Beyond the Lottery: A no baselines approach to Expected Value

Last week’s no baselines post looked at the lottery and showed that while buying tickets is a bad deal mathematically, people still play because of the excitement it brings. This post follow-up takes the same idea and compares the lottery to other rare events. If winning Powerball is one chance in 292 million, how does that stack up against things like becoming president, playing pro baseball, or being struck by lightning?

The numbers highlight how unusual the jackpot really is. You are far more likely to bowl a perfect game, hit a hole-in-one, or even be struck by lightning than to win. Some events, like becoming president or a Major League Baseball player, aren’t just about chance but rather they depend on training, connections, and opportunities. Others, like asteroid strikes, are random but still more likely than winning Powerball.

This is where expected value comes in. Expected value is what you “expect to get back on average.” A $2 lottery ticket has a negative expected value since you lose money over time, but people still buy because the dream feels worth it. Lightning has a negative expected value too, but you can lower the odds by being cautious. Big careers are rare, but the “return” on effort is higher if you’re in the right system. The table below shows how different odds compare, but the bigger lesson is about investing wisely,not just with money, but with time. Just as investors look for positive expected value in a stock, we should ask where our hours and energy are most likely to pay off. The real jackpot is how you choose to spend your time.