A surprising number of said people are also quite well off, although there is all sorts of selection biases embedded in that statement.
Surprising for what reason? I speculate that a majority of the people who did well are following variations of the same strategy ... although I also speculate that if you sort through the rubble of those who did not do well, you will find a lot of them also following variations of the same strategy, just with unfortunate timing and possibly with not-very-good risk controls.
And then, all of what we do with our models and equations is based on rational
pricing considerations, without going too much into what that really means. But there are irrational actors in the market as well, hopefully for their own sakes not too many, but with the advent of trading platforms like Robin Hood probably more than ever before.
So there will always be people who play state lotteries, despite the fact that the expected return is about 50 cents on the dollar; what they're buying, really, is the happy feeling between the time they buy their ticket and the time it expires worthlessly. A friend of mine once told me that if he won the grand prize from Publisher's Clearing House (for non-Americans, this is -- or maybe, was -- a heavily advertised free lottery scheme that tried to get you to buy magazine subscriptions that you didn't really want) AND two of the lower prizes of new cars, he'd give me one of the cars! I think this was shortly before he decided that totaling the car he had and that he couldn't really afford was one of the luckiest things that had ever happened to him ...
And there will always -- I guess -- be people who buy the warranties on cheap appliances, the ones offered at check out that make me shake my head in disbelief and ask, "How much???!" I'm not sure what these people are really buying, and for the record I think that buying a protective put probably almost always makes more sense than paying $8 for a warranty on a $40 appliance. But I guess, as with the Nigerian princes who can help me recover the fortune my distant uncle left me if I just forward some of my banking information to them, someone must be biting because they keep dropping their lines in the water.
Anyway, as casinos know, and as insurance companies know, there are pretty strong markets for things that casinos and insurance companies wouldn't sell if they thought they were clearly worth every bit of the price paid.
And even in financial markets, I think there is sometimes room to be "the house" rather than the individual gambler walking in with high hopes and a full wallet. The question I see is, will the house's edge be closer to the 50% of state lotteries or the scant few percent of most casino games?
In any case, that's what a simple actuary sees.