Optimal Stopping

There's a concept called the optimal stopping problem. I originally read about this in a book called Algorithms To Live By.

The point is -- when you are considering a set of options, when you should you pick a path forward vs. continue to search/weigh different options?

The book uses a shopping mall's parking lot as an example. If you want to find the closest spot to the entrance, how long do you circle around before you pick? If you pick too soon, you might see a better spot later. But if you circle too long, you might pass on good spots that would've been fine. So when do you choose?

The answer is 37%. There is a bunch of math explaining why this is the number, but let's take it as fact. Which means the optimal time to stop searching is after you have seen 37% of the options. So after you cross that threshold, the next best one that you see (compared to all of the earlier options), you take.

So in the mall example, if you've allocated 10 minutes to search for parking then after ~3.5 minutes, you pick the first spot that is better than all the ones you saw previously.

This framework dramatically simplifes most nebulous problems. Instead of struggling back and forth between thinking or acting, you can use the 37% rule. Observe the options, then go through 37% of them without picking. After that, keep reviewing the options but pick the next one that beats everything you have seen prior.

Most meaningful problems in life have no fixed path. And so you see this a lot when people are presented with nebulous problems. They got bogged down thinking about every possible scenarios, all the different problems, etc. And while it's good to think about things, most of the time it's better just to act.

But that doesn't mean you should just mindlessly act on everything. There is value in thinking things out, planning, etc. However most people I see struggle more with overthinking vs. overdoing.

Smart people are used to thinking & planning, often at the expense of action. That's why tier 2 backgrounds produce better founders than tier 1 backgrounds. There seems to be an inverse relationship with bias to action and pedigree.

However if you always act too quickly, you make easily avoidable mistakes. Most of the time, these are fine and the lessons gained from acting trump the time saved from optimal planning. But sometimes it's not.

So use the Bezos's one way vs. two way door framework. If it's a two way door, bias to acting without worry. But if it's a one way door, then worth thinking. But to prevent yourself from overthinking and wasting cycles, use the 37% rule to make sure that while you stop and think, you still force action.