Extremely low odds of instant gratification vs significantly higher payoffs of delayed wealth creation!
Fascinated by lottery sales explosion in Kerala(last year was approx 12000cr).Over 79 million lottery tickets sold every week in the state which has a population of just 33 mn
Fascinated by lottery sales explosion in Kerala(last year was approx 12000cr).Over 79 million lottery tickets sold every week in the state which has a population of just 33 mn
Compare this to total net flow to equity mutual funds last year of 1500cr from Kerala!Former has such low odds of instant gratification while latter has demonstrable much higher odds of wealth creation if held for decades,& yet...
Kerala lotteries have grown at a phenomenal pace. In 2009-10, total revenue of kerala lotteries was 625cr (i.e revenues went up 20x in a decade), while profits have showed a similar trend (from about 100 cr to arnd 2500cr, net profit margin have been 21-24%,last few years)
If it were a listed co, I would not be surprised if it was among top 25 market cap companies in india, given its monopoly, such revenue growth, super normal profit margins and almost zilch capex requirements
The state’s share of non-tax revenue from sale of state lotteries has increased to 80.49% in 2016-17 from 38.39% in 2000-01 and 13.4% in 1980-81, and given the surge since 2017, this share must have gone up further!
Which brings me to power of incentives - distribution margin for a lottery to an agent is :for a ticket priced Rs 30, the agent gets a commission of Rs 5.80 from the state. In case a ticket wins, 10% of the prize-winning money for the ticket-holder goes to the agent’s pocket.
I.e , close to 20% distribution margin in a seemingly pull product (given the 20x revenue surge from state in a decade). Compare this with distribution margin in "pushing" a financial product like equity mutual fund, where effective commision are in "bps"!
While there is no record I could find of total prize money won by lottery holders in a year, of the roughly 79mn tickets sold every week, my guess is about 100 tickets get lucky, effectively one in a million odds!
This thread is not to take away the social benefits of employment to the many lottery agents etc, but more to reflect the choices we as a society make for instant gratification!
