Smart SpendingSmart Spending

Can you guarantee a Powerball win?

Theoretically, it can be done. So why isn't anyone undertaking this plan?

By MSN Money Partner Nov 27, 2012 6:09PM

This post comes from John Carney at partner site CNBC.

 

CNBC logoNow that the Powerball jackpot is worth more than $500 million, it has become theoretically easy to guarantee a win. Picking the right numbers isn't the problem anymore -- it's all a matter of logistics.

 

Man playing Lotto © Angelo Cavalli, Photodisc, Getty ImagesAnd the logistics are a nightmare.

 

Ordinarily, guaranteeing a win at Powerball is a money-losing proposition. In order to assure that you will win the jackpot, you have to buy up every single combination of numbers. That would cost you nearly $400 million. But when the jackpot gets very high, it begins to make sense to play for a guaranteed jackpot.

 

Six numbers are drawn from a tumbler with 59 white balls, and the final "powerball" is drawn from a different tumbler with 39 red balls. Because each of the six white-ball drawings removes a possible number from the pool and the order of the numbers doesn't matter, the odds aren't quite as bad as they might seem.

 

You need to buy just 195,249,054 tickets to guarantee a win by buying every single combination.

 

Actually, if you buy all the numbers you'll wind up better than guaranteeing a win. You guarantee multiple wins, since a few of the tickets will have winning combinations of numbers short of the jackpot.

 

So why don't we have syndicates organized to buy up all the tickets?

 

Well, for one thing, multiple syndicates buying the tickets would become self-defeating. They would wind up splitting the jackpot, diminishing the returns from undertaking the project. (Although the syndicates would also increase the size of the jackpot, ameliorating some of the damage to the returns.)

 

This highlights one of the big risks in undertaking the guaranteed-win strategy: You might be forced to split the jackpot with one or more lucky players. Splitting jackpots can be deadly to the profitability of the guaranteed win. If just two other players also win, you wind up losing money.

 

Taxes are also a hindrance to profitability. They explain why you wouldn't want to undertake the guaranteed-win strategy for, say, just $200 million. You need a jackpot high enough to leave an after-tax profit. (Although, if you organized as a syndicate, it seems like you should be able to write off the cost of buying the tickets as an ordinary business expense, so that only your profits would be taxed. I don't know if the IRS would see it that way, however.)

The logistics of the operation are a bigger problem. Let's say it takes about one second to print each number combination. With 86,400 seconds in each day, it would take you more than six years (2,259.82 days) to print all the required combinations. But you haveonly  four days between the Saturday and Wednesday drawings.

 

This time constraint means that you'd have to recruit other ticket purchasers into your syndicate. More specifically, you'd have to recruit 565 people, each of whom you'd supply with around $691,148 to play the $2 game. (Actually, they don't quite need that much but since you can't play fractional games, you wind up buying a few extra tickets.)

 

This creates a major problem: Do you know 565 people you would entrust with $691,148 in cash? The incentive to take the money and run is enormous. If your syndicate of 565 people divided a $425 million jackpot evenly, each one would get a bit more than $752,212 if you hit the jackpot.

 

But each syndicate member would know that the defection of other syndicate members could put the jackpot at risk. Remember, if even one of them absconds with the money, you lose your guaranteed win and must depend on luck. So a rational syndicate member would prefer to take the $691,148 in cash and not risk it buying tickets.

 

Actually, you probably need even more people than that. Lottery machines cannot really print tickets every second of every day for four days. They'd run out of ink and paper. The mechanics would break down. So you would likely need a few thousand people spread out at several locations to guarantee a win. This increases the odds of defection immensely.

 

It would be difficult to raise the capital to buy the tickets. Investors would demand a share of the returns, which would diminish the share of the jackpot spread to those who do the work of buying the tickets. Ideally, you'd want your labor and capital sources to be identical to resolve this problem.

 

The problem of monitoring to prevent defection and raising capital from your labor force indicates that, ideally, you'd want to undertake the operation as part of a tight-knit community. A small village, for instance, in which people have bonds of loyalty that would help prevent defection, would be ideal.

 

Outside of a very tight-knit community, it is probably a practical impossibility to mobilize capital and labor to undertake the guaranteed win. So, if you play the lottery, you'll just have to take your chances like everyone else.

 

More on CNBC and MSN Money:

5Comments
Nov 27, 2012 10:23PM
avatar
Thanks for the long story that meant absolutely nothing.
Nov 28, 2012 7:42AM
avatar
Hi, if you give me a 75% chance to win I might try a ticket, but they are saying 1 chance in 750,000 that is Stupid to waste your money on those odds, my Dad told me , I have to work the rest of my life I should get use to that, so far my Dad was right !
Nov 28, 2012 4:32PM
avatar
The Powerball ticket I purchased has only 5 numbers from the white balls and 1 Power Ball.
Nov 28, 2012 7:15AM
avatar
You Know I have to play if you don't play you can't win and you have to give them a chance to give it to you,but then I also play the Market. From the people that brought you EGHT at 3.50 and SBSA at 1.00 Take a look at CVBK, Central Virginia Bank, with a Beta of 1.55 and a P/E of 13.00 showing a small profit of between .06 and .11 a share this is one small bank that's definetly on the mend, with a past value of 4 to 16 dollars ,recently upgraded by BB&T,  with a Yahoo 1 year target of 27.06!! at 10% of that you could triple your money. Check it out for yourself 
Nov 27, 2012 6:53PM
avatar
I have something that`s worth 500,000,000.I just won`t tell what it is.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More