Sociology: Blind to the mathematical odds, we fall to the marketing gods.
BY ADAM PIORE
ILLUSTRATIONS BY ELLEN WEINSTEIN
To grasp how unlikely it was for Gloria C. MacKenzie, an 84-year-old Florida widow, to have won the $590 million Powerball lottery in May, Robert Williams, a professor of health sciences at the University of Lethbridge in Alberta, offers this scenario: head down to your local convenience store, slap $2 on the counter, and fill out a six-numbered Powerball ticket. It will take you about 10 seconds. To get your chance of winning down to a coin toss, or 50 percent, you will need to spend 12 hours a day, every day, filling out tickets for the next 55 years. It’s going be expensive. You will have to plunk down your $2 at least 86 million times.
Williams, who studies lotteries, could have simply said the odds of winning the $590 million jackpot were 1 in 175 million. But that wouldn’t register. “People just aren’t able to grasp 1 in 175 million,” Williams says. “It’s just beyond our experience—we have nothing in our evolutionary history that prepares us or primes us, no intellectual architecture, to try and grasp the remoteness of those odds.” And so we continue to play. And play. People in 43 states bought a total of 232 million Powerball tickets for the lottery won by MacKenzie. In fact, the lottery in the United States is so exceedingly popular that it was one of the few consumer products where spending held steady and, in some states, increased, during the recent recession. That’s still the case. About 57 percent of Americans reported buying tickets in the last 12 months, according to a recent Gallup study. And for the 2012 fiscal year, U.S. lottery sales totaled about $78 billion, according to the North American Association of State and Provincial Lotteries.
It may seem easy to understand why we keep playing. As one trademarked lottery slogan goes, “Hey, you never know.” Somebody has to win. But to really understand why hundreds of millions of people play a game they will never win, a game with serious social consequences, you have to suspend logic and consider it through an alternate set of rules—rules written by neuroscientists, social psychologists, and economists. When the odds are so small that they are difficult to conceptualize, the risk we perceive has less to do with outcomes than with how much fear or hope we are feeling when we make a decision, how we “frame” and organize sets of logical facts, and even how we perceive ourselves in relation to others. Once you know the alternate set of rules, plumb the literature, and speak to the experts, the popularity of the lottery suddenly makes a lot more sense. It’s a game where reason and logic are rendered obsolete, and hope and dreams are on sale. And nobody knows how to sell hope and dreams better than Rebecca Paul Hargrove.
On most days in a nondescript office park on the outskirts of Nashville, Tennessee, you will find Hargrove reclining in a purple executive chair behind a massive desk. She occupies a corner office in the Tennessee Education State Lottery Corporation, where she serves as president.
Hargrove is a lottery legend. In the 1980s and ‘90s she built the state lotteries in Georgia and Florida from scratch, constructing multibillion-dollar empires that soon surpassed many lotteries that had been around far longer. After two years of Hargrove’s leadership, Florida was outselling every other lottery in the nation, including California, which had a population twice Florida’s size. When Hargrove left Georgia for Tennessee in 2003, Georgia Lt. Gov. Mark Taylor commented, “Now I know how the Boston Red Sox fans felt. Babe Ruth has been traded to the Yankees.” Hargrove, he said, was “the premier lottery executive in the country.”
On a sweltering morning in June, I was ushered into Hargrove’s second floor corner office. She greeted me warmly, dressed in a pink T-shirt, khaki pants, and a button-down sweater. With a mass of snowy white hair swept back in a loose bun, and a pair of glasses perched precariously on the bridge of her nose, Hargrove came across as a folksy Fairy Godmother, with a gift for schmooze. Within minutes of my arrival, she was spinning out anecdotes about her hairdresser’s predilection for cat-themed instant game tickets and the little old lady who lives down the block from her mother and won $56 million.
It’s a game where reason and logic are rendered obsolete, and hope and dreams are on sale.
Hargrove has an intuitive understanding of what drives her customers to play the game. She has a preternatural sense of where their psychological buttons are located and how to push them. She responded in a flash to my comment about the logical futility of playing the lottery. “If you made a logical investment choice, you’d play a different game,” she said, leaning forward for emphasis. “It’s not an investment. It’s entertainment. For a very small amount of money you might change your life. For $2 you can spend the day dreaming about what you would do with half a billion dollars—half a billion dollars!”
