Automatic.
The only setting I ever use cause manually managing brightness is out of the question. I go through too many differing lighting conditions (different venues, indoors, outdoors, etc.) to have to deal with that.
No issues with battery. I still bump charge when I'm in the car, sitting at home doing nothing, etc. like I have with every other phone I've owned. Keeps the battery in better shape.
Friend of mine has an S4 that he keeps at almost 10)% (between 80and 100%) and it still gets great battery life for him. I can't keep the brightness that high. It hurts my eyes just looking at his screen...