Monday, August 24, 2009

RAI on ROI

The headline alone should tell you that I'm not terribly clued up about ROI. I thing I understand it enough to know that it's something we measure.

I like measurements.

According to a variety of news sources over this past weekend RAI (Radio Televisione Italiana) someone won 210,000,000 on the weekend. The units don't matter; I'm using the same units throughout this article to derive a percentage.

2,800,000,000 had been input to the lottery pool since the start of the year.

According to The Toronto Star ( http://www.thestar.com/article/685177 ) half the money goes into the state coffers.

That leaves half the money available for distribution, but I doubt all of THAT gets distributed.

The winners pool is therefore half of 2,800,000,000, but by now, you ought to be overwhelmed by all the zeroes. I will change my units by dividing all these known figures by seventy million.

Players (throughout Italy?) invested a total of Forty Dollars; the government took Twenty, leaving a MAXIMUM of Twenty in the pool for distribution.

The winning prize was Three Dollars. I suspect that all the other prizes, if any, amounted to less than the winning prize. At best therefore the total winnings were Six Dollars.

Six dollars represents an ROI of about 30%.

And yet my high school maths teacher, Brian Feld, told us that lotteries were for fools who didn't understand mathematics. We didn't want to look like fools, so we avoided lotteries and studied harder for our matriculation exams.

So if 30% ROI is Not Good, how does your business ROI stack up against the Italian lottery (or any other lottery for that matter?

And why would you claim that a business investment is different from a personal investment?

It's all about money breeding money, isn't it?

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