captioning funded by cbs and ford. we go further, so you can. >> tonight, former starbucks c.e.o. howard schultz makes an announcement that will surprise many. >> i am seriously thinking of running for president. i will run as a centrist independent. both parties are consistently not doing what's necessary on behalf of the american people, and are engaged, every single day, in revenge politics. >> do you worry that you're going to siphon votes away from the democrats and ensure that president trump has a second term? ( ticking ) >> three, two, one... >> a private company named planet labs has put about 300

small satellites into space,ough every day. >> i'm always astonished that almost every picture we get down, we compare it to the picture from yesterday, and something's changed. >> making it available to everybody, people are going to come up with uses of that imagery that you haven't... >> yeah. >> ...imagined. >> you worry about that? >> i worry a lot. ( ticking ) >> for years, high school sweethearts jerry and marge selbee lived a quiet life in evart, michigan, a single- stoplight factory town that collapses in the folds of a map. which is why investigators took note when jerry and marge made $26 million winning various state lottery games dozens of times. you went into this looking for organized crime. were you surprised by what you found? >> i wasn't surprised. i was dumbfoundely amazed, that these math nerd geniuses had found a way, legally, to win a

state lottery and make millions from it. ( ticking ) >> i'm steve kroft. >> i'm lesley stahl. >> i'm scott pelley. >> i'm anderson cooper. >> i'm jon wertheim. >> i'm bill whitaker. those stories, tonight, on "60 minutes." ( ticking ) audible members know listening has the power to change us, make us better people. with audible you get more. two audible originals: exclusive titles you can't find anywhere else. plus a credit good for any audiobook and exclusive fitness and wellness programs. all for just $14.95 a month, and always ad free. the most inspiring minds, the most compelling stories, the best place to listen. download audible and start your free trial today.

[indistinct conversation] [friend] i've never seen that before. ♪ ♪ i have... half of small businesses fail within 5 years.ne. and more people than ever struggle with debt.

intuit is here to change thry... with giant solutions like turbotax, quickbooks and mint that give everyone the power to prosper. intuit. proud makers of turbotax, quickbooks and mint. >> pelley: starbucks c.e.o. howard schultz left his company seven months ago, which led many to wonder what the socially conscious executive was planning. to schultz, starbucks was never

just a coffee shop. he saw his stores as meeting halls, where customers came to chew over the great issues of the day. his activism is rooted in a rags-to-riches life, and tonight, schultz reveals traumas he has never discussed publicly. at the age of 65, he is preparing for the greatest challenge of his life. many believe that schultz would run for president as a democrat. his announcement tonight may come as a surprise. >> howard schultz: i am seriously thinking of running for president. i will run as a centrist independent, outside of the two-party system. we're living at a most fragile time. not only the fact that this president is not qualified to be the president, but the fact that both parties are consistently not doing what's necessary on behalf of the american people, and are engaged, every single

day, in revenge politics. >> pelley: why run as an independent? your views have always aligned with the democratic party. >> howard schultz: that's true. i've, you know, i've been a lifelong democrat. i look at both parties. we see extremes on both sides. well, we are sitting, today, with approximately $21.5 trillion of debt, which is a reckless example-- not only of republicans, but of democrats as well-- as a reckless failure of their constitutional responsibility. >> pelley: do you worry that you're going to siphon votes away from the democrats and, thereby, ensure that president trump has a second term? >> howard schultz: i want to see the american people win. i want to see america win. i don't care if you're a democrat, independent, libertarian, republican. bring me your ideas, and i will be an independent person who will embrace those ideas. because i am not, in any way, in

bed with a party. >> pelley: we met with howard schultz this month in his adopted hometown of seattle. it was here, in 1981, that he arrived as a stranger in the pike place market to visit the original starbucks, just a tiny store that sold coffee beans. you were selling coffee-makers, living in new york, and this was one of your customers. why did you come out here to visit them? >> howard schultz: the thing is, i had never heard of starbucks, and they were buying a ton of these products. and i just thought, i've got to come to seattle and see who this company was. >> pelley: how he created the nger than the line at starbucks. suffice to say, schultz got a job behind this counter. he installed an espresso machine. and in 1987, with borrowed money, he bought the shop. how many stores are there today? >> howard schultz: almost 30,000, in 77 countries.

