Lotteries and the Age of Extreme Payouts

I saw this Mega Millions ticket wins $1.34B lottery jackpot

Why it matters: The jackpot rolled 29 times since April and if no one won Friday’s drawing lottery officials said the prize had the potential to grow to $1.7 billion for Tuesday’s drawing, which would have been the nation’s largest lottery prize.

These lotteries have really ballooned in size over the past 15 or so years. We’re talking hedge fund levels of wealth or tech founder levels of wealth. I remember when it was $100 million, 10-15 years ago. Now multiply that by 13.

It’s not just lottery payouts, but it would seem like we’re seeing massive pay inflation for the upper-end of everything, whether it’s sports contracts for top players, WSOP top prizes, MMA and boxing purses for top fighters, Forbes 40 wealth, A-list actors, etc. It’s like a super-power distribution in which even the top of the power distribution has its own power law within it.

Because the states are so high, that payouts must also be so big. For a trillion-dollar tech company, the difference between first or second-rate talent is the difference between being first or second to capture a market, which can make the difference between winning or losing tens of hundreds of billions of dollars worth of market share to a competitor; Apple Pay vs. Google Pay vs. PayPal for example. Or Snap Chat vs. TikTok vs. Instagram.

As others have noted, lotteries are regressive. Poor families can spend as much as 6% of their income on lotteries. Not to make this too partisan, but it does show the sort of hypocrisy or inconsistency of the left to condemn Elon Musk or Bezos as not being fully deserving of their wealth, yet support lotteries. A lottery is like a trust fund kid funding his money not with private wealth but asking the public to chip in $1-2.