F our G reatest L icences to P rint M oney
Idea 20 Betting with the odds approximately 14 million to one in your favour
A game of chance where, usually, each of many people has an equal opportunity of winning the main or subsidiary prizes existed in Roman times. Roman emperors used the drawing of lots to give away property and slaves during festivals.
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The 100 Greatest Business Ideas of All TimeItaly is credited with inventing the modern version of a lottery in the sixteenth century. The purpose of public lotteries was to provide improved defences of cities, or to aid the poor. The very first public lottery to have paid money as prizes was La Lotto de Firenza. Later, when Italy was united, it hosted the first national lottery.
In the UK, Elizabeth I used lottery money to repair harbours and to finance other public works. The Virginia Company was allowed to hold lotteries to fund its pioneering work in the New World. Interestingly, business people regarded the chances of a lottery fulfilling its purpose as very good. They became in fact the ‘first and most certaine’ way of raising funds.
It is hard to know how such enterprises as the British Museum and the infra-structure of America would have otherwise been financed.
While the state ran a fair competition, there were various ways that private individuals could make money on the side. They would obtain tickets at low prices and sell them on at high mark-ups, and there was a thriving business in insurance bets. Since the state made nothing out of these side-lines, they were cited as part of the reason for banning lotteries after 1830.
Ireland set the pattern for the modern lottery in Europe with the Irish Hospital’s Sweepstake. Almost all countries in Europe, North America and Asia have national or state lotteries, the notable exceptions being China and India. Australia is sometimes known as the home of lotteries since it uses them to finance much of its public works.
Against this background the Government of the UK offered a licence to run a national lottery in 1994.
The story of Camelot, the company that runs the National Lottery in the UK, would not fit into a category ‘the greatest risk takers of all time.’
From the earliest examples of the sixteenth century, masses of people have been happy to accept huge odds against winning an almost unimaginable jack-pot. An awful lot of people will regularly venture a pound or more for the small chance of being able to tell the boss what they think of him.
Camelot won the seven-year licence in May 1994 against seven other bidders.
The risks they took were cleverly mitigated in a number of ways. First of all, the From the
Four Greatest Licences to Print Money
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25shareholders were also the suppliers of products, services and expertise to the con-sortium. The current shareholders are as follows.
1 Cadbury Schweppes brings marketing and sales support with their extensive knowledge of the UK retailing scene.
2 Royal Mail Enterprises are the largest retailer of National Lottery tickets.
3 De La Rue has the expertise and ability to print the high security materials necessary.
4 Fujitsu Services – at the beginning the Fujitsu subsidiary ICL produced the lottery terminals and did the huge training job. They had to train more than 34,000 retailer staff in 10,000 retailers.
5 Thales Electronics are providers of electronic products and advanced systems.
The figures for the half year to September 2002 make sobering reading for the share-holders. From a sales turnover of some £2.276 billion, down 5.2% overall, half went back to the punters as prize money. 27% went to Good Causes (Camelot always spells Good Causes with capital letters), 12% in tax, 5% to the retailers and approximately 6% covered operating costs. This leaves a modest 1% as the bottom line profit of the business. This modesty is in better perspective when you note that the profit before tax of £17.9 million was all distributed to the shareholders.
Camelot publicity makes much of the fact that they had an awful lot to do in a very short time when the lottery was launched, and that the penalties for being late were heavy. Quite so, but the risk that people would not flock to a well-advertised opportunity to get away from the humdrum of work was historically quite low.
In 2001, against very stiff competition, Camelot won the renewal of their li-cence to run the National Lottery in a bitter and political campaign. They changed the name of the main draw to Lotto; but at this time they are failing to reverse a sharp decline in their sales. Maybe people are catching on to the real chances of becoming a multi-millionaire and telling their boss where to stuff their job.
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The 100 Greatest Business Ideas of All TimeHere comes the twist
1 The chance of winning the jackpot is approximately 14 million to one. If you do the lottery, stop it at once.
2 Money invested in a premium bond also has only a remote chance of landing a big win. The chances of winning anything are 15,000 to one for each bond you hold. The interest paid on bonds is about 5% so that, in theory, is what you should earn over the long term if you have a fairly extensive holding. But at the end of the day at least the Government has the grace to give you your pound back, some of which you might care to give directly to charity.
‘If by the people you understand the multitude, the hoi polloi, ’tis no matter what they think; they are sometimes in the right. Sometimes in the wrong: their judge-ment is a mere lottery.’
John Dryden (1631–1700)