Thursday, October 29, 2015

That Time Voltaire Decided To Game the Lottery and Make a Small Fortune

I thought we had posted a version of this story a couple years ago but a quick search of the blog says non.

From Damn Interesting:

François-Marie Arouet knew how to get into trouble. After a very public scuffle with a nobleman nearly ended in a duel, the young playwright was exiled from Paris, the city where his plays were only just coming into fashion. He lived in dreary England for two whole years before slinking back to France, where he lived in the house of a pharmacist. There he experimented with various potions and poultices, but nothing would cure the vague sense of impotence and dread that dogged him.

Finally in 1729 the gates of Paris were opened to Arouet again, but he was still ill-at-ease. At a dinner party held by the chemist Charles du Fay, Arouet, better known by his pen-name Voltaire, found the cure he had been looking for. He met a brilliant mathematician called Charles Marie De La Condamine, who promised a panacea better than any Voltaire had found at his pharmacist.

It wasn’t medicine—it was money. Condamine had a plan that would make both him and Voltaire more money than he could ever scratch together by writing plays or poems, enough money to allow Voltaire to never have to worry about money again. He would be free to live how he wanted and write what he wanted. The plan was simple. Condamine planned to outsmart luck herself. He was going to arrange to win the lottery.

At the time the French crown secured much of its revenue by issuing government bonds. In 1727, in order to save money, the state cut the bonds’ interest rate. The market value of these bonds plummeted, and the market became wary of French credit. The French state was left without an easy way of raising money.

A Deputy Finance Minister named Le Pelletier-Desforts had a great idea that would let the state drive up the prices of the bad bonds and so restore faith in the government’s finances. In his scheme owners of bad bonds could buy a lottery ticket. If your ticket won, you would win back the face value of your original bond—plus an extra jackpot of 500,000 livres. This was a lot of money. While no comparison to modern-day currency is possible, an annual income of only 30,000 livres would make a person very, very rich. 500,000 livres was enough to make a person rich for the rest of their lives.

French citizens were allowed to buy a ticket for every bond they owned at 1/1000th of the bond’s value. A ticket for a 1,000 livre bond cost one livre, while a ticket for a 10,000 livre bond cost ten livres. But both tickets had equal chances of winning the 500,000 livre jackpot. Condamine realized that a group of people could buy up a lot of cut-price bonds, split them into tiny parcels of 1,000 livres, buy up cheap lottery tickets, and thus easily win the huge jackpot.

Voltaire and Condamine started a syndicate to do just that. But once they got the people, the money and the bonds together, they faced a final problem. Lottery tickets were issued only from a very small number of notaries, and the notary issuing stacks of lottery tickets to shifty young Voltaire would almost certainly guess what was going on, and give the syndicate away before any money could be won. Voltaire had to develop an ‘understanding’ with a notary before the plan could proceed. Once this was done, the young men were ready to get rich.

Every month Voltaire would go to the Châtelet to visit his notary, and walk away with reams of tickets. By tradition people inscribed the backs of their tickets with good-luck phrases. Voltaire’s were mocking. “Here’s to the good idea of M.L.C. [Marie De La Condamine]!” “Long live M. Pelletier-Desforts!” He signed them with a series of assumed names, getting increasingly more absurd as the scheme went on. Every month on the 8th when the tickets were drawn, the syndicate would be about a million livres richer, according to Voltaire’s later estimate....MORE