Powerball Politics
Two scenarios that stick in my mind—some of you may have read me writing about these before, but I hope you’ll forgive the repetition for the sake of what I think is a useful discussion.
Scenario 1: Your Uncle Bob refuses to save for his retirement. When asked what he is going to do when he is too old to continue working, Uncle Bob says, “No sweat. I’m going to win the lottery and retire with hundreds of millions of dollars in the bank.” Every week, he buys a lottery ticket, and, every week, probability holds—he wins nothing. And, then, on his 65th birthday, Uncle Bob wins a $1 billion jackpot.
Question: Was his retirement plan a good one? Answer: Of course not. It was deeply stupid and profoundly irresponsible. The fact that it happened to work out well, against astronomical odds, means nothing—should mean nothing—when it comes to the matter of our judgment. The lottery people say the odds of winning a Powerball jackpot on any given ticket are just under 1 in 300 million—in a country of some 330 million people, many of whom play the lottery from time to time, there are going to be some winners. It is a big world with a lot of randomness in it—all sorts of cockamamie ideas work out, for somebody, sometimes. Don’t mistake randomness for a well-executed financial strategy.
Scenario 2: You have a pretty bad family-health history: cancer, heart problems, early-onset dementia, debilitating arthritis, etc. Because of this, you buy a lot of health insurance, including expensive disability supplements and other products, and put a lot of money into a medical savings account, etc. And you never get sick. As if to spite your grim caution and realistic forward-mindedness, you are inexplicably healthy your entire life. You live to be 108 and die peacefully one night of no obvious cause after never having had so much as a sniffle.
