What is optimal stopping?

Optimal stopping is a decision-making strategy used to determine the best time to make a choice to maximize your chances of getting the best outcome. Think of it as a Goldilocks problem: you don’t want to choose too early or too late, but just at the right moment.

Imagine you’re a busy executive trying to hire the perfect assistant. You have a stack of 100 resumes on your desk. The optimal stopping rule helps you decide when to stop interviewing candidates and make your final decision.

The most famous example of optimal stopping is the “37% Rule.” In this approach, you would sample 37% of the options (e.g., interview the first 37 candidates) without making a decision. After that, you’d choose the next candidate who is better than all the previous ones. By doing this, you maximize your chance of finding the best option.

In summary, optimal stopping is a strategic approach to decision-making that helps you determine the best time to make a choice, increasing the likelihood of achieving the most favorable outcome.