize and “frame” logical facts and how we view ourselves and others. The popularity of the lottery becomes much more understandable once you have mastered the alternative set of rules. It’s a game in which logic and reason are obsolete and where hope and dreams are available for sale. Rebecca Paul Hargrove is the best at selling hope and dreams.
Hargrove can be found in a purple executive chair with a large desk in an unassuming office park in Nashville, Tennessee. Hargrove is the president of Tennessee Education State Lottery Corporation.
Hargrove is a legend in the lottery world. She built multibillion-dollar lottery empires in Florida and Georgia from scratch during the 1980s and 1990s. Two years under Hargrove’s leadership, Florida outsold every other lottery in America, even California which had twice the population of Florida. Georgia’s Lt. Governor was present when Hargrove moved to Tennessee in 2003. Mark Taylor said, “Now I understand how the Boston Red Sox fan felt.” Babe Ruth was traded to the Yankees. Hargrove, he stated, was “the most respected lottery executive in the country.”
It was June’s hottest morning and Hargrove’s corner office on the second floor welcomed me. I was dressed in a pink Tshirt, khaki pants and a button-down sweater when she greeted me. Hargrove looked like a folky Fairy Godmother with a gift of schmooze. She had her snowy white hair in a loose, wavy bun and a pair glasses perched on her bridge. She was telling me stories about her hairdresser’s love for cat-themed instant games tickets, and the old lady who lived down the street from her mother and won $56million.
It’s a game in which logic and reason are obsolete and where hope and dreams are for sale.
Hargrove is able to see what motivates her customers to play the game. Hargrove has an uncanny ability to see where people’s psychological buttons are and what they need to do. My comment about the logic futility of playing the lotto was quickly answered by her. She said, leaning forward to emphasize, “If you made the logical investment decision, you’d play another game.” It’s not an investment. It’s entertainment. You can change your life for a small amount of money. You can spend $2 to imagine what you could do with half a million dollars, or even a whole day fantasizing about it!
Hargrove was not familiar with the business when James Thompson, the Illinois Governor, appointed her to lead the state lottery in 1985. The former Miss Indiana beauty queen and Miss America finalist in 1973 did learn a few things about selling products. After being offered a job on a weekend weather channel at the ABC affiliate in Indianapolis, she decided to move to Springfield, Illinois to work for NBC. She was a natural marketer and recruited her own TV advertisers. After becoming involved in politics, she rose to the position of Illinois Republican State Party Chairwoman before taking over control of the Illinois lottery.
Hargrove, in her new job, did what any smart marketer would do: she sat down to think about her motivations. She said that she played lotto because it was a thrill to win a jackpot of $40 million. “And I thought, ‘What made me go?’ What drove me to play was the idea of what I could do with $40 million. For $1, you can ask that question for three days. What if I could share my brother-in law’s meal? No! That brother-in-law is not my favorite. However, I would like to share my nephew with my neighbor.”
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Hargrove was able to make marketing a success of this simple insight. Over 200 advertisements were displayed on billboards throughout the state. One billboard in Chicago’s poor neighborhood displayed a photo of a tempting pile of lotto money. Hargrove advocated for bigger, more attention-grabbing jackpots. She played a crucial role in the creation of a multistate lottery that included nine states and District of Columbia in 1987. This allowed jackpots to reach as high as $80 million. She figured that the excitement generated by eye-popping jackpots would create more excitement than any single state could. She said, “The bigger the jackpot is the more tickets you can sell.” It feeds the dreaming.
Hargrove’s first days in the lottery industry taught her how to make the lottery dream real by making winning on a smaller scale something people can experience. Hargrove stated, “If you play a lot and play for three years without winning, then you won’t keep playing.”
Hargrove tried smaller prizes in Illinois. They had better chances of winning than the state Lottos. She saw a 5 percent increase in sales when she added a second weekly Lotto drawing. Hargrove created games that had different themes, prices, and designs to prevent player burnout. For cat lovers, she might offer a game that allows you to scratch off cute cats and for Bears fans, a game with footballs. On St. Patrick’s Day she might sell four leaf clover tickets and reindeer-themed tickets. Although the odds of winning are not likely, keeping it “fresh and exciting” gave it a sense of possibility, and made it more enjoyable. Hargrove understood that impulse purchases are common with game cards, so she focused on point-of-purchase marketing. She advocated for the cards to be as common as bubble gum.
