Ian Coss
Appearances
Planet Money
How the scratch off lottery changed America
This is Planet Money from NPR. Joe's Market in Quincy is one of the biggest lottery retailers in Massachusetts. It's got all your convenience store staples, but the area behind the counter is dominated by scratch tickets. At least 50 different clear plastic boxes, all numbered and all dangling these colorful tickets. Could I ask you a few questions for the podcast?
Planet Money
How the scratch off lottery changed America
You know those kids still talk about that vacation and hate it, right, Ian? There's no way that was a good vacation.
Planet Money
How the scratch off lottery changed America
But when John Koza was there, lucky for him, the PhD in computer science worked well for Dr. Peralt. He arrived in Massachusetts with his pitch for an instant ticket. Things seemed promising. You know, that man in charge spoke his language, combinatorics and all. And the people around him were eager to try something new. There was just one problem.
Planet Money
How the scratch off lottery changed America
Yeah, quite bad for John. But he was convinced his ticket was better. You know, John had spent so much time making those supermarket scratcher tickets. He had seen the ways that people hacked those tickets at first. And he was sure that this other company, they could not have made a ticket as secure as his. There was no way.
Planet Money
How the scratch off lottery changed America
After the break, how to hack a lottery with a can of Diet Citrus Soda. Now, the thing the Massachusetts lottery was worried about, the danger in starting a brand new instant lottery ticket, is that if that instant ticket had a vulnerability,
Planet Money
How the scratch off lottery changed America
then any convenience store clerk with a stack of tickets might be able to figure out which ones of those are winners, which ones are losers, and then, you know, hand out the winners to friends, keep them for themselves, like just corrupt the whole system.
Planet Money
How the scratch off lottery changed America
So, John Koza, back in Ann Arbor, he got to work. This other company's ticket was made of pretty thin paper with flap doors over the hidden numbers held down by glue. So John's goal was to see if he could reveal those numbers without visibly altering the ticket. That would be hacking the ticket.
Planet Money
How the scratch off lottery changed America
This time, Dr. Peralt... great vacation giver. No, just kidding. This time, Dr. Peralt was waiting on the runway to greet them and carry their bags. Everybody convened at lottery headquarters, probably like half a dozen men in dark suits gathered around a conference table, eagerly awaiting this presentation from John.
Planet Money
How the scratch off lottery changed America
A cystoscope has a tiny lens on the end of a thin, flexible tube. A doctor might use it to examine the inside of a patient's bladder, for example. John used it to peer underneath the ticket's flap doors.
Planet Money
How the scratch off lottery changed America
Then there are a lot of states in the middle, California, Texas, Illinois, all in about the $300 range. Towards the top, you've got New York, Michigan, Georgia. They're all around $500 or $600 per adult per year.
Planet Money
How the scratch off lottery changed America
Now, the average convenience store clerk probably does not have access to a cystoscope and may not have a copier in 1973. And so John presented his final foolproof technique. In a dramatic demonstration, John opened a bottle of Fresca, something you certainly could find in the average convenience store.
Planet Money
How the scratch off lottery changed America
He poured the Fresca on the ticket and the glue, which was supposed to be the ticket's sacred seal, it simply let go. You could peel the whole thing apart, read the numbers, and glue it back together again.
Planet Money
How the scratch off lottery changed America
Now, Ian, do we know why Fresca? Was it like what John had around? Was it an ingredient in Fresca? Like what is happening?
Planet Money
How the scratch off lottery changed America
We're an economics podcast. We're not a science show.
Planet Money
How the scratch off lottery changed America
The lottery canceled their existing contract and put out a new bid. John Coase's company, Scientific Games, won the new contract and their product, which used an indentation-free paper and, of course, that famous shiny metallic film. That became the world's first scratch ticket ever.
Planet Money
How the scratch off lottery changed America
One liquor store owner described the scene as, quote, instant insanity. A pharmacy had to set up separate sales counters at the back of the store just for lottery tickets so that non-lottery customers wouldn't be disturbed by the apparently unruly crowds. Within a day, stores across Massachusetts had run out of tickets and were waiting to be resupplied.
Planet Money
How the scratch off lottery changed America
Yeah, the other states had waited for someone else to take the plunge. But once they saw what was happening in Massachusetts, they jumped right in.
Planet Money
How the scratch off lottery changed America
We now spend more on scratch tickets than we do on movie tickets, on concert tickets, on sports tickets combined. And the fact that the scratcher all started in Massachusetts, well, that is part of the reason that Massachusetts is spending more per person on average on lottery than anywhere else in the country.
Planet Money
How the scratch off lottery changed America
So, Ian Koss, Massachusetts native. now lottery expert. How do you end up feeling about being from a home state that is like the scratch capital, being part of a state that spends way more on the lottery than any other place? Do you have a sense of pride in this? How are you feeling?
Planet Money
How the scratch off lottery changed America
On his next $50 ticket, number eight for the day, our anonymous mechanic catches a break. He wins 100 bucks. So what are you going to do with that $100?
Planet Money
How the scratch off lottery changed America
Yeah, and I suppose it's the instant gratification of the instant ticket, right? is so much more like the kind of gambling we see today on our phones for sports than what lotteries ever were. So in that sense, we can thank Instant Lottery Tickets for creating a social norm around that kind of thing.
