The 95% accuracy sounds reassuring until you run the numbers and realize the base rate is doing most of the damage.
Recognize this as a Bayes' theorem problem and set up the confusion matrix with given probabilities. Calculate the posterior probability P(Bad | Predicted Bad) using the formula: P(Bad | Pred) = P(Pred | Bad) * P(Bad) / P(Pred). Clearly state assumptions and interpret the result in context.
Pro tip: Emphasize that despite high accuracy, the low base rate (5%) leads to a low precision, which is crucial for understanding model performance in imbalanced settings. This shows you can connect statistical results to business impact.
Let B = user is bad, P = model predicts bad. Given: P(B) = 0.05, P(P|B) = 0.95, P(not P|not B) = 0.95. Derive P(P|not B) = 0.05.
Use law of total probability: P(P) = P(P|B)P(B) + P(P|not B)P(not B) = 0.95*0.05 + 0.05*0.95 = 0.095.
Calculate posterior: P(B|P) = P(P|B)P(B) / P(P) = (0.95*0.05) / 0.095 = 0.5.
The probability is 50%, meaning half of flagged users are actually bad. Discuss implications for precision and potential need for threshold adjustment.
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