WORTH MAGAZINE
(August 2007) Visions and Revisions: A conversation with Ed Ugel
Hard Luck
Author Edward Ugel explains why lottery winners often squander
their sudden wealth—to the delight of many onlookers.
Not too long ago, Ed Ugel stalked lottery winners for a living. He would offer these lucky individuals a limited amount of cash up-front in exchange for their jackpot annuities, which spread payments over decades. According to Ugel, many of the winners would accept his offer because, despite their winnings, they were desperately broke. In his new memoir, Money For Nothing: One Man’s Journey Through the Dark Side of Lottery Millions, Ugel tells the true story of how sudden wealth overwhelms and ultimately destroys some of the luckiest people in the world. Speaking recently with Worth features editor Douglas McWhirter, the author talked about the psychology of sudden wealth and the intoxicating schadenfreude of watching lottery winners fall.
Is there a typical lottery winner?
There is definitely a blueprint that lottery winners tend to follow. Look no further than the people who play the lottery to figure out who wins the lottery. If you take out the big Powerball jackpots that get so much national media attention that everybody and their dog play—the doctors, the lawyers, the brain surgeons, everybody—when we talk about your everyday, average players, they tend to be relatively blue-collar folks. They come from a lower- to lower-middle-class background and the lower end of the education spectrum.
You can imagine that, coming from this background, there’s a big chance for problems when they come into that kind of money. One of the reasons many lottery winners are so troubled is that they are grossly unprepared to make the type of decisions surrounding this instant wealth. Someone who earned it or inherited it would have people surrounding him who could help him—a lottery winner would have no clue what to do, short of opening up the Yellow Pages and looking under “money.”
But are there lottery winners who take the money and live happily ever after?
Yes. There absolutely are. Unfortunately, they are more of a rarity than anyone would wish. If you wonder why there are so few of them, the answer is advisors. They get a good financial team and listen to that team right away. ?That may seem logical, but when your entire background—financial, cultural—is catch-as-catch-can, hustling your entire life to get by, working hard, but never enjoying the luxuries of life, you make different choices. If you look at the way the lottery presents winning, it’s, “Hey, you’re a millionaire, and now it’s easy street for you.” Lottery winners believe that hype; they listen to their friends and family rather than to solid financial advisors who will put them on a budget—not just saying yes to everything.
And the lottery bureaucracy does nothing to help winners manage their winnings.
I do not believe that lotteries have negative motivations. However, they run like businesses, and they answer to a bottom line. They need to keep revenue coming in, which means they get a lot of marketing juice out of winners by displaying them to the population. I strongly believe that if lotteries were more protective of winners’ privacy and made some kind of institutional and financial assistance available to them—rather than just wheeling them in front of the press with an oversize check—there would be significantly fewer instances of winners getting into the kinds of trouble that feed the tabloids. It starts with the lotteries themselves: They don’t protect their winners once they win.
You describe the impact that sudden, unearned wealth has on human beings. Is there a psychological common ground that we all share in the face of windfalls?
The biggest problem that people who have a sudden windfall face—and it becomes especially acute among lottery winners—is that they have a bull’s-eye on their backs. Many people take aim at those with money, and many of those people are their closest friends and their most trusted family. It is very easy to circle the wagons and say, “Don’t let outsiders in,” but when you have people in your intimate circle eyeing your bank account, that’s when things really get tough. So many lottery winners learn that hard lesson a little too late and soon there is nothing left. It is a depressing truth when they learn that everyone—even their mothers and fathers, siblings and best friends—wants a free ride. Winners usually respond in one of two ways: They say, “To hell with it,” and share it all until it’s gone. Or they seal up and trust no one. Either way, it is not the “sitting on a yacht drinking martinis” life that the lottery advertising campaigns portray.
Don’t people who earn large sums of money experience the same thing? For example, does Bill Gates’ distant cousin show up at Thanksgiving dinner with his hand out?
I can tell you that when someone has earned his own money, it is much more likely that, along the way, he would have surrounded himself with financial caretakers who provide the good, solid advice that will keep him out of harm’s way. That’s why you see so many fewer examples of the kind of pain that instant wealth brings. These are people who have earned it or even people who have inherited it. I would say that with people who have inherited large sums of money there is a level of sophistication with money that comes with having had money over time, and also a level of expectation from the family with regard to what will happen with the money.
You write about how lottery winnings can ruin lives. Why do the rest of us take comfort in that notion? Sour grapes, perhaps?
If you look at the tabloids, we are such a pop culture nation. We love to see which starlet got drunk and went into rehab. We seem to feed off of other people’s failures. In this celebrity environment, lottery winners become D-list celebrities, at least locally. We enjoy seeing their trials and tribulations because it is very easy for us to say, “Boy, I wouldn’t have let that happen to me,” in the same way we might say of a celebrity,? “I wouldn’t have had to go to rehab,” or, “I wouldn’t have had to declare bankruptcy.” It has more to do with our society.
A lottery winner’s experience is not that different from that of someone who was at the right dot-com in the late ’90s, and suddenly found himself with great wealth.
You’re absolutely right. We saw a few of those stories when an entry-level employee was at the right place at the right time and drove off into the sunset in a Maserati. But I still think that the same rules apply. Even the youngest person at the little dot-com probably had a higher education level than most lottery winners. The analogy is dead-on, though. New money is new money. It’s a question of how prepared you are to handle it.
You worked in the lump-sum industry for many years. Are there other groups that target lottery winners?
They are the same groups that target any individual who has money. But lottery winners are, in some ways, the perfect target for all kinds of sales people—real estate, financial services, insurance. Whatever you are selling to someone who has access to a big pile of money, lottery winners are obviously a good choice. Sales people are savvy and understand how to close a deal. Closing a deal with someone to whom it is easy to sell a dream, that’s a good client. I’ve been in sales for a long time, and I can sell dreams. Dreams are easy to sell. Reality is a little harder. The difference between most groups that target lottery winners and the lump-sum industry is that if it weren’t for the lottery annuity, there would be no lump-sum industry. While other businesses market very heavily to lottery winners, I don’t think they hold a candle to the efforts of a business that actually eats lottery annuities themselves. It is the epicenter of the business surrounding lottery winners.
You write that on some level you relate to lottery winners.
I was a gambler, and I still am to some extent. Although I come from a well-educated background and a family of educated people, when I was 27 I started working in the lump-sum industry. Within a matter of months, I started making lottery-type money. ?I had access to the kind of cash that 27-year-olds don’t see. There was the kind of cash flow that allowed me to get away with making a lot of stupid decisions with money, and two weeks later there’s another paycheck, and two weeks beyond that and so on. One of the reasons that I feel I understand lottery winners now, and one of the reasons I was so successful in this industry, is because I felt like I was a lottery winner.
What do you do now?
I am a full-time writer. I’ve finished my first book and I am working on my second now, which is in the development stages. I have made an unbelievable career leap, having gone from the wild world of finance back to my roots, which is one of creativity and humor. I haven’t had any more fun or taken any greater pleasure in my life than in this past year and a half since I left the lump-sum industry. Writing full time has been a life-changing decision—and it’s the best thing I’ve ever done.
Sounds like you won the lottery.
You’re not the first person to say that. It’s more a life lottery than a financial lottery. I hope I’m a little wiser than the average player about what I do with this windfall.
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