Planet Money
How the scratch off lottery changed America
Well, look, if you would like to hear more of Ian's fantastic series, just go look for Scratch and Win to listen to the entire eight-part series. I mean, what we've basically just played for you now is sort of episode one. So, Ian, why don't you tell folks what they can expect from the rest of the series?
Planet Money
How the scratch off lottery changed America
And edited by Lacey Roberts. The executive producer is Devin Maverick Robbins.
Planet Money
How the scratch off lottery changed America
And also to all the Jacks over at Joe's Market in Quincy. This one's for the Jacks. Shout out Jacks 1 through 15. I'm Ian Koss. I'm Kenny Malone. This is NPR. Thanks for listening.
Planet Money
How the scratch off lottery changed America
Hello and welcome to Planet Money. I'm Kenny Malone. And I'm Ian Koss. And Ian, you are here today as the host of a special series from NPR member station GBH in Boston. That series is called Scratch and Win. It chronicles the history of lotteries in America. And Ian, you have brought us part of that series today, yes.
Planet Money
How the scratch off lottery changed America
Today on the show, the unlikely story of how Massachusetts became the lottery capital of America. It's a tale of high-level mathematics, organized crime, and perhaps the single most important use of a can of Fresca in American history. The story of scratch-off lottery tickets begins with an apparently not very good board game.
Planet Money
How the scratch off lottery changed America
So this company's business, the supermarket games, these were popular in the 1960s. Stores would give them out for free as a little treat to customers, and the prizes were fairly small. We're talking like as small as half a penny. But these games did use a kind of rub-off film. What the company was making was, in effect, proto-scratch tickets.
Planet Money
How the scratch off lottery changed America
Yeah, so the way this particular game worked was there were 10 scratch-off spots on the game ticket, and each revealed a playing card, you know, like ace, king, queen, jack. So you scratch off three spots. If those match, you win. Again, mostly just small prizes like pennies.
Planet Money
How the scratch off lottery changed America
So while still chipping away at his PhD, John started to work with this game company.
Planet Money
How the scratch off lottery changed America
This is ticket number seven for today. The other six are in the trash bucket already. Six $50 tickets.
Planet Money
How the scratch off lottery changed America
Still, you know, like having a chance to encounter those weaknesses, those vulnerabilities in a low stakes environment, it was kind of giving John the chance to beta test a method and work out all the bugs.
Planet Money
How the scratch off lottery changed America
Yeah, so the idea was to take this ticket design that John had perfected in the form of a fun promotional gimmick and bring it into the big leagues of actual gambling. Like, instead of pennies, the ticket could offer up thousands of dollars if, that is, they could find a state willing to try this.
Planet Money
How the scratch off lottery changed America
It was not the Pennsylvania lottery. Seared in your mind. Oh, for the rest of my life, that jingle will exist. Anyway, yes, in other words, the lottery was... Boring and slow, notably slow. You buy a ticket, you wait, which is definitely not like, I don't know, a slot machine where you pay and then you play and you get the adrenaline rush of finding out right away.
Planet Money
How the scratch off lottery changed America
In fact, that was John's pitch, like instant gratification, excitement. That was the lottery of the future. And when states heard that pitch... Well, it apparently did not work, actually. It did not land.
Planet Money
How the scratch off lottery changed America
Right. Credibility and integrity over innovation because of...
Planet Money
How the scratch off lottery changed America
Lotteries, gambling, was a shadowy business that states were wading into cautiously. And any whiff of irregularity, a fixed drawing, a forged ticket, it would shatter the public's trust.
Planet Money
How the scratch off lottery changed America
So yeah, organized crime may have been in the back of states' minds when they were not interested in John's flashy new lottery scratchers. However, ironically, the mob might also be the reason that Massachusetts decided to be less conservative about their lottery, which brings us to the tale of Fat Vinnie the Stool Pigeon.
Planet Money
How the scratch off lottery changed America
And Vinny was also the informant, of course. And as an informant, Mr. the Stool Pigeon testified in court lots of times. And perhaps most notably for our story, he also testified in front of a United States Senate hearing about organized crime.
Planet Money
How the scratch off lottery changed America
In fact, part of the reason state lotteries were popping up in the first place was to do just that, to offer a legal alternative and ideally put the mob out of business. And I mean also so that the states could have a little extra revenue stream, but, you know, whatever. Yes, put the mob out of business. But that was not working.
Planet Money
How the scratch off lottery changed America
We know that he lives nearby, that he works as a mechanic, which fits with the dark blue work pants and black t-shirt. He comes here on his lunch break, part of his daily routine.
Planet Money
How the scratch off lottery changed America
Yep, better odds, better payouts. Anonymity, I guess, and also the ability to bet on credit if you feel pretty good about your kneecaps.
Planet Money
How the scratch off lottery changed America
Yes. To John Koza, our unemployed computer scientist, the... the potential of his game design seemed completely obvious. Like again, it was instant lottery, something that even the mafia could not offer their customers.
Planet Money
How the scratch off lottery changed America
But this time, there was one place that was ready to hear them out. Massachusetts. Even better, the director of the Massachusetts lottery was not one of those FBI agents.