February
02
2018

The Lottery Winner’s Curse

By Chris 1

In 2002, Jack Whittaker won $315 million in a Powerball jackpot. Within a decade, his daughter and granddaughter had died of drug overdoses, his wife had divorced him, and he had been sued several times. Once he was robbed of $545,000 in cash that had been sitting in his car while he visited a strip club. When interviewed after the robbery, he sobbed to reporters,

 

“I wish I’d torn that ticket up.”

 

Every picture of every lottery winner is the same: big teeth, blown-up check, clean slate. The winner is thinking, “All of my past mistakes are erased. I’m out of debt. I have a clean slate. I can do anything I want. I won. I’ll be a winner forever.”

 

But pictures of lottery winners taken three years later show the opposite story: more than half are broke. Nearly 50% get divorced. And almost none of them are smiling.

 

Money didn’t solve their problems. More than anything else, money just poured jet fuel on their problems. Here are ten more examples out of thousands.

 

As my friend Jarret Perelmutter once told me, “Nobody cares about money until they don’t have any. Then it’s ALL they care about.”

 

Many lottery tickets are sold to people who don’t have money.

 

What does this have to do with CrossFit gyms? Well, there are a host of new “marketing consultants” out there. And many of their programs generate revenue. The gyms who are most likely to sign up for their services are those in triage: they need money NOW or face bankruptcy. And, thankfully, sometimes they GET the money to keep going.

 

Does that solve their long-term problems?

 

No. Clients upset about “bait-and-switch” tactics leave horrible reviews on Google. High turnover rates mean gyms owners must always recruit at a high rate, even when ad prices rise (and what happens when Facebook is replaced by the next platform?) Coaches struggle under the sales pressure. And when systems don’t exist to onboard new clients effectively, the business can crumble under the new weight.

 

When a teenager is drafted to the NBA, they’re given mandatory financial training. Obviously, for teenager who’s gone from no money to ALL THE MONEY, this is a wise move. But what about for business owners who have never seen $20,000 in one place before, who are now making $20,000 per month, and paying $19,500 in bills? Are they given financial training? Do they have a long-term plan, or are they just watching money run right past them?

 

Many lottery winners turn to Don McNay, a financial advisor and author of Life Lessons From the Lottery, for advice. Many NBA draft picks have a large portion of their salaries placed in escrow. And many gym owners invest their short-term income spike in mentorship with us. It’s simply a way of turning short-term gain into a long-term strategy.

 

But most don’t. A lottery jackpot is too big for comprehension for most people, so they blow it. Many NBA draft picks come from low-income backgrounds, so financial literacy wasn’t part of their childhood. And I’m not surprised when a gym owner says, “I make more than enough on paper, but I never have anything left at the end of the month.”–not anymore.

 

Maybe you’re different. Maybe you’ll win the lottery three times. But probably not.

 

I’ve done this without money, and I’ve done it with money. WITH money is better–as long as you know the next step.

 

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What Comes First: Marketing or Mentorship? – Two-Brain Business

[…] I wrote yesterday in “The Curse of the Lottery Winner“, marketing takes on disproportionate importance when you don’t have money. But when it […]

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