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Powerball winner becomes filthy rich - where are the protestors?

March 20, 2017 - 12:00am
David Surdam
Financial Reform Now sign

Many Americans begrudge CEOs of large corporations for making millions of dollars, often from exercising stock options that depended upon an upswing in the stock’s prices. Yet you rarely read of citizens or politicians bemoaning one of those “Powerball” winners becoming instantly wealthy, so wealthy that their net worth now ranks them in the upper portion of the “1%-ers.”

It is instructive, however, to compare a Powerball winner with a successful CEO or entrepreneur. The $434 million recently won by a player in Indiana is probably worth roughly $250 million when discounted for present value. Even $250 million puts the winner well within the top 1% of wealth holders. I don’t see adherents of income redistribution picketing winners of Powerball jackpots.

The salient question is, though, what in the world did such a person do to deserve such a windfall? Absolutely nothing! To be sure, they got themselves to a convenience store and purchased a ticket, so one might say they exercised some initiative. Otherwise, there is absolutely no virtue inherent in their newfound wealth.

In contrast, a CEO often had to invest years of study and experience before assuming responsibility for a large organization. The CEO’s decisions affect the lives of thousands, possibly millions, of investors, employees, customers, suppliers, and the public. CEOs bear a weighty responsibility; admittedly some CEOs don’t appear to do a very good job, but that is an issue for the shareholders and board of directors to address.

Entrepreneurs such as Bill Gates and Mark Zuckerberg created products that tens or even hundreds of millions of us use. Although it might be a stretch to say that Gates’ products bring us joy, presumably Zuckerberg’s Facebook brings people pleasure. These entrepreneurs envisioned the potential of a new product or service, and they figured out how to translate their vision into reality. They became fabulously wealthy, but they only received a part of the overall gain they conferred upon society.

The Powerball winner produced nothing. Perhaps the winner’s family gains some pleasure (and the Powerball winner will discover in the upcoming days and weeks just how many “cousins” he or she has) from the winner’s luck.

Powerball adherents will claim that “responsible” players gain pleasure from the vicarious thrill that they, too, might win the jackpot and change their life forever. Certainly the Powerball officials are quick to instill excitement and glamor into the games.

The get-rich-quick mentality of Powerball lacks virtue. I can think of no philosopher, who would endorse such antics, who may understood that get-rich-quick schemes often depend upon fraudulent behavior.

Many poor Americans, many of whom lack access to good schools or a mentor with connections and useful knowledge, may feel that playing the lottery represents their only chance of attaining a materially-decent life. They are partially correct; their chances of improving their lives are worse than those of middle- and upper-middle class Americans, although the chances are greater than zero. Children may watch their parents’ endless attempts to get rich quick and fail to absorb the lesson that even a paltry education, if accompanied by a willingness to sacrifice instant gratification, can lead to a modest estate. For instance, giving up a pack of cigarettes (or a couple of fancy lattes, or, heaven forbid, five lottery tickets) per day every day for forty years of adulthood would represent more than $170,000 ($5 per day and assuming a 4% rate of interest). Sad to say, such a wealth holding exceeds the median wealth holding of many Americans on the cusp of retirement.

You might think me a sore loser, except I never play the lotteries. I have nothing against someone gambling; heck, I used to play a decent game of poker in my youth. I gamble with my investments (not so well--otherwise I would be somewhere quaffing a pina colada and enjoying the sea breeze rather than writing this opinion piece on a cold Iowa morning).

The next time you applaud a Powerball winner and excoriate a CEO, perhaps you should reconsider.

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

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Headshot of David Surdam

David Surdam

Professor of Economics

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Comments

Submitted by Dylan Wiedner on
I really enjoyed reading through this article. I often think to myself similar questions to this, why choose to hate against one person, but not against another, even though they have similar characteristics. In my opinion, this has something to do with people not taking a full look at a much larger picture. It is so easy to point a finger at someone that we have no contact with, yet decide to purchase products from their organizations. I more or less see the reasoning behind this as they are the "easy target" in something that people don't agree with. Another thing that makes choosing the CEO much easier is the idea of news and media. They are willing to make articles about large organizations and famous CEO's because the odds of it catching fire and taking off are much greater than those of a story of the name that no one knows from a town of 300 in the middle of a corn field about winning the lottery.