American Express

American Express was founded in 1850 by Henry Wells, William Fargo, and John Butterfield — the same Wells and Fargo who would later found Wells Fargo. The company provided express freight and delivery services in the northeastern United States, competing with the U.S. postal service by offering faster, more reliable delivery of packages, valuables, and cash. In an era before electronic communication, the ability to move physical documents and money quickly was enormously valuable.

American Express introduced the traveller's cheque in 1891 — a prepaid instrument that could be cashed anywhere in the world, replacing the dangerous practice of carrying cash while travelling. The product generated float — American Express held the money until the cheques were cashed — creating a financial model that would eventually be replicated in the credit card business. By the mid-20th century, American Express processed $5 billion in traveller's cheques annually.

American Express launched its charge card in 1958 — positioned explicitly for affluent business travellers and executives. Unlike bank credit cards, the American Express card required full payment each month — no revolving credit. The fee-based model and the requirement for creditworthy cardholders created an association with wealth and status that became the brand's defining characteristic. "Don't leave home without it" — the tagline introduced in 1975 — reinforced the card's identity as an essential accessory for serious travellers.

Berkshire Hathaway began accumulating American Express shares in 1964 — when the stock was depressed following the "salad oil scandal," in which a fraudster had borrowed hundreds of millions against fictitious vegetable oil inventory that American Express had guaranteed. Buffett concluded that the scandal would damage the stock temporarily but not the underlying business. He was right. Buffett held American Express for decades, eventually owning approximately 20% of the company — one of his most profitable long-term investments. The salad oil scandal became one of the textbook examples of contrarian investing.

American Express reported revenues of $65.9 billion for fiscal year 2024 — up 10% — with net income of $10.1 billion. The company had successfully repositioned from a card for older business travellers to one coveted by younger professionals and millennials, who found the Membership Rewards programme and the Platinum Card's lifestyle benefits aligned with how they wanted to spend. 60% of new card acquisitions in 2024 were from millennials and Gen Z. The rewards ecosystem — points that created switching costs and emotional attachment — had proven more resilient than any other competitive moat in the payments industry.