Hargrove, a tireless worker in Tennessee, never lost her energy. She stressed that the lottery raised millions of dollars to support educational programs for children in the state. She stated that education has a direct impact on everything. It affects how legislators feel, how the playing public feels about it and how the media feels about you. All of these factors add up to a positive experience when you buy a lottery ticket.
Although Hargrove’s positive marketing is a great way to explain why we continue to play the lottery, scientists are now able to show how lottery marketing affects our brains as well as our communities.
It is possible to sell the lottery dream because the odds of winning are so small that they no longer matter. Complex odds were not created by our brains. The ability to tell the difference between a region that is at risk of being attacked by predators and one with a 1% or 10% chance of it happening wouldn’t have been a significant advantage in our evolutionary history. Jane L. Risen is an associate professor of Behavioral Sciences at the University of Chicago Booth School of Business. She studies decision-making and says that a more intuitive and crude method of categorizing would have been sufficient. She says that despite our advancements in mathematics and reason, we still rely on crude calculations when making decisions, particularly quick ones like purchasing a lottery ticket.
According to George Loewenstein (a Carnegie Mellon professor of psychology and economics), people can experience magic thinking, superstition or hunches in a conceptual vacuum caused by incomprehensible odds. He says that most of the strange stuff you see in decision-making and risk is caused by small probabilities.
It is possible to sell the lottery dream because the odds of winning are so small that they seem irrelevant.
Uncertainty activates brain areas that prompt us to seek out a solution. Uncertainty in the brain is considered a negative state. It shouts “I don’t have any idea what to do, I don’t know how to act, my body is at risk,” says Giorgio Coricelli. He is an associate professor of psychology and economics at University of Southern California. Your brain searches for information to help you make the decision. If there are not enough information, it can create strange associations and assume that something is real, even if it seems superstitious.
Coricelli states that there is a lot of historical research that shows the correlation between superstition and religion’s rise, as well as uncertainty. Coricelli also said that when it is impossible to increase a probability, people are equally likely to play lucky number 7, or insist on purchasing their lottery ticket at a specific time to increase their chances of winning.
Advertising is easy because of our proclivity to fantasize. Lottery commercials show winners riding in stretch limousines while they count stacks of cash, wearing evening gowns and tuxedos, and sipping champagne.
Because we fantasize about winning the lottery, the commercials resonate because it activates the same brain parts that are activated if actually win, says Daniel Levine, a psychologist at the University of Texas at Arlington and expert on decision theory, neural networks, and decision theory. Imagine yourself in a limousine, and the visual cortex activates. The auditory cortex lights up when you imagine the champagne glasses exploding. These brain regions are linked to those involved in emotion, decision making, and motivation. According to Levine, vivid daydreaming can have a significant impact on the brain’s motivational regions. Visualizing something can trigger the emotions, just as seeing it can.
Hargrove understood from the beginning that fantasy can lose its grip on us if it is always lost. According to the University of Lethbridge’s Williams, positive reinforcement has been proven to be a key factor in almost all of the winning lotteries. He says that lotteries that allow players the option to select combinations of four to five numbers from a total 60 numbers are very popular because players often experience the “near miss” which gives the illusion of winning the multi-million-dollar jackpot. However, most players don’t realize that “near miss” is a lie. With each match, the odds of winning decrease.
As we approach the cash register at the convenience shop, another important factor is our self-image. It turns out that lottery sales are greatly affected by how we think about buying lottery tickets and how we view ourselves in relation to other people when we do.
Loewenstein of Carnegie Mellon and his colleagues showed that it is possible to alter the number of lottery tickets people buy by getting them to think about their purchase in a wider context. One group of participants was given $1 each, five times. Then, they asked them if it was a desire to purchase a lottery ticket. A second group was given $5 and asked for how many tickets they wanted. The third group was given $5 and told that they only had two options: spend the entire amount on tickets or not purchase any tickets. People in the first group bought twice as many tickets than those who were asked to specify the percentage they would like to spend on tickets. The all or nothing group members opted for no tickets in 87 percent.
Romel Mostafa is an assistant professor of business, economics and public policy at Ivey Business School. He co-authored the 2008 study along Loewenstein. We think of these purchases one at a time. It adds up when you look at the purchases over time. If I had to divide the expenditure over a longer time period, I wouldn’t have bought it.
The same phenomenon of “framing” also helps to explain our misperceptions about the risk. According to Princeton Economist Hank Farber, most people view the lottery as “Boy! I could win $100,000,000” rather than thinking about what they might lose. He says, “To them, a dollar seems inconsequential.”
