The Coffee Optimization Problem

My Keurig broke last weekend. I tried to revive it, but to no avail.

While waiting for a French press to arrive, I had to go out and buy coffee for the entire work week.

I’m a tad addicted to caffeine—averaging 2-4 cups of coffee per day. Even when my Keurig worked, I still went out for coffee about four times per week.

But this unfortunate death forced me to go out seven times last week.

It inspired me to analyze my coffee consumption habits, and I noticed something fascinating.

I live in the Financial District of NYC, so there are plenty of coffee options within a 10-minute walking radius.

If I want a quick to-go cup, I head to Starbucks. However, there are eight I could walk to in under eight minutes. So, if I’m in a rush, I choose the one closest to me. But if I have time to spare and want to take some extra steps, I choose a location a bit further away.

When the weather was nice during the spring and summer, I enjoyed sitting on Pier 17. Nothing felt more soothing than enjoying an iced coffee while overlooking the East River and the Brooklyn Bridge. Again, I chose Starbucks, as there’s a spot located halfway between me and the pier.

But if I instead wanted to go for a long walk along the west side of Lower Manhattan that overlooked the Hudson River, I went to the Blue Bottle Coffee near the World Trade Center.

Sometimes, I wanted to sit indoors to read, write, or program.

I never went to Starbucks for this. The seating areas are dull and uninviting. I went to boutique coffee shops instead.

The best spot for this was 787 Coffee, which was a seven-minute walk from my apartment. I went there often, but they have a major issue—they only serve lattes. So, if I wanted indoor seating and drip coffee, I’d select Black Fox coffee.

Other times, I wanted to sit outdoors to read, write, or program.

I needed a spot with a pleasant view and an abundance of outdoor tables. The Tin Building Cafe on Pier was my prime option here. The food was decent, too, so I could also eat while enjoying coffee outside.

But if I wanted food and coffee to go, I had better options. Instead of the Tin Building Cafe, I could grab a large coffee and egg sandwich from Leo’s Bagels.

As fall and winter approached, the weather grew cold.

I was no longer willing to walk far. So, I relied on the shops I could walk to in under five minutes. This includes two Starbucks, Black Fox Coffee, and Luckin’ Coffee. The latter is the closest, right next to my apartment.

It rained and snowed a lot during the last few months, so I preferred locations with routes that had scaffolding to shield me for over 90% of the hike. Black Fox Coffee was the best option here.

And, of course, there were the days I brewed coffee in my apartment with my now-deceased Keurig. I don’t want to buy 2-4 cups of coffee per day, so roughly 75% of my drinks since moving to the city last March have come from my Keurig.

As you can see, I have many options.

Rather than sticking to one place, I switch between them often.

I used to think my decisions were random, but that’s not true.

My decisions are instead driven by a set of factors I like to call my Coffee Dictating Factors (CDF). A CDF is any element or condition that influences where I choose to go for coffee.

It turns out my coffee choices aren’t trivial. They’re economic.

Each decision results from a quiet optimization problem to find the best option based on my CDFs.

I can categorize each CDF as one of the following economic concepts:

• Utility
• Opportunity Cost
• Constraints
• Transaction Costs
• Time Preference

Here’s how these concepts apply to some of my CDFs.

Utility is the satisfaction, happiness, or benefit I get from a choice. It’s what I want to get out of my coffee.

The first example is the latte vs drip decision.

Most of the time, I strictly desire a caffeine rush, so drip coffee suffices. But on occasion, I want something sweet and tasty. That’s when I opt for a latte.

The second example is getting coffee to-go vs to stay.

If I plan to sit outdoors or return to my apartment, I often choose Starbucks. But when I want indoor seating, I go to boutique cafes due to their more appealing atmosphere.

Opportunity cost is the value of the next-best alternative. It’s what I give up when choosing one place over another.

An example is reward points.

As an avid Starbucks customer over the last three years, I’m a rewards member and collect stars that earn me free drinks. If I choose a place other than Starbucks, I lose out on the potential stars I could have collected.

Another example of opportunity cost is making coffee at home versus going out.

The opportunity cost of going out for coffee is time and money. The coffee costs more, and it takes longer to get since I have to walk, order, wait, then walk back.

Making coffee at home is not only faster but cheaper per cup. However, I spend most of my days indoors since I work from home, so the opportunity cost of making coffee at home is a chance to get fresh air and outdoor time.

Constraints are the non-negotiable realities that limit my options.

How much time I have to get coffee is an example.

On weekends when I have no plans, I can afford to walk farther and/or sit at a coffee shop. But when my schedule is tight—when I have upcoming meetings or urgent tasks at work—I go to a nearby shop for a to-go cup or make coffee at home.

The weather is another constraint.

Warm, sunny days mean I can choose places far away, sit outdoors, or enjoy coffee while walking. But when it’s cold and raining or snowing, I prefer close-by locations.

Transaction costs are the expenses beyond the monetary price of coffee.

This includes things like the energy I spend walking, how long I have to wait in line, whether seating is available, and how noisy a place is.

Time preference is the subjective value I place on getting coffee now rather than later. It’s when I choose short-term gratification over long-term benefits.

The example here is whether I want a latte or a drip coffee.

Lattes provide more pleasure as they’re sweeter and tastier than drip. But lattes are more expensive and take longer to make. Drip coffee is cheaper and faster, making it the better option for both finances and efficiency.

In the long run, it’s best to always drink drip coffee. But the short-term gratification of lattes makes me go for them frequently.

Every time I want coffee, my mind reviews my CDFs and deduces the most optimal place based on the given circumstances.

This optimization happens subconsciously and takes a fraction of a second. That’s why my coffee decisions feel trivial.

But by taking the time to review and analyze my coffee trends, I discovered the fascinating economic system that exists within this basic habit.

It makes me wonder where I can find other optimization problems in my life that secretly dictate my decisions.