American Express, every mention
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every year anyone David Rosenthal 46Ben Gilbert 26Jason Calacanis 1
Verbatim, from the transcripts: the passages where American Express comes up
Coca-Cola: The Complete History & Strategy (Audio) · Acquired
- ▶ 48:53 Ben Gilbert This reminds me a lot of our Visa episode, where we were talking about the difference between if you're Visa and you're scaling as a network of networks versus if you're Amex as a closed loop system, and we were talking about how Visa…
- ▶ 49:37 David Rosenthal If they had taken the Amex approach and Candler had decided, ah, you know, we're gonna enter the bottling business ourselves and
Rolex (Audio) · Acquired
- ▶ 4:25:13 Ben Gilbert There's a chance this thing's worth more than American Express, or Goldman Sachs, or Adobe, or Pepsi, or Disney, or Qualcomm, or AT&T