I know that most people never heard or know nothing about "Type I and Type II Error", so I am going to try to explain it and its significance in this blog.
We all make decisions every day and most of us use the same logic thinking that we are doing a good job. In many cases we are kidding ourselves. We are not good decision makers. Think about this? Let's take an easy example of a simple decision. You go to a fancy restaurant with a long minu with strange names. Your objective is to order something that you will enjoy. Isn't that always our objective? You go down the list of items and identify some and from those, you make your selection. What you are doing it making sure that you do not make the "Type I Error". That is you don't want to make the mistake of ordering something that you do not like. Your order comes and it is, infact, something that you enjoy. You can now pat yourself on the back that you have made a good decision, but have you?
The next day you tell a friend about your enjoyment of going to this special restaurant and having a good meal. They tell you that the restaurant is one of their favorites and that they always look forward to a unique item that they have on their menu. You noticed this item on the menu, but did not try it. Your friend tells you that the next time you go to that restaurant that you have to order this item. Now, what you did on that visit too this special restaurant was to commit "Type II Error" by eliminating that special item from consideration. You made a decision to reject the very good item that your good friend recommended to you. Further, the next time you went to that restaurant you did try that item and you found that it was much better than what you had ordered in your prior visit.
Now, do you understand the difference between "Type I" and "Type II" error? A more common application is in hiring new employees. If you require all your applicants to have degrees and then you select the best from among them you think you have made the right decision, but have you? You were avoiding Type I error but what about Type II error which means rejecting an even better employee because they did not have a degree?
The lesson from this blog is that most of us go thru life avoiding Type I error but are making Type II error in the process. Think about it and you will understand.