>> pelley: a sweet success-- with a few bitter notes. starbucks almost went broke in the 2007 financial crisis. >> starbucks coffee is anti-black! >> pelley: and last year, a store manager set off a furor when she called police on african american men who were just hanging out at a table. schultz closed all the u.s. stores for hours of racial bias training. race had been an issue even before, when schultz asked employees to talk to customers about racial justice. >> howard schultz: we had a moral obligation as a company to discuss this. >> pelley: and then, you were excoriated... howard schultz: yeah. coee shop tell people what it thinks about humanity. >> howard schultz: the execution was flawed. and who owns that execution? i do. because i was the one who was pushing us to not play it safe.

>> pelley: but from the beginning, his 350,000 employees caught a break with schultz's social agenda. >> barista: whoo, thanks kirby! >> pelley: they enjoy health insurance, tuition aid and stock. >> barista: caramel macchiato! >> barista: hi there, welcome! >> pelley: schultz likes to say he created the company his impoverished parents never had the chance to work for. >> howard schultz: when i read statistics that says that over 40% of the american people don't have $400 in the bank, and are only a crisis away from bankruptcy, or that 5.5 million kids in america, many of whom are african american and latino, are not in school and not in work and don't have a chance, and one out of six people in erhis is what i think about. >> pelley: those grim numbers describe his own childhood. >> howard schultz: this place has never left me. i think it has defined my character, my vulnerability.

>> pelley: schultz took us back in time to his boyhood home... and this is the way up to the seventh floor. ...a brooklyn, new york public housing project. his family was already poor when his father was injured on the job. with no insurance, they were destitute. and bitterness led to violence. your father beat you. with his fists. >> howard schultz: there were moments where there was physical abuse, yes. >> pelley: he beat you up when you were taking a shower. and you ended up crumpled on the floor of the shower, watching your blood go down the drain. at that moment, you thought what? >> howard schultz: i was 15. i was disrespectful to my mother. he came home, and... beat me to a pulp. i couldn't go to school for a

couple days. i was angry, upset. >> pelley: did you hate him? >> howard schultz: i'm sure there were moments when i did. and then there were glorious moments, of being in the right-field bleachers at yankee stadium with him. there is a level of hate that does emerge. but it didn't stay. >> pelley: his journey is mapped in a new autobiography, titled "from the ground up." if your father was the darkness, your mother was the light. >> howard schultz: she was. and my self-esteem came from my mother. and i could say that, if, if my mother was here, if my mother-- for her, it would just be the greatest moment of her life, to think... because one of the things that is, has been so hard for me, is that both my parents didn't--

did not see my success at starbucks. maybe i'm here because of her. >> pelley: well, let me see if i can find out where you are on some of the issues that are pressing in the country. immigration. >> howard schultz: the country, first and foremost, is based on humanity, fairness, goodness. we have been for 200-plus years a country of immigrants. and for the 11 million people here, unauthorized, there should be a fair and equitable way for them to get in line, pay the taxes, pay a fee, and become citizens of the united states. >> pelley: climate change. >> howard schultz: tremendous mistake, again, by president trump, to leave the paris climate accord. >> pelley: healthcare. >> howard schultz: every american deserves the right to have access to quality healthcare. but what the democrats are proposing is something that is as false as the wall. and that is free healthcare for all, which the country cannot

afford. >> pelley: the 2018 tax cut. >> howard schultz: i would not have given a free ride to business, from 35% or 37% to 21%. it would've been more modest. but i would've significantly addressed the people who need tax relief the most, which is the people i talked about earlier, who don't have $400 in the bank. >> pelley: many people are going to ask, what does the coffee entrepreneur know about being commander in chief? >> howard schultz: i have a long history of recognizing, "i'm not the smartest person in the room." that in order to make great decisions about complex problems, i have to recruit and attract people who are smarter than me, and more experienced, more skilled, and we've got to create an understanding that we need a creative debate in the room to make these kind of decisions. >> pelley: his world view is shaped by his experience as a

global c.e.o. >> howard schultz: is it in our national interest to have a fight with mexico, canada, the e.u., china, nato? is it in our interest? give me a break. no, it's not in our interest. these are our friends. these are our allies. we are much better, as a country, being part of the world order. >> pelley: schultz formed his alliance with his wife sheri when they were married more than 36 years ago. today, they have a son and a daughter, two grandchildren, and another on the way. sheri schultz oversees the family's $200 million charity that links disadvantaged youth and veterans to jobs. this is a long, rocky road, g r pr? >> sheri schultz: well, it, it wasn't in my plan, my long-term life plan, for sure.

