The optimizer’s curse is a real phenomenon studied by decision analytics researchers using statistical techniques. Academics consider the optimizer’s curse as follows:

• With unlimited time and resources, you could assign the actual value to a variety of alternative solutions to a problem.
• Because humans do not possess unlimited time and resources when faced with problems, they must do their best to assign predicted values to a variety of alternative solutions when making a decision.
• After making a decision, you may find that the actual results are better than you predicted or worse than you predicted.

You might assume given the above information, that over the long run, you will have selected solutions to your problems that result in an average actual value equal to the average predicted value.

Research has shown that in fact, you will over the long run, select solutions that result in worse actual value than predicted value!

How so? In a nutshell, when presented with a variety of solutions, we tend to choose the most optimistic of the bunch, which leads us to consistently overestimate the value of our choice. The more options we consider, the father from the actual value we may be led!

News flash: I am not a decision researcher or an academic! But the optimizer’s curse has corollaries to points and miles and so I want to spend a few minutes thinking about how we can do our best to avoid getting so caught up in analysis paralysis that we fail to make any decisions at all!

Getting the Most Points Per Dollar Spent

Once you start using points and miles, you might start thinking about which card is best to used in a certain situation based on category spend or other measures. For instance, you might have 5 credit cards, what card will you use when you go out to eat at a restaurant? Well maybe you will use the American Express Gold card for 4x per dollar at restaurants. Or maybe you have the Citi Strata Premier and its a Friday or Saturday and its between 6pm – 6am ET, which means you can get 6x per dollar at restaurants. Or maybe there is a special offer you activated with your Chase Sapphire Preferred card to get 10x on up to $1,000 spend on restaurants through the end of the month. And this is just restaurants! As you can see, this could quickly become complicated and hard to track. While the optimizer in you might be determined to get the most value out of every dollar spent – and there are apps that can help you – I personally find this approach overkill.

Let’s say you spend $100 per week at restaurants. So over the course of a year, you spend $5,200 at restaurants. If you use the American Express Gold, that is 20.8k points you will earned. If you only eat between 6pm-6am ET on Friday and Saturday, the Citi Strata Premier could net you 31.2k points. The truth is, most people can reliably get at least 2x on restaurants (or an estimated 10.4k points). The question can be reframed then, as should you stress or worry about optimizing restaurant spend, for an extra 10.4k points?

For me, the answer is “no” because I like to always be working on a new SUB! SUBs normally blow category spend out of the water. Consider a SUB of 75,000 for spending $4,000 in 3 months. You can think about each dollar spent working towards that SUB as earning at least 18 points! If you were always working on a SUB of 75,000, then that $5,200 restaurant spend would be comparable to earning you 93.6k points! For me, this is a no-brainer. If you are always working on a SUB, then all your purchases go on one card (so easy) and each dollar spent on that card will earn far more than any 4-6x category spend that requires jumping through hoops while standing on your head and balancing a basketball on your nose 🙂

Finding the Best Flight/Hotel Award Deal

Of course you also face the optimizers curse when using your points. You will naturally want to best deal because spending fewer points means getting the most out of your points and miles stash. I do this – I will spend hours and hours across many days searching for the best reward redemptions and looking for patterns and rethinking my travel plans, all so I can feel like I did the best job ever and pat myself on the back.

When you go to book a flight, the challenges are:

• You may have some preconceived notion of what is a good deal based on someone else’s experience or some viral social media post. Remember, what you see online is not always representative of the actual value or available! If you are trying to book flights from ORD to CAN, the options could range from 8k points per person one-way to 63k points per person one-way. Obviously 8k points per person one-way would be amazing, but not everyone will or can book that option.
• Speaking of options, they are usually limitless as far as we are concerned. You could fly ORD to CAN on probably 10+ carriers each offering different departure and arrival times. Maybe your flight is direct, or maybe its indirect. You are probably looking at economy seats, but maybe business or premium economy is available. The cost in points could change daily or hourly, and so could opportunities to leverage transfer bonuses. An airline might add more award seat availability or a family of 10 might book up every award seat on a flight. For all these reasons, it is impossible to know if or when you will find the best option. You could search for a year and never book your flight! To overcome this, I usually:
  • Run some quick searches to get a sense of what is reasonable, sometimes testing out different fare types, dates, or destinations (depending on my flexibility, because being flexible is a benefit)
  • Search early, oftentimes before my dates are even available to book (1+ year), and take note of what routes and programs seem to be the most competitive
  • Double check transfer bonuses – this can make a decent redemption an amazing redemption!
  • Once I find a good deal, I book it and carry on. If I never find a good deal, I usually book then keep running alerts for something better – if I see something better, I can usually cancel my original award seats and book the better option, but at least I have a fallback plan that is booked and acceptable to me. I usually consider the following good deals:
    • Anything domestic USA for 10k-15k or less one way in economy.
    • Anything to Mexico or Caribbean for 15k-30k or less one way in economy. These deals often extend to South American, too.
    • Anything to Europe for 15k-30k one way in economy or 40k-60k one way in business. Flights to Europe will vary by East vs West coast departures. Similar pricing for flights to Africa and the Middle East.
    • Anything to Asia or Oceana for 70k-100k in business class one way.

From my perspective, as long as I can continue to earn more SUBs in the future, I try not to sweat it if I end up paying a bit more on flights or hotels than I *expected* (it is so easy to be disappointed when you are an optimizer)! The way I see it, if I end up spending 75k on business flights to Europe instead of the 50k I was hoping for – oh well! – I will more than make up for that with my next SUB. The other thing to note is over time, many people may find they are earning more points than they can reasonably spend. This is a great situation to be in, as it will free you up to book “bad redemptions” without too much disappointment.

Conclusion

At the end of the day, I have a hard time calling any flight or hotel booked with points and miles a bad redemption. I mean, flying overseas in a lie-flat bed for the cost of taxes and fees only is an experience that can’t be beat. To be able to repeat that experience is something I never imagined was possible. My worst redemptions from a CPP perspective have probably been domestic economy flights, and even then, I would rather use my points than my cash. You might have a different stance, but I encourage you to figure out what your stance is (be gentle with yourself!), set some boundaries or general rules you like to follow, and start earning and burning today!