In 1985, when Illinois Governor James Thompson tapped Hargrove to head the state lottery, she didn’t know much about the business. But the former beauty queen (Miss Indiana 1972, Miss America finalist 1973) did know a thing or two about selling a product. After winning a TV job doing the weekend weather at an ABC affiliate in her hometown of Indianapolis, she moved to Springfield, Illinois, to work for a NBC affiliate. In Springfield, she recruited her own TV advertisers and produced her own commercials, demonstrating a natural talent for marketing. She got involved in politics and rose to Illinois Republican State Party Chairwoman, before taking over the Illinois lottery.
In her new job, Hargrove did what any savvy marketer would do: She sat down and thought about her own motivations. “I played the lotto when I was caught up in the frenzy of a $40 million jackpot,” she said. “And I thought, ‘What made me play?’ What made me play was the thought of what I would do with $40 million. You pay $1 and then for three days you can think about that question. Would I share with my brother-in-law? No! I don’t like that brother-in-law. But I would share with my neighbor’s nephew.”
With that simple insight, Hargrove struck marketing gold. More than 200 ads went up on billboards across the state. “How to Get from Washington Boulevard to Easy Street,” read one in a poor Chicago neighborhood, displaying a picture of a tantalizing pile of lotto money. Hargrove also pushed for larger, attention grabbing jackpots. In 1987, she played a key role in creating a multistate lottery, consisting of nine states and the District of Columbia, so that jackpots could balloon to as much as $80 million. The excitement generated by the eye-popping jackpots, she figured, would generate more excitement than any one state could create on its own. “The more the jackpot is, the more tickets you sell,” she said. “It feeds the dreaming.”
From her first days in the lottery business, Hargrove learned to make the lottery fantasy tangible by making sure that winning, on a smaller scale, is something people experience. “If you play a lot and you play for three years and you never win, you’re not going to keep playing,” Hargrove said.
In Illinois, Hargrove experimented with smaller prizes, which had better odds of winning than the big state Lottos. When she introduced a second weekly Lotto drawing, she saw an immediate 5 percent spike in sales. To prevent player burnout, Hargrove pioneered games with different prices, designs, and themes. She might trot a game where you scratch off cute cats for cat lovers, and a game with footballs for Bears fans. She might sell four leaf clovers on St. Patrick’s Day, and reindeer-themed tickets around Christmas. The odds of winning may remain remote, but keeping it “fresh” and “exciting” added a sense of possibility and made it more fun, she said. Hargrove knew that game cards were impulse buys, so she emphasized point-of-purchase advertising. She pushed to make the cards as ubiquitous as “bubble gum.”
Sitting in her Tennessee office, her energy never flagging, Hargrove stressed the lottery raised millions to fund educational programs for the state’s children, and that was something that should always be apparent. The direct link to education “affects everything—it affects how the legislators feel, it affects how the playing public feels about it, it affects how the press feels about you,” she said. “All those things add up to a positive experience buying a lottery ticket.”
While Hargrove’s feel-good marketing goes a long way toward explaining why we keep playing the lottery, scientists are increasingly making it clear how lottery marketing taps into our brains and impacts our communities.
Selling the lottery dream is possible because, paradoxically, the probabilities of winning are so infinitesimal they become irrelevant. Our brains didn’t evolve to calculate complex odds. In our evolutionary past, the ability to distinguish between a region with a 1 percent or 10 percent chance of being attacked by a predator wouldn’t have offered much of an advantage. An intuitive and coarse method of categorization, such as “doesn’t happen,” “happen sometimes,” “happens most of time,” “always happens,” would have sufficed, explains Jane L. Risen, an associate professor of Behavioral Science at the University of Chicago, Booth School of Business, who studies decision-making. Despite our advances in reason and mathematics, she says, we still often rely on crude calculations to make decisions, especially quick decisions like buying a lottery ticket.
In the conceptual vacuum created by incomprehensible odds, people are likely to experience magical thinking or superstition, play a hunch, or simply throw reason out the window all together, says George Loewenstein, a professor of economics and psychology at Carnegie Mellon. “Most of the weird stuff that you see with decision-making and risk happens with small probabilities,” he says.
Selling the lottery dream is possible because, paradoxically, the probabilities of winning are so infinitesimal they become irrelevant.