>> pelley: did he tell you or did he ask you? >> sheri schultz: no, he asked. he came to the family. we knew it was serious-- >> howard schultz: i'm still-- i'm still asking. >> sheri schultz: he's still asking, and there's been many family meetings. >> howard schultz: i'm going to steam a little milk for you. >> pelley: he's still asking himself whether to run, but he has assembled a campaign team, and he has done the homework. can you get on the ballot in all 50 states? >> howard schultz: if i decide to run for president, not only will i be on the ballot of every state, all 50 states, but we'll be on the ballot in every county, in every district, that we have done that work. >> pelley: would the stores be part of this? is there going to be a schultz 2020 button on every green apron across the country? >> howard schultz: no, there would be a complete separation between me and the company. >> pelley: what we know is that no independent has ever come close to winning. >> howard schultz: what we know,

factually, is that over 40% of the electorate is either a registered independent, or currently affiliates themselves as an independent. because the american people are exhausted. their trust has been broken. and they are looking for a better choice. >> pelley: what effect do you think being jewish would have on your campaign? >> howard schultz: i have great faith in the goodness and the kindness of the american people. we elected an african american president. i'm old enough to remember in 1960 when john f. kennedy was nning, and there was an outcry of hate that no one catholic should be president. i am jewish. i have faith in god. i am not running as a jew, if i decide to run for president. i'm running as an american who happens to be jewish. >> pelley: your net worth is something close to $3.5 billion,

and "forbes" magazine would tell you that that's more money than donald trump has. are you willing to spend what it takes to win? >> howard schultz: well, i'll say it this way. we'll be fully resourced to do what's necessary. >> pelley: winning could cost $300 million, $500 million. do those numbers change your mind? >> howard schultz: no. >> pelley: would you release your tax returns? >> howard schultz: 100%, yes. >> pelley: well, donald trump said that. >> howard schultz: i will. we can do it today, if you want, scott. this is where it all started for the company. >> pelley: decades ago, housewares salesman howard schultz fell for p >>ish salesperson:hh el thu d 'tley:metion slimier than others. now, he's challenging tradition. >> fish salesperson: stand right here. >> pelley: asking whether americans want to toss old politics... >> fish salesperson: t.t. for howard! >> pelley: ...into fresh hands. ( cheers ) >> howard schultz: all right!

>> pelley: you know, if you dropped the fish, your political ambitions would have been over. >> howard schultz: oh, completely! >> pelley: you know it's on after this interview. president trump is going to be tweeting by about 8:00 eastern time. >> howard schultz: you know, i'm... >> pelley: going to say terrible things about you. >> howard schultz: i think, like most people, i'm-- i've become bored with president trump and his tweets. ( ticking ) >> cbs money watch, sponsored by lincoln financ no mter who you're responsible for, lincoln can help. >> good evening. exist expect the nerve to leave interest rates unchanged. s&p global says the government shutdown costs the economy at least $6 billion. and facebook is expected to report record profits wednesday despite its scandals. i'm elaine quijano, cbs news. i knew about the tremors.

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( ticking ) >> pelley: now, david martin, on assignment for "60 minutes." >> martin: for decades, the u.s. has relied on spy satellites to look deep inside the territory of its adversaries. these giant, billion-dollar satellites take high-resolution photographs which can see objects as small as a fist inside russia, north korea or wherever the target is. tonight, we will take you inside the intelligence agency where those photos are analyzed, and we will also take you inside a revolution that is rocking the top-secret world of spy satellites. a private company named planet labs has put about 300 small satellites into space, enough to take a picture of the entire land mass of the earth, every day. those small satellites have created a big data problem for the government, which can't possibly hire enough analysts to look at all those pictures. welcome to the revolution.

>> five, four, three, two, one. >> martin: this is how the revolution began: 28 small satellites sent out into orbit, by astronauts, from the biggest of all satellites-- the international space station. >> robbie schingler: we took a satellite that would be the size of a pick-up truck, and we shrunk it. we wanted to make it about the size of a loaf of bread. >> martin: robbie schingler began building satellites 20 years ago, working for nasa. >> schingler: the way that i grew up, at nasa, is we would spend about five to ten years, even, to build one satellite. >> martin: now he's one of the founders of planet labs... >> schingler: this is our satellite manufacturing building. >> martin: ...a company that turns out satellites in months, not years. >> schingler: you can pick these up. they're about 12 pounds, or five kilograms. >> martin: packed with some of the same electronics used in smart phones, they're built by hand in a non-descript building in downtown san francisco.

