American Express Company

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 became the dominant express carrier in the eastern United States within a decade.

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 was inspired by an incident in which an American Express executive found himself stranded in a foreign country because his letter of credit had been damaged. Traveller's cheques 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 — positioning it explicitly as a product for affluent business travellers and executives. Unlike bank credit cards, the American Express card required full payment each month — there was 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 American Express's 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.

American Express generates significant revenue from annual card fees and merchant fees, but its most powerful competitive moat is its rewards programme — Membership Rewards points that cardholders accumulate and redeem for travel, merchandise, and experiences. The programme creates switching costs: cardholders with accumulated points are reluctant to change cards and lose them. During the COVID-19 pandemic, when travel collapsed, American Express maintained cardholders by expanding rewards redemption options and reducing annual fees. The loyalty ecosystem that had taken decades to build proved more resilient than the travel industry it had been built to serve.