The Statistical Errors That Explain Our Behaviour


My colleague planned on going to school last year, but unlike others, she only applied to her first choice school. My colleague had prayed, so believed that she would get into the one school she applied to. Unfortunately, she got rejected. Having optimistically banked on one school, she had been turned down. To me, it did not sound like a very clever strategy to adopt in the first place. However, the more I considered it, the more I realised that her action was but a reflection of what many of us – on an individual, state and national level – do.

As humans, we find it hard to apply statistics in everyday life, and so we often make mistakes. We make two types of errors commonly known in Statistics as Type I errors and Type II errors: a Type I error, or false positive, is believing a pattern is real when it is not; a Type II error, or false negative, is not believing a pattern is real when it is. Here is another way of looking at it: If you believe that a condition is present when it is actually not present, that is a Type I error. Meanwhile, when a test result indicates a condition is not present, when it actually is, that is a Type II error.

In the past, when the probability and costs of danger were much higher, believing in a false negative was costlier than believing in a false positive. If you believe that the animal behind the bush is a lion when it is not a lion (Type I error), you are more likely to survive than if you believe that the animal behind the bush is not a lion when it indeed is a lion (Type II error). Because making a Type I error is less costly than making a Type II error, those who made the more cautious error had a higher chance of survival compared to those who took more optimistic risks. Thus, it makes more sense to be more cautious than less cautious.

What does this have to do with Nigeria? We’re getting there. As pessimistic as Nigerians might seem about our general state of affairs, we are rather optimistic about a lot. Optimism is great. It lets you see opportunities where others see failure. It keeps entrepreneurs striving, churches full, politicians and governments full of promises, and people hustling along despite deplorable situations. However, too much optimism and too little realism leads to a knee-jerk belief in a Type II error.

Consequently, as Nigerians, we buck the trend and err on the side of Type II errors rather than on the more cautious side of Type I errors. We consider future events positively rather than negatively. It’s of course more appealing to see the future positively than to see how things could turn out bad. The consequence of solely seeing the future this way is that when things happen to be bad, we remain unprepared to handle it.

The advantage of a Type I mindset is that in the event that you’re right, you win, and in the event that you’re wrong, you don’t lose nearly as much as you would have if the event did actualise. Nigeria failed to see that we were pregnant with several pressing issues that needed immediate attention. We tend to ignore our issues and then reactively attend to them. For example, Nigeria has suffered from flooding for many years, however, we made the Type II error that the flooding wouldn’t get worse and did nothing about it. So we believe we won’t have a flood, but the reality is that we do. The 2012 flood killed 363 people, displaced over 2,100,000 people and cost Nigeria ₦2.6 trillion.

Nigeria’s insurgents began as a bunch of ragtag terrorists before they grew into a terrifying force capable of opposing the Nigerian army. The Nigerian government has frequently been accused of underestimating Boko Haram – another classic case of a false negative. Assuming Boko Haram wouldn’t become a formidable threat was a Type II error. They were not considered a viable threat until much later. So we believed that we didn’t have Nigerian terrorists who were ready to blow themselves up, but the reality is that we did. That error has cost Nigeria roughly ₦5 trillion, thousands of lives and thousands of displaced persons.

When oil prices topped a hundred dollars a barrel, we failed to augment our foreign reserves, thinking oil prices wouldn’t fall. From our high recurrent spending and misappropriation of public funds, we believed oil prices would remain high, but this backfired. They did fall and we were left with the full consequences of a false negative mindset – with Nigeria’s economy at a precarious position, a weekly struggle by the CBN to defend our falling naira, halved capital expenditure to less than 10% of the 2015 Appropriation Bill, axing of necessary infrastructural projects, and inflation risk from deflation due to high dependence on imports.

Currently, we’re looking at our population and not seeing the time bomb that it is if we fail to improve education and salvage our human capital. By 2050, the global Population Reference Bureau (PRB) predicts that Nigeria will be the world’s fourth most populous country, with 400 million people. Even as we see rising human capital, we should also be see the teeming mess that will be created if the proper social structures are not put in place to accommodate for such population growth.

Choosing not to see a pattern when it’s clearly there is something we also do individually. We might constantly fail a class, and yet optimistically see ourselves passing that exam before we write it, and then we blame everything but ourselves when we fail. Negative patterns are hard to spot when we’re the ones looking at events that concern us – especially if we might be the cause.

The solution is to look through potential patterns that might be negative and develop contingency plans for them. This way, you’re prepared whether they occur or not. If you’re starting a business, consider that a large number of startups fail, and plan accordingly. If you’re a policy maker for the government or an international organisation, consider that policies fail and might not have the intended effect, so go ahead and make a Type I error that sees failure as a result, and find solutions to these potential pitfalls. The same applies to any event. Plan for the worst, so you don’t wait to see what happens if it does occur.

Of course, pessimism should not become the order of the day. Besides, the cost of preparing for what might not materialise is a problem in itself. However, preparing contingency plans for events is a crucial tactic in war – there is no reason this shouldn’t be applied to crucial facets of life. When we make a Type I error, we risk unnecessary waste. However, failing to pay attention to patterns that could significantly affect future events could spell disaster even before a move has been made. These days, Type II errors are just too costly to make.

 

Categories