>> schingler: it looks like a warehouse, and our engineers here build and operate the largest fleet of satellites in human history. >> martin: that's a pretty big statement, "largest fleet of satellites in human history." >> schingler: i know. isn't that cool? and frankly, we're just getting started. >> martin: how many have you built over the years? >> schingler: oh, over the years... we've built about 300 satellites over the years. and last year, we launched about 146 satellites into space. >> martin: the satellites are called "doves." here on the production floor they are kept in "nests," waiting to be launched in "flocks." >> schingler: this is a visualization that shows every satellite that we have up in space today. >> martin: this is mission control? >> schingler: this is mission control, yeah. >> martin: it's a little bit of a letdown. >> schingler: it's a little bit non-traditional. a normal mission control, you will have dozens and dozens of engineers for one satellite. we flip that around, so we have dozens of satellites for a single engineer. >> martin: the satellites orbit the globe every 90 minutes,

while the earth rotates beneath them, their cameras documenting the planet as it's changing. >> will marshall: i'm always astonished that almost every picture we get down, we compare it to the picture from yesterday, and something's changed. >> martin: will marshall is another of the company's founders. >> marshall: we see rivers move, we see tress go down, we see vehicles move, we see road surfaces change. and it gives you a perspective of the planet as a dynamic and evolving thing, that we need to take care of. >> martin: is that what people are supposed to conclude from seeing all this change? >> marshall: well, you can't fix what you can't see. >> two... one... >> martin: that kind of save- the-world ambition carries a big risk, especially for a small firm that's just getting >> and we have lift-off! >> marshall: planet has many records. we've launched the most satellites in the world ever, but we've also lost the most satellites ever. >> martin: four years ago, marshall gathered his staff in carrying 26 doves blast off.sha. and we had a customer in the

audience at the time who we had brought to see a launch. it was really embarrassing. ( explosion ) >> oh, god! oh, god! oh, god! oh, god! >> chester gillmore: i'll never forget it. we see the, you know, smoke coming, and everyone's cheering... ( cheers ) and then it goes, and then ka-boom. ( explosion ) >> martin: chester gillmore runs planet's satellite assembly line. you lost how many satellites? >> gillmore: 26? i think we lost, yeah, 26. ( explosion sounds ) >> martin: those are your babies. >> gillmore: they were. that was a tough-- yeah, they were. >> martin: how long did it take to get back to normal? >> gillmore: we didn't even skip a beat when that happened, didn't lose a day. >> martin: on the day we visited planet, its satellites were beaming down 1.2 million pictures every 24 hours. planet sells images to over 200 customers, many of them agricultural companies monitoring the health of crops. but this is planet's most important customer.

>> robert cardillo: so, this is our operations center. heartbeat of the agency. >> martin: robert cardillo is director of the national geospatial intelligence agency, n.g.a. for short, the organization which analyzes satellite photos. >> martin: so this really is ground zero for all the intelligence coming in from space? >> cardillo: that's correct. it's, its where we bring in all of our sources, whether they come from space or any source. but, correct, it's ground zero. >> martin: because "60 minutes" was allowed into this secure operations center, top-secret high-resolution pictures taken by spy satellites are nowhere in sight. >> cardillo: across the center. >> martin: cardillo says lower- resolution images, like this one taken by commercial satellite companies... >> cardillo: you see one of the outposts that the chinese have developed in the south china sea. >> martin: ...are changing his world by giving him more and more looks at the earth, especially places u.s. spy satellites are not zeroed in on. >> cardillo: i'm quite excited about capabilities such as what planet's putting up in space.

>> martin: planet is a small company with just over 400 employees, many of them in san francisco. n.g.a. is a government bureaucracy with a workforce of 14,500 and a 2.7 million square foot headquarters south of washington, d.c. but robert cardillo knew a revolution when he saw one. >> marshall: this is not a scale model. this is the real size. >> martin: when planet's will marshall unveiled his small satellite at a 2014 ted talk, cardillo showed the video to his work force. >> marshall: it's going to provide a completely radical new data set about our changing planet. >> martin: and a radical new culture. >> marshall: thank you. >> martin: planet openly markets its images. n.g.a.'s spy photos rarely see the light of day. the intelligence analyst wholean shipyard in 1984 went to prison. what n.g.a. can see from space is top secret. how many of these high-

