Why We Worry About the Wrong Things, Part II

I mentioned it earlier in a round-up, but I really want to draw people’s attention to Time’s cover article this week. The magazine has done some very good work lately, and this week’s cover is another example. It painstakingly gets underneath our human penchant for getting possibilities, probabilities, and likelihoods all messed up, worrying over the least likely things, and being oblivious to the things that have a high chance of killing us.

Much of this has shown up in other guises in behavioral finance and elsewhere, but it is still solid reading for investors, among others, and it is worth pushing on people around you.

Shadowed by peril as we are, you would think we’d get pretty good at
distinguishing the risks likeliest to do us in from the ones that are
statistical long shots. But you would be wrong. We agonize over avian flu, which
to date has killed precisely no one in the U.S., but have to be cajoled into
getting vaccinated for the common flu, which contributes to the deaths of 36,000
Americans each year. We wring our hands over the mad cow pathogen that might be
(but almost certainly isn’t) in our hamburger and worry far less about the
cholesterol that contributes to the heart disease that kills 700,000 of us
annually.

As a kind of digression, I like that the piece is sufficiently unorthodox such as to defang some of the useless sops that are tossed the wrongly worried out there. For example:

Officials are fond of reassuring the public that they run a greater risk from,
for example, drowning in the bathtub, which kills 320 Americans a year, than
from a new peril like mad cow disease, which has so far killed no one in the
U.S. That’s pretty reassuring–and very misleading. The fact is that anyone over
6 and under 80–which is to say, the overwhelming majority of the U.S.
population–faces almost no risk of perishing in the tub. For most of us, the
apples of drowning and the oranges of mad cow disease don’t line up in any
useful way.

But such statistical straw men get trotted out all the time. People defending
the safety of pesticides and other toxins often argue that you stand a greater
risk of being hit by a falling airplane (about 1 in 250,000 over the course of
your entire life) than you do of being harmed by this or that contaminant. If
you live near an airport, however, the risk of getting beaned is about 1 in
10,000. Two very different probabilities are being conflated into one flawed
forecast. “My favorite is the one that says you stand a greater risk from dying
while skydiving than you do from some pesticide,” says Susan Egan Keane of the
Natural Resources Defense Council. “Well, I don’t skydive, so my risk is
zero.”

Lovely stuff.

Related posts:

  1. Peter Bernstein on Amaranth: Better to be Wrong Than Too Right
  2. Floyd’s Wall of Worry
  3. What’s Really Wrong with Dell?
  4. Be it Resolved: VCs are Wrong About Desktop Apps
  5. The VC Trap, Part II

Comments

  1. Tom says:

    Persons further interested in this topic should read the book “Numerosity”. It’s an older book, and I’m glad to see that the the Times Magazine article is just getting around to figuring it out. It’s way overdue. The Times Magazine in the past has been one of the greatest perpetrators of “innumeracy” – ignorance of numbers and their application. It’s a bigger problem than illiteracy, and it costs the world billions in wasted money because of bad decision-making. Hopefully Times Magazine will learn to apply that they have discovered instead of bending with the winds of popular delusion.

  2. tom says:

    Sorry, I should have said “Time” magazine, not “Times Magazine”. I don’t read the poor thing except at the doctor’s office or something. It’s only moderately useful for me as a tool to (a) gauge how far out of touch the American media is with reality, and (b) see how far they can lead the American public around by their noses.