So the multi-state Mega Millions jackpot will be up to $252 million or so on Wednesday. The odds of winning the jackpot are 1 in 175,711,536. But actually doing the analysis to figure out if it makes sense to buy a ticket needs to also take into account the chance of others winning based on the number of tickets sold for the drawing… here are further details. As they point out, they don’t typically give out the number of tickets sold as a statistic, but given that there were 1.9 million winners in the last drawing of lesser prizes, and it is said there is a 1 in 40 chance of winning, 80-90 million tickets seems fair. Also, if the jackpot went up from $207 million to $252 million expected this time, assuming 50% goes into prizes that’s about 45 x 2 = 90 million tickets ($1 each). So let’s say 90 million, so chances of someone winning are 90,000,000 / 175,711,536 = 51.22%.

Thus calculating the Poisson distribution, and using the cash payout instead of the overall jackpot we get:

W = $159.2 million x ( 1 - e ^(- 0.522)) / (0.522)

W= $124,582,387

So then we look at your expected prize winnings in relation to your chance of winning, which gives you (when you include the chance of winning one of the smaller prizes, which by the other estimate are around $0.20 for every $1 of tickets purchased, we get this:

$124,582,387 / 175,711,536 + 0.20 = 0.70901 + 0.20 = 0.90901 or …

For every $1 ticket you buy at this level, you can expect to make about $0.91 (today).

I have restarted this blog, and will use it both as a testing ground for blogging in general and using Wordpress in particular, and also to play around with and give voice to various ideas clanging around that don’t neatly fit into my day-to-day work at CPM Advisors (though it is quite likely there will be overlap/crossover since it is difficult to maintain any kind of separation mindwise when you are working in an online startup).

My posts will align around my interests in economics and finance especially behavioral economics, mathematics, computer science, psychology and many things inbetween - and I encourage discussion and interaction in the comments section, on twitter and elsewhere!

Long but worthwhile article about the risk meltdown on Wall Street:

All the incentives — profits, compensation, glory, even job security — went in the direction of taking on more and more risk, even if you half suspected it would end badly. After all, it would end badly for everyone else too.

Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. (wikipedia)

I was chatting with Scott Rafer this morning and his observation was, we are not in a cycle, this is a sea change. Everything has changed, and we all need to realize that. It’s not going back to the way it was. Not only in the online advertising world that is my day job, but everywhere ->

There are very few riskless islands in business and life anymore; everything has a profound degree of connection to many other things. Every risk- and leveraged action banks and investors have taken on has a consequence as we have seen, and will unfortunately continue to see. One of the things I’ve started to think a LOT about is the incentives that  each person and company I deal with has in any given context. While we are all connected, we each have a slightly different frame of reference and that shapes how we react to situations.

The point of this ramble - beware of things that look too good to be true. The costs will get parceled out eventually; and the timing and magnitude of that is what might really hurt.

Zero is a part of the name of this blog - I’ve always been fascinated by it and combining it with something that these days is the cause of much consternation for people - the “Economy” giving it its capital letter due - seemed strangely appropriate. In a lot of areas, we need to go back to zero, go back to first principles, to our founding assumptions.

The wikipedia entry on zero ends with several quotes, one of which is:

The point about zero is that we do not need to use it in the operations of daily life. No one goes out to buy zero fish. It is in a way the most civilized of all the cardinals, and its use is only forced on us by the needs of cultivated modes of thought. Alfred North Whitehead

When I think about the economy, there is seldom something that stands on its own without reference to something else. It is hard to determine a zero point, a starting point with no dependencies. Even if I start a brand new company making something new, there are always other people, services and things to depend upon that I need to utilize. This makes the creation of something easier to do - we don’t have to build all the supporting services like banks, roads, paper, etc. from scratch in order to create something new - we simply take these things for granted and build something new as a derivative on top of them.

So perhaps it is unreasonable to look for absolutes, but rather we can think about relative zero’s, local minimums, starting points within a greater context. And so it goes…

Would be interesting to hear about other weird stuff that has been twittered live, like the guy who was in a plane crash - as it turns out I saw an interesting police chase that I twittered at one point last year and funnily enough I also used the “holy shit” version:

There are 8 cruisers at jessie str 12:05 PM Jun 4th, 2007

The one cop tripped over his own feet when he drew his weapon! 12:03 PM Jun 4th, 2007

Holy shit.. Cops weapons drawn in sf. 2nd and market 12:01 PM Jun 4th, 2007

Because 0 is underrated, and 1 isn’t the first number… that’s why I created Zeronomy.

I look forward to sharing my thoughts with you on this forum. Cheers.