resolution satellites do you operate? >> cardillo: i'll not comment. >> martin: but much of what cardillo won't talk about is common knowledge to ted molczan, who is a household name in the obscure world of amateur satellite tracking. >> martin: how many photo satellites does the u.s. have in orbit? >> ted molczan: currently there are three. >> lift off of nrol-71 for the national reconnaissance office. >> martin: since we interviewed molczan, what looks like a fourth photo satellite has been launched. he tracks them from his balcony in downtown toronto, with nothing more sophisticated than $300 binoculars. you just wait for a fly-by? >> molczan: yeah. >> martin: from a satellite? >> molczan: yeah. i'm laying in wait. >> martin: for something that's 150 miles away, going five miles a second? >> molczan: yes. and it will cross my field of view in a few seconds. so i've got to be on the ball. p secret satellite looks like from earth, captured on video by one of about 20 amateur trackers around the world. >> molczan: its code name is

"crystal." this thing is about the size of a city bus. >> martin: and this is what it looks like from earth? >> molczan: that's right. it just looks like a moving star. >> martin: the satellite trackers watch as it streaks across the sky, measuring its position against well-known stars. that's enough to tell the orbit of the satellite? >> molczan: yes. we're doing this with our eyes, often with cameras, but the end result of it is numbers. and if we pool enough of that data together, we can actually calculate the orbit to great precision. >> martin: if you've been able to calculate this, presumably the north koreans have been able to calculate this. >> molczan: absolutely, yes. >> martin: so there's no mystery to the north koreans, the chinese,n thessatell tis spe-age hide>> m: 'sight. anseek. adversaries know when and where american spy satellites are looking, but can never be sure what they're finding. >> cardillo: this is what n.g.a.

developed in the pursuit of osama bin laden. >> martin: before president obama and his national security team-- including cardillo, there on the left-- gathered in the white house situation room on the night of the raid, n.g.a. had gone back in time, through seven years of satellite imagery, to construct this scale model of bin laden's hideout. >> cardillo: we had historic imagery of this compound that enabled us to reverse time. >> martin: n.g.a. could see, not just the outside, but inside as well. >> cardillo: it enabled us to go back to the point of construction, and essentially, through our imagery archive, to rebuild the house. so, we could see how the first floor was designed and how the rooms would lay out, where are the stairs from the first to the second floor, and the second to the third floor. >> martin: so old pictures show that building before the roof went on? >> cardillo: we had pictures before the compound existed. we saw it when it was first constructed and as it, as it was built over time. correct. >> martin: and that's how you

could find out the dimensions of each room? >> cardillo: indeed. >> martin: the satellites that made that possible are the equivalent of a hubble space telescope, but instead of taking pictures of the heavens, they are zeroed in on earth, able to make out objects just four inches across. >> keel camera on monitor two. >> martin: for decades, they have been indispensable to knowing what america's adversaries are up to. but like hubble, they cost billions of dollars each-- which is one reason there are so few in orbit. are they putting more up? >> molczan: they've never had more than four up at a time. >> martin: which is why cardillo is so interested in planet and its small satellites, that deliver a tsunami of data like n.g.a. has never seen. how many analysts would it take to keep up with those number of satellites? >> cardillo: we did some calculations, and we came up with, six million humans would need to be hired to exploit all the imagery that we have access

to. you can see that it's not exactly a viable proposition. >> shawna wolverton: if you were trying to find this in syria, it's sort of like a needle in a haystack, right? >> martin: planet's shawna wolverton showed us how a computer can be programmed to help track the impact of syria's civil war on the people who live there. >> wolverton: so, what we've done is created a algorithm that looks for new roads and buildings. >> martin: an algorithm that rifled through reams of satellite photos, and identified the first signs of a new refugee camp. >> wolverton: here's that first image. >> martin: so, that red grid is what? >> wolverton: those are new roads. and all of these blue spots, that you can see here, are buildings. >> martin: so, this is one little corner of, of syria. could you do this for the entire country? >> wolverton: we can absolutely do this for the entire country. i can show you over here. we can zoom out.