One reason may be that uncertainty activates a network of brain areas that push us reflexively to find a resolution. Uncertainty for the brain is a negative state, and so it screams, “‘I don’t know what to do, I don’t know how to act, my organism is at risk,’” says Giorgio Coricelli, an associate professor of economics and psychology at University of Southern California. “To make the choice, your brain automatically looks for suggestions, searches for more information, and if there is little information, we can make strange associations, assume something is realistic, even if it is superstitious.”
There is plenty of historical research to correlate the rise of religion and superstition with uncertainty, Coricelli says. In the same way, he adds, when there is little we can do to raise a probability, we are just as likely to play the lucky number 7 or insist on buying our lottery ticket at a certain time of day to raise our chance of winning.
Our proclivity for fantasy makes us an easy target for advertising. Lottery commercials depict winners in stretch limousines, counting stacks of money, dressed in evening gowns and tuxedos, sipping champagne.
The commercials hit home because fantasizing about winning the lottery activates the same parts of our brains that would be activated if we actually won, notes Daniel Levine, professor of psychology at the University of Texas at Arlington, and an expert on decision theory and neural networks. Picturing ourselves in a limo activates visual areas of the brain, while imagining the clink of champagne glasses lights up the auditory cortex. These areas have links to the brain regions involved in emotion, decision-making, and motivation. “The motivational areas of the brain can be heavily influenced by vivid daydreaming,” Levine says. “Just like seeing something can activate the emotional system, so can envisioning it.”
But even fantasy will drop its hold on us if we always lose—a point Hargrove grasped from the start. Research has shown that positive reinforcement is a key in virtually all of the successful lotteries, notes the University of Lethbridge’s Williams. Lotteries that allow players to choose combinations of four or five numbers from a total of 60 numbers are popular, he says, because many players experience “the near miss,” which creates the illusion that they came close to winning the multi-million dollar jackpot. Most players don’t realize, however, that “near-miss” is an illusion. The odds of winning get worse with each successive match.
Another important factor comes into play as we step up to the cash register at the convenience store: self-image. Lottery sales, it turns out, are heavily influenced by the way we are thinking about the purchase, and the way we perceive ourselves in relation to others when we do.
Carnegie Mellon’s Loewenstein and colleagues demonstrated it’s possible to change how many lottery tickets people will buy by making them think—or not think—about their purchase in a larger context. The researchers gave one group of study participants $1 at a time, five times, and asked them if they wanted to buy a lottery ticket. They gave a second group $5 and asked how many tickets they wanted, while a third group received $5 and was told they had only two choices: they could spend it all on tickets or not buy any tickets at all. The people in the first group purchased twice as many tickets as those asked explicitly what percentage of the $5 they wanted to spend on tickets. Members of the all or nothing group opted for no tickets 87 percent of the time.
One of the things the experiment shows is that lottery players are often “thinking myopically,” says Romel Mostafa, who co-authored the 2008 study with Loewenstein, and is now an Assistant Professor of Business, Economics, and Public Policy at Ivey Business School, Western University. “We think about these purchases in one or two at a time. But when the decisions aggregate over time, it adds up. And if I were to bracket the spending over a longer period of time, I would not have bought it in the first place.”
This same “framing” phenomenon also helps explain our misperception of the risk. Most people “frame” the lottery as “Boy, I could win $100 million,” rather than considering what they might lose, says Princeton Economist Hank Farber. “To them a dollar seems inconsequential,” he says.
It’s not just the way we frame the odds in the lottery that can affect how likely we are to play the game. It turns out that the way we frame our own economic status can also play a role in our decision to play the lottery.
Mostafa, Loewenstein, and colleagues designed a study to examine the influence that “feeling poor” has on the decision to play the lottery. They approached people at the Pittsburg Greyhound Bus Depot (who had an average income of $29,228) and asked them to fill out a questionnaire about “community issues.” Much of the survey was just window dressing. The only thing researchers cared about were two different versions of multiple choice answers offered for a single question, “How much money do you make.” Half received questionnaires with the categories: “less than $10,000, less than $20,000, less than $30,000.” The other half were presented with choices designed to make them feel poor. The categories included “less than $100,000,” “less than $200,000,” and “less than $300,000.”
