What would you do if you won the lottery?

This is one of those topics that many people think about a lot. Frankly I don’t think about it much, mainly because I never play the lottery. I don’t have anything against gambling. It’s a vice like many others and I have my share, but most vices are acceptable in moderation.

Gambling doesn’t appeal to me for a few reasons. First of all, as a mathematically inclined person, I’m acutely aware of the odds. Long term, it’s a losing proposition. I also don’t get a big rush out of it. That’s what I see as the primary allure, but I don’t get nearly excited enough about winning money (perhaps because it’s mostly luck?) and I really don’t like to lose money (I worked hard for it). So it’s just not much fun to me.

I’m also philosophically opposed to the government running a gambling operation. Sure, it’s easy tax revenue (though a fairly regressive tax primarily on those who can least afford it) but I don’t think the government should be in the business of encouraging gambling just because it’s easy money.

But I understand that most people do enjoy gambling. And most people like the lottery fantasy (hey, someone has to win, why not me?). It’s especially appealing when you’re fed up with your job, which all of us are from time to time. And anyone who has looked at New York real estate prices has certainly thought, damn, if only I had a big chunk of money to buy a nice place.

So let’s fantasize. Say you won $10 million dollars (after taxes). I like using that amount because it’s a lot of money, but not “quit your job and buy an island” type money.

Let’s examine options. First, the quit your job option. Say you just invested that money and tried to live off of the interest. If you made a constant 10% you’d be living on $100K for the rest of your life. Not bad, depending on where you live. But then what do you do? Your money is tied up so it’s not like you can go see the world. Sleeping until noon gets old (not that I’d know – with a four year old sleeping until 8:00 is luxury). You could find some type of work that is really rewarding to you without caring how it pays. That would be one good approach.

Then there’s the “kick start your life” approach. This assumes that you could make a dramatic change in your life if you didn’t have to worry about money for a short period of time. For example, quit your job and start your own business. You don’t have the pressure of being successful right away. Or go back to school to work towards a totally different career. This, to me, is a very good strategy if you aren’t satisfied in your current career and you have some sort of idea. It’s dangerous if you don’t have a real plan. Then it becomes “blow your money randomly for a few years until it’s gone”.

If you generally like your life and your career, there’s the “subtle upgrade” strategy. Keep your job, live your life, but knowing that the money allows you to buy a slightly nicer house, take a slightly nicer vacation, etc. For this approach you don’t take the lump sum payment up front, you take the longer view. This becomes much less of a life changing event, so most people don’t go this route (the whole point of playing the lottery is to change your life, right?).

Of course there’s always the “buy a bunch of really cool stuff” strategy. This is a common approach since there is tremendous immediate gratification and it is immediately life changing. But it’s also very common to find actual winners who took this approach five years later back to the same life they had before they won the lottery, often in worse shape. The primary fallacy here is thinking that having nicer things will make you happier.

What would I do? I would probably buy a very nice brownstone building in my neighborhood in Brooklyn. That would be my life changing event. Then I’d probably play the “subtle upgrade” strategy using return on investment money. Not that flashy, but I’m not a very flashy guy.

The other thing I would seriously consider would be coming up with an idea for a technology company, grabbing a few people I really respect and like working with and trying to run with it. But you need that truly inspirational idea. And frankly, if I ever get that, I might not wait to win the lottery…