and you can see that we've run this algorithm over the entire country, and you can see all of the roads and buildings. >> martin: this is the first photo an american spy satellite ever took from space, in 1960-- a far-off look at a russian air field. since then, we have gotten much more spectacular looks at earth, like these taken by the apollo astronauts. but the u.s. government no longer holds a monopoly on photos from space, and has no power to stamp "top-secret" on any of the 800 million images planet has taken in its brief lifetime. making it available to everybody, people are going to come up with uses of that imagery that you haven't imagined. >> marshall: yeah... dreamed of, yeah. >> martin: and not all of them are going to be good. >> marshall: no. >> martin: you worry about that? >> marshall: i worry a lot. and we wouldn't have started planet if we didn't have a very strong conviction that the vast

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( ticking ) >> wertheim: last year, americans spent more than $80 billion playing state lotteries. that's around $250 for each citizen, more than what was spent on concerts, sporting events and movie tickets

combined. over 25 states took in more from their lottery proceeds than from corporate income tax. because of these stakes, it's essential that-- in both perception and reality-- lotteries are truly games of chance, everyone entering with an equal opportunity to win. which is why investigators took note when a retired couple from michigan, jerry and marge selbee, made $26 million winning various state lottery games dozens of times. this is not a story, though, of a con, or a scam, or an inside job. no, this is a ballad of a couple from smalltown america who did something that most people only dream of. they didn't so much as beat the lottery odds, as they figured them out.hool sweethearts jerry and marge selbee lived a quiet life in evart, michigan, population 1,900, a single-stoplight factory town that collapses in the folds of a map. together, they raised six kids, and ran a local convenience

store on main street. jerry handled the liquor and cigarettes, and marge kept the books and made the sandwiches. how long did you have the store? >> jerry selbee: 17 years. >> wertheim: 17 years? >> jerry selbee: uh-huh. >> wertheim: every day? >> jerry selbee: uh-huh. >> marge selbee: every day. >> wertheim: why'd you decide to sell it? >> jerry selbee: i was 62. marge was 63. and i thought it was a nice time to sell and see what we could do after that. >> wertheim: you're in your early 60s, you decide to retire. >> both: uh-huh. >> wertheim: you're going to put your feet up. what was the plan? >> jerry selbee: yeah. ( laughs ) that was basically it. >> marge selbee: i don't think we had one, per se. >> jerry selbee: that was basically it. we were going to enjoy-- we were going to enjoy life a little bit. >> wertheim: but one morning in 2003, jerry happened to walk back into the corner store and spotted a brochure for a brand new lottery game called winfall. jerry always possessed what he calls "a head for math"-- he has a bachelors degree in the subject from nearby western michigan university. and in only a matter of minutes, he realized that this was a unique game.

>> jerry selbee: i read it, and by the time i was out here, i knew what the potential might be. >> wertheim: it did not take you weeks to suss this out? >> jerry selbee: no, not at all. three minutes. >> wertheim: three minutes and you found the loophole in the state lottery? >> jerry selbee: three minutes. i found-- i found a special feature. ( laughs ) >> wertheim: that feature was called a "rolldown," and the lottery announced when it was coming. unlike the mega millions games you've probably heard of, where the jackpot keeps building until someone hits all six numbers and wins the big prize, in winfall, if the jackpot reached $5 million, and no one matched all six numbers, all the money "rolled down" to the lower-tier pr wellry see if you can stick with him here. >> jerry selbee: here's what i said. i said, if i played $1,100, mathematically, i'd have one four-number winner. that's $1,000 bucks.

i divided $1,100 by six instead of 57, because i did a mental quick dirty, and i come up with 18. so i knew i'd have either 18 or 19 three-number winners, and that's $50 bucks each. at 18, i got $1,000 for a four- number winner, and i got 18 three-number winners worth $50 each, so that's $900 bucks. so i got $1,100 invested and i've got a $1,900 return. >> wertheim: sounds like good math. >> jerry selbee: that's-- yeah. ( laughs ) a little over 80%, isn't it? >> wertheim: you're talking about this as if it's the most obvious set of figures in the world. >> jerry selbee: it is. >> wertheim: this is not taxing the outer limits of your math skills? >> jerry selbee: no, it is actually, it's just basic arithmetic. >> wertheim: are you thinking, i bet there are a million people that have also caught onto this? >> jerry selbee: exactly, is what i thought. >> wertheim: when a rolldown was announced, jerry sprang into action. he bought $3,600 in winfall

