What is the rule of 70?
When I was a young man, I did the first job interview of my life. I’d taken an exam at my local college and had been selected for a full-time job: a clerical position at a large corporation. I think the interviewer thought that it would be a good idea to have me take the exam so he would know how good I was. So it was very important that I do well on the exam in order to get my first real job.
I spent all day on the test, which lasted several hours, going through about two dozen questions. The problem with this test is that each one was different so you had to spend several hours on your test just getting through all of them. Needless to say, my performance on the test did not impress the interviewer. He said, “Well done! You’ve got nothing like this in college!”
Then he asked me what kind of job I really wanted to do: “What do you want to be when you grow up?” Well, for a long time it seemed as if there were no jobs that interested me; but then one day when I came home from work and turned on the TV news and saw someone saying we needed more people like me, who were smart and could work hard and be productive and make lots of money…I started thinking seriously about what kind of career I wanted to have (or even if having one in particular made sense).
So then I went back to college (which is how it happens all the time) and took another exam for another job. This one lasted about two hours; there were only two or three questions worth answering. And again the interviewer said he thought it would be interesting if he saw how well I did on this test (so he could assess how good I was). Then he asked w
What kind of job I really wanted to do: “What do you want to be when you grow up?” Well again, since there were no jobs like this in college anymore (for which they are now looking), but also since being an engineer/programmer/computer scientist/scientist seemed cool and important, then this time around (after a lot of hard thinking)…I decided that being an electrical engineer/programmer/computer scientist /scientist would be what i wanted to be when I grew up because it sounded most interesting.
So after all that hard thinking…I decided that being an electrical engineer
Rule of 70 Explained
The rule of 70 is one of the easiest and best-known of the many random number algorithms. It’s been used for a long time and it seems like no one has figured out why it works.
The rule of 70 works this way:
Take a random integer between 0 and 1, return it to a random integer between 0 and 100 (the number of which you can reasonably expect to know), repeat this process:
So, for example, if you were to take a random digit from 1 through 7 (let’s use 2 for simplicity) and then take another random digit from 0 to 99 (let’s use 6), you would get something like this:
1 * 2 * 3 * 4 * 5 * 6 = 66
And so on. You can imagine that over time, as each number gets closer to 100, the probability of getting any given digit gets lower. You can also imagine that when you do get the digit close to 100, you are more certain that the next digit will be even better or even worse than what preceded it. This is called “pivoting around the bottom” or “pivoting around the top” depending on which side you want to be on. If you think about it in terms of probability theory, these are very simple processes and very powerful ones at that; all things considered though…
Applying the Rule of 70 to Business Growth
The rule of 70 (also known as the rule of 72) was first introduced by Henry Ford in 1894, when he stated that if the company grew at a rate of 7% for three years, then it would be expected to grow at a rate of 12% a year for the next seven years.
The rule is simple enough: if you have grown a product and market at a rate of 70%, then you should expect your growth to continue at a rate of roughly 70%.
However, there are two important caveats to keep in mind. First, it is not always easy to find this kind of market. Many businesses simply don’t cultivate markets like that very well and are therefore concerned about their saturation rates. Second, this is only an estimate; it can’t be guaranteed that your growth will continue at the projected pace. One thing is certain: you cannot take any action until you know what you are dealing with and how long you have before your growth stalls.
Applying the Rule of 70 to Personal Growth
This rule of 70 is something that has been applied to people who have ideas, plans, or dreams but don’t know how to start anything. In a nutshell, it says:
90% of the hard work is done by 10% of the people.
If you know how to do something and you can execute it, you should be able to scale your efforts towards more than yourself.
While this isn’t always true (it’s easy to lose focus on what others are doing), if you can back that up by constantly thinking about the progress others are making and asking questions like “what would they be doing if they were me?” then you will get closer to more ambitious goals. The idea is that too much of your energy is spent trying to figure out what other people are already doing and what methods work for them. If instead, you start asking “what would I be doing if I was them?” then maybe you find some new ways of pursuing your own dreams.
What is the Rule of 70?
“Rule of 70”. It is a popular saying among investors and speculators. This phrase is often heard by people who are bullish on an investment they’ve made.
But what exactly is the Rule of 70, and how do you use it in your business?
The Rule of 70 is a statistical probability rule that usually refers to a long-term trend (usually longer than 2 years). The rule states: “If we look back at our investments recently, and average them over two years, we will see that most of our investments were profitable.” So if we make an investment for which we think the probability of failure is high, and we invest for which we think the probability of success is low, then in actual fact, most of our investments have been successful. But it’s not always that simple. Sometimes there are no cases where our beliefs about potential outcomes line up with reality; sometimes there are cases where our beliefs about potential outcomes do match reality.
The results can be surprising; it’s easy to get more out of a disappointing investment than out of a profitable one. It’s important to remember that the Rule of 70 only applies if you think your future could be lucrative (in other words, it doesn’t apply if you think your future will be not-so-lucrative). If you think your future might involve losing money or having very low gross margins (that’s possible even when you’re right), then you should get out before any damage happens to your company or reputation. There isn’t any way around this rule: don’t bet on being right all the time — try different things and find something that works better. Once you’re in a position where nothing lasts forever, you’ll realize how little progress there actually was in your life before investing — so why would you need to continue making bets on things when they aren’t likely to work out?