Rule of thumb’ refers to:

Both 1 and 2

The correct answer is option 3- Both 1 and 2

A rule of thumb is a general principle used as a basis for judgment, often based on experience rather than rigorous analysis. It incorporates aspects of both option 1 and 2:

• Use of personal judgement: Since it's not a strictly defined method, applying a rule of thumb involves using your experience and intuition to make a decision.
• Adopting a hit-and-trial approach: Rules of thumb are often developed through trial and error over time. People observe what works and what doesn't in similar situations and create a general guideline.

In the earlier days of the Industrial Revolution, in the absence of an established theory of factory organisation, factory owners or managers relied on personal judgment in attending to the problems they confronted in the course of managing their work. This is what is referred to as ‘rule of thumb’. Managing factories by rule of thumb enabled them to handle the situations as they arose but suffered from the limitation of a trial and error approach.