tickets, and won $6,300. then, he bet $8,000, and nearly doubled it. >> jerry selbee: at that point, i told marge what i was doing. ( laughs ) >> wertheim: i was going to say, you're putting thousands of dollars in action on the state lottery game-- at what point do you share this with your wife? >> jerry selbee: right at that point. >> wertheim: jerry says, "i think i've cracked the michigan state lottery." what do you say to that? >> marge selbee: he just, you know-- ( laughs ) it didn't surprise me. >> wertheim: you weren't surprised? >> marge selbee: no, i wasn't surprised. because as long as nobody wins and you win money, you could see the numbers. >> wertheim: so when you realized there aren't a million people that have discovered this, it's pretty much just you, what's that feeling like? >> jerry selbee: amazed. ( laughs ) >> marge selbee: yeah. >> jerry selbee: amazed. >> marge selbee: pretty happy. >> jerry selbee: i just couldn't... i just couldn't fathom it. >> wertheim: soon, jerry and marge selbee started playing for hundreds of thousands of dollars. jerry set up a corporation-- g.s. investment strategies. he showed us stacks of record books that detailed their winnings. >> jerry selbee: here's one that was pretty successful. we played $515,000 and we got

back $853,000. >> wertheim: it's about a 60% return? >> jerry selbee: that was a good return. >> wertheim: they invited family and friends to share in their... well, windfall... selling shares in the corporation for $500 apiece. you might say this was a different kind of hedge fund. we met some of the local investors at the evart hangout spot, sugar rae's cafeé. >> wertheim: all four of you guys are members of an exclusive club. >> all: yeah. ( laughter ) >> wertheim: james white is a local attorney. dave huff operated a machine and tool shop. and brothers loren and ray gerber are retired farmers. >> james white: and when you looked at the mathematics of it, it made sense. >> wertheim: you guys followed the math when he broke it down? >> dave huff: pretty much,ah, l. >> loren gerber: yeah, yeah, but he's really good at math. >> wertheim: so he explained this? >> gerber: you ask him questions. >> white: yeah, he's a math whiz. >> wertheim: do you guys remember how much you gave him to invest? >> gerber: well, i had about $8,000, and then i put another

$6,000 in for the grandkids. >> wertheim: for the grandkids? >> gerber: yeah. >> wertheim: but overall, you guys came out way ahead on this? >> all: oh yeah, oh yeah. >> gerber: it was a good game. >> huff: it helped me put three kids through school, and one through law school, so it was quite beneficial to me. >> wertheim: used it for education? >> huff: pretty much. >> white: there's a lot of people around town that knew what it was about, and talked about it and that it occurred. >> huff: but a lot of people were really leery. >> gerber: you bet! >> huff: they were thinking, "you guys are nuts." >> wertheim: by the spring of 2005, jerry's club stood at 25 members. those willing to press their luck included three state troopers, a factory plant manager, and a bank vice president. they had played winfall 12lionn michigan suddenly shut down the game, citing, ironically, lack of sales. michigan game gets closed down. how long before you realize there was a game in massachusetts that also presented some favorable odds? >> jerry selbee: one of our players emailed me and he said,

"massachusetts has a game called 'cash winfall.' do you think we could play that?" >> wertheim: i've heard that. >> jerry selbee: and so i got on the computer, i looked at the game. and once i researched it, i got back with him and i said, we can play that game. >> wertheim: we got another winner. how long did it take you this time to figure out that you could get a positive return here? >> jerry selbee: ten minutes. >> wertheim: that's when jerry and marge selbee developed a routine they continued for the next six years-- driving 900 miles to massachusetts every time there was a rolldown, and buying hundreds of thousands of tickets at two local convenience stores. then, they holed up. not in some fancy suite at the high rollers hotel, but in a room at the red roof inn, sorting the tickets by hand for ten hours a day, ten days straight. not so much playing the lottery, as working it. so once there was a rolldown, on

average, how much were you putting in play? >> jerry selbee: over $600,000 per play. seven plays a year. >> wertheim: $4.2 million once this rolldown was coming? >> jerry selbee: per year. >> wertheim: did you ever get nervous? >> marge selbee: oh yeah. ( laughs ) >> wertheim: what'd you do with all the losing tickets? >> jerry selbee: saved them. >> wertheim: you saved all the losing tickets? >> marge selbee: saved them in big, you know, the big totes. >> jerry selbee: big plastic totes. >> wertheim: there must have been millions. >> jerry selbee: 18. >> wertheim: $18 million worth of losing tickets. and you have those? >> jerry selbee: uh-huh. just in case we had a physical federal audit. >> marge selbee: we had the upstairs of the barn. i stored them in one end, and then the other end, and then i thought, "oh no, this floor is going to fall through." so then we stored them down in the pole barn. and we had probably 60, 65 tubs of tickets. >> wertheim: did you guys ever say, "we're supposed to be retired, here. we're making 14-hour drives to massachusetts"? >> jerry selbee: we're having fun. >> wertheim: it's fun for youe:u >> jerry selbee: it's fun doing it.

