Many People Don't Understand Probability

Modeled Behavior (h/t the Dish):

Here is a data point you may want to keep in the back of your mind when discussing financial literacy:

In a recent consumer study, 21 percent of individuals surveyed – including 38 percent of those with income below $25,000 – reported that winning the lottery was “the most practical strategy for accumulating several hundred thousand dollars” of wealth for their own retirement. In addition, 16 percent thought that winning the lottery was the best retirement strategy for all Americans, not just themselves (Consumer Federation of America and The Financial Planning Association, 2006).

Some may be tempted to interpret this as the Death of the American Dream, and evidence that people are hopeless about their economic futures. But winning the lottery as the best retirement strategy for all Americans? I chalk this up to the phenomenon that no matter how stupid a belief is, if you know one person that ascribes to it then a survey will show that 1/4 to 1/3 of the population probably does as well. This includes the existence of witches and werewolves, and the fact that Saddam Hussein planned 9/11. That, and I blame the fact that people don’t understand the concept of a fair bet and thus, of course, an unfair bet.

A friend plays the high odds Keno bets (I think his favorites are the 2 number [1 in16.63 payout] and 5 number [1 in 10.34 payout] bets, the worst odds of all on the game) but claims he wins at a greater rate than the published odds.  I tend to doubt it.  But it is kind of hard to prove when he mainly remembers the games he came out ahead versus the games he was a net donor.  I'll show up at his retirement party when he hits it big, that's for sure.