After completing the questionnaires, the participants were paid $5 and asked if they wanted to use any of the money to buy lottery tickets. Those who had been made to feel poor bought twice as many lottery tickets as those in the control group, the authors wrote in a 2008 study published in the Journal of Behavioral Decision Making.
The commercials hit home because fantasizing about winning the lottery activates the same parts of our brains that would be activated if we actually won.
“The lottery is a way to raise the ceiling on what can happen to you,” says Loewenstein. “So if you are reminded of your poverty, it makes the idea of lifting the poverty a more salient motive. Lottery tickets become that much more attractive at that moment.”
For many poor people, he adds, there is “no scenario they can come up with in which they are suddenly going to get very rich.” To them, the lottery may be a low probability event—but so is getting a job that pays six figures.
That point is driven home by a 2006 Consumer Federation of American study, which surveyed 1,000 adult Americans about their personal views on wealth. The survey found that 21 percent of Americans—38 percent of whom had incomes below $25,000—thought that winning the lottery represented the “most practical” way for them to accumulate several hundred thousand dollars.
“A lot of people say that the lottery is a regressive tax, which is true,” Loewenstein says, referring to taxes that aren’t pegged to income, and take a larger proportion of income from those who can least afford it. (A person who makes $15,000 a year and buys $1,500 worth of lottery tickets has spent 10 percent of his income, while a person who makes $150,000 and buys $1,500 has spent only 1 percent.) “It is true that poor people spend a substantially higher fraction of their income on lottery tickets” than the affluent, he notes. “But I don’t think it is necessarily irrational. Buying lottery tickets is a fairly inexpensive way of raising the ceiling on what can happen to you economically.” In other words, when your economic prospects are dim, buying hope makes sense.
How we perceive ourselves in relation to others also shapes our decision to play the lottery—a lever the industry consistently pulls. A salient example is the “Postcode Lottery” in the Netherlands. Weekly it awards a “Street Prize” to one postal code, the Dutch equivalent of a zip code, chosen at random. When a postal code (usually about 25 houses on a street) is drawn, everybody who has played the lottery in that code wins about $12,500 or more. Those living there who neglected to buy a ticket prior to the drawing win nothing—except the chance to watch their neighbors celebrate. In secondary drawings, many of those who purchased tickets in the winning postcode win BMWs, and are eligible to win as much as $14 million—$7 million for one lucky winner picked from within the winning postcode, and $7 million for their immediate neighbors who bought tickets.
“There is no scenario that poor people can come up with in which they are suddenly going to get very rich.”
In a 2003 study, researchers in the Departments of Economic and Social Psychology, and Marketing at Tilbrug University in the Netherlands, noted fear of regret played a significantly larger role in the Postcode Lottery than in a regular lottery. It was not the chance of winning that drove the players to buy tickets, the researchers found, it was the idea that they might be forced to sit on the sidelines contemplating missed opportunity. The promoters of the postcode lottery seemed well aware of that. One mailer read: “Sour, that is how it feels when you miss an amount of at least 2 million by just an inch. Because seeing a multimillion prize fall on your own address, but winning nothing since you did not buy a ticket, that is something that you do not want to experience.”
“The brain is very sensitive to loss—even low probability losses,” explains USC’s Coricelli. “So if you frame something as a loss, biologically there is a compulsion to avoid it. We have an aversion to it.”
In fact, says Levine of the University of Texas, we are hardwired to evaluate gains or losses based not on their own terms, but in comparison with other people. “If you don’t see anybody in a limo, you can be perfectly happy with your Honda Civic,” Levine says. “But if you do, you might feel less happy with what you have. It is a comparison. You can manipulate people into potentially feeling regret when they see other people getting more than they have.”
In the end, fear and regret are the flipsides of hope and dreams—all are powerful emotions that when tapped can cause us to relinquish rationality, to act on instinct, even to make decisions that might not be in our best interest. As I left Hargrove’s office and drove along the Tennessee Interstate toward the airport, I scanned the highway for the giant Powerball billboards that she had touted as the best marketing tool in her arsenal. She didn’t need many words to get her message across, as the billboard that week trumpeted, in 10-foot-high digital numbers, a $100 million jackpot. I couldn’t help but think, as I drove along, “What would I do with that much money?”
Adam Piore is a freelance writer based in New York.