37% RULE — Why ‘Optimal Stopping’ is one of the best way to avoid further bad decisions in life?

  • How many people should you date before deciding to ‘settle down’ and get married?
  • How many interviewee should we look at before deciding on “The One”?
  • How many flats should I look upon before saying “Yes” to one of the offers?
  • How many hotels should I look before deciding on the one to settle into?
  • How many internships should you do before deciding on a job offer?
  • How many careers should you try out before you figure out which your favourite is?
  • Spend too long probing your options and you fall prey to analysis paralysis and let promising opportunities go by.(Overly Exploratory)
  • Close out the process too quickly and you risk regretting options you never considered.(Overly Exploitative)
37% Rule
Image by Author — 37% Rule

MAIN IDEA

The 37% rule comes from ‘optimal stopping’ theory in mathematics, which determines the optimal time to take a particular action in order to maximize reward and minimize cost (aka, the best time to stop seeking more options and pull the trigger). According to mathematicians, that point is right after you’ve seen or explored the first 37% of your options.

TECHNICAL (1/e Stopping Rule)

This oddly precise recommendation actually has a formula behind it and mathematicians insist this rule gives you the highest probability of making the optimum choice. If you’re into math, it’s actually 1/e ( 1 over e, where e is the basis of the natural logarithm), which comes out to 0.368, or 36.8 percent or 37% as the number of choices increases.

Image copied from Wikipedia

PSYCHOLOGICAL TEST on Exploit or Explore Conundrum

Mathematics offers us the best answer to the “optimal stopping problem.” But there’s just one big issue with it: Humans are not rational probability-crunching machines. In fact, the opposite is usually true. We’re beautifully, infuriatingly, creatively, and messily chaotic. So, it falls on psychology to tell us about how we actually behave.

  • If you are visiting a city you know vaguely well, will you go to a restaurant you know is nice, or will you try somewhere new?
  • If I tell you a gambling machine has a payout of $50, will you stay and play or explore to see if others have a bigger payout?
  • When you’re playing a game, do you tend to stick to the same tactics or mix it up each time?

USE CASES

1) SECRETARY PROBLEM OR HIRING PROBLEM

A historical problem that derived this rule called “Secretary problem” at around 1960.

Secretary Problem
Image by Author — Secretary Problem
Secretary Problem — Sampling
Image by Author — Secretary Problem — Sampling

2) MARRIAGE PROBLEM

So let’s think over it for sometime, what essentially the solution says is that if you have a consideration set of around 10 girls before you decide which one to marry, you should not commit to anyone, until you have looked through at least 4 of them. Post which you should be ready to commit to anyone who is better than all previous ones.

3) REAL ESTATE PROBLEM

Brian Christian in his book, Algorithms to Live By: The Computer Science of Human Decisions, uses the 37% rule to help Macy to hunt best apartment for rent. As he writes: “If you want the best odds of getting the best apartment, spend 37% or first third of your apartment hunt (eleven days, if you’ve given yourself a month for the search) noncommittally exploring options. Leave the check book at home; you’re just calibrating. But after that point, be prepared to immediately commit — deposit and all — to the very first place you see that beats whatever you’ve already seen. This is not merely an intuitively satisfying compromise between looking and leaping. It is the provably optimal solution.”

CONCLUSION

Following this rule will save you from getting unnecessarily mired in information gathering and data analysis, get you into action, and maximize your probability of success.

  • When trying to pick the best among many options, how many samples should you try before you commit? This is known as the optimal stopping problem.
  • Mathematicians tell us that, to maximize the chances of the best outcome, we ought to ditch the first 37% of any options.
  • In psychology, people tend to either “explore” or “exploit” more. But, sadly for us, relationships are a bit messier than probability would have it.

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Quantum Thinker

Quantum Thinker

I write about Notions built from 3Ms : Maxim, Mental Model & Metaphor related to Finance — Health — Philosophy — Psychology — Technology. www.quantumthinker.io