>> marge selbee: we get a high on doing it. >> jerry selbee: and it gave you the satisfaction of being successful at something that was worthwhile, to not only us personally, but to our friends and our family. >> wertheim: but in 2011, the "boston globe" got a tip and discovered that in certain massachusetts locations, cash winfall tickets were being sold at an extraordinary volume. >> scott allen: smart people had figured out, if i buy enough of these tickets, i'll always be a winner. i'll get back more than i spent. >> wertheim: scott allen oversees the "globe's" investigative reporters, known as the "spotlight team." the paper's reporting revealed that two groups were dominating cash winfall: the selbee gang from evart, michigan-- and their competition, a syndicate led by math majors from m.i.t., the massachusetts institute of technology. these were kids young enough to be the selbees grandchildren. >> allen: the guy who started it, he was doing an independent study project as an undergraduate at m.i.t., and he figured out that he could win

this game. so he got a bunch of his friends to pool in their money. so they became, as time went on, professional cash winfall players, recruiting their friends and raising money from backers until they too were spending hundreds of thousands of dollars. >> wertheim: incredibly, the m.i.t. group bet between $17 and $18 million on cash winfall over a seven-year period, earning at least $3.5 million in profits-- almost the exact same rate of return as the selbees. you've got a syndicate from northwest michigan. you've got a group of m.i.t. students. did your story meter start beeping? >> allen: it was-- "oh, it's a great story." >> wertheim: the "boston globe" articles caused a sensation, raising suspicion that the game was rigged. the massachusetts state treasurer shut down the cash winfall game, and called for an investigation. it was led by then-state inspector general, greg sullivan. >> greg sullivan: when we got involved, the public perception was, there must be some kind of organized crime or public

corruption, to explain how millions of dollars are being bet by syndicates on state lottery tickets. we really looked at this, looking for corruption. we used subpoenas, we looked at documents, we interviewed dozens of people to get-- to look at this in detail, with a hypothesis that something illegal had happened. >> wertheim: you went into this looking for organized crime. as the story unfolded, were you surprised by what you found? >> sullivan: i wasn't surprised. i was dumbfoundely amazed, that these math nerd geniuses had found a way, legally, to win a state lottery and make millions from it. >> wertheim: and the state's getting rich in the process. >> sullivan: and the state got very rich. the state made $120 million. >> wertheim: the investigation found no one's odds of winning was affected by high-volume betting. when the jackpot hit the rolldown threshold, cash winfall

became a good bet for everyone, not just the big-time bettors like the selbees. by then, though, massachusetts state lottery had moved on to a different game-- without a statistical twist. and with that, jerry and marge selbee's excellent adventure drew to an end. in total, their unlikely homegrown company grossed more than $26 million from nine years of playing the lottery. your corporation, $26 million. you smile when you recounted that figure. >> jerry selbee: uh-huh. that was satisfactory. >> wertheim: satisfactory? >> jerry selbee: yeah. >> wertheim: they made nearly $8 million in profit, before taxes. back in evart, not exactly the land of extravagance, the selbees put their winnings to practical use-- renovating their home, and helping their six kids, 14 grandkids and ten great-grandchildren pay for their education. they still get together with members of their lottery group, but millions of dollars in

winfall tickets have been replaced by nickel-and-dime poker night, and marge makes everyone chicken pot pie. i'm struck by how measured you are, telling this story. do you find anything remarkable about this? >> jerry selbee: the only thing i found really remarkable is, nobody else really seemed to grasp it. >> wertheim: what i'm hearing you say is that this part of the country is really good at keeping a secret. >> jerry selbee: ( laughs ) ( ticking ) >> the story's not over. the tale of marge and jerry may be headed for hollywood. go to 60minutesovertime.com. sponsored by pfizer. psoriatic. as you and your rheumatologist consider treatments, ask if xeljanz xr is right for you. xeljanz xr is a once daily pill for psoriatic arthritis. taken with methotrexate or similar medicines, it can reduce joint pain... ...swelling and significantly improve physical function. xeljanz xr can lower your ability to fight infections,

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