The way we view the lottery’s odds can have an impact on our chances of winning. The way we view our economic situation can have an impact on our decision to play the lottery.
Mostafa, Loewenstein and their colleagues devised a study to determine the impact of “feeling poor” on the decision to play the lotto. The researchers approached the Pittsburg Greyhound Bus Depot, who had an average income $29,228, and asked them to complete a questionnaire on “community issues.” Most of the survey was superficial. Researchers only cared about two versions of multiple-choice answers for the single question “How much do you earn?” Half of respondents received questionnaires that included “less than $10,000”, “less than $20,000”, and “less than $30,000” options. The rest were given choices to make them feel poor. These categories were “less that $100,000”, “less then $200,000” and “less over $300,000.
Participants were asked to complete questionnaires and received $5. They also had to decide if they would use the money to purchase lottery tickets. In a 2008 study, published in Journal of Behavioral Decision Making, authors found that those who felt poor purchased twice as many lottery tickets than those in the control group.
Because fantasizing about winning the lottery activates parts of our brains that are activated if it actually happens, the commercials resonated.
Loewenstein says that the lottery can be a way to increase your chances of winning. It is a way to remind yourself of your poverty and make the desire to lift the poverty more appealing. Lottery tickets are that much more appealing at this time.
He said that many poor people cannot imagine a scenario in which they suddenly become very wealthy. However, they also believe the lottery is a low-probability event. But, they do not consider getting a six-figure job.
This point was made clear by a Consumer Federation of America study that surveyed 1,000 adults about their views on wealth. Survey results showed that 21% of Americans, 38% of whom have incomes less than $25,000, believed that winning the lottery was the best way to build several hundred thousand dollars.
Loewenstein states that “a lot of people believe that the lottery can be a regressive” tax. This refers to taxes that don’t depend on income and take more income from the least able. A person who earns $15,000 per year and purchases $1,500 worth lottery tickets, has spent 10% of his income. However, a person earning $150,000 and buying $1,500 has only spent 1 percent. He notes that the poor spend a significantly higher percentage of their income on lottery ticket purchases than those who are more financially secure. It is not necessarily rational, but it is possible. Buy lottery tickets is an inexpensive way to raise the limit on what you can do economically.” This means that buying hope is sensible when your economic prospects are poor.
The way we see ourselves and others influences our decision to play the lottery. This is a lever that the industry pulls consistently. The “Postcode Lottery”, a Dutch lottery, is a good example. It gives a “Street Prize” each week to one postal code. This is the Dutch equivalent to a zip code. The winner is chosen at random. Everybody who has played the lottery in that zip code, which is usually 25 houses per street, wins $12,500 or more. The only thing that matters is the chance to see their neighbors celebrating and those who didn’t buy tickets before the drawing. Secondary drawings offer the chance to win BMWs for those who purchased tickets within the winning postcode. One lucky winner will win $7 million, while their immediate neighbors can win $7 million.
“There are no scenarios that poor people can imagine in which they suddenly get rich.”
Researchers from the Departments of Economic and Social Psychology and Marketing at Tilbrug University, the Netherlands, found that regret played a greater role in the Postcode Lottery’s 2003 results than in regular lottery draws. Researchers found that it wasn’t the chance to win that drove players to purchase tickets. It was the fear that they would be forced to miss an opportunity. This was something that the promoters of postcode lottery were well aware of. One mailer stated, “Sour, that’s how it feels to miss an amount of at most 2 million by an inch. You don’t want to see a multimillion-dollar prize drop at your home, and you lose nothing because you didn’t buy a ticket.
Coricelli, from USC, explains that the brain is sensitive to loss, even low-probability losses. “Biologically, if something is considered a loss, there will be a compulsion not to do it. It is something we are averse to.”
According to Levine of University of Texas, our brains are wired to compare other people’s gains and losses. Levine states, “If you don’t see anyone in a limousine, you can be perfectly content with your Honda Civic.” You might be less content with what you have if you don’t. It’s a comparison. It is possible to manipulate people to feel regretful when they see others getting more than they have.
Fear and regret are ultimately the opposites of hopes and dreams. All are powerful emotions that can make us lose our rationality and allow us to act on instinct even when it is not in our best interests. As I drove past Hargrove’s office on the Tennessee Interstate towards the airport, I looked for giant Powerball billboards. She had described them as her best marketing tool. She didn’t need much to communicate her message, as the billboard she displayed that week boasted, in digital numbers 10 feet high, a $100,000,000 jackpot. As I drove, I couldn’t help but wonder, “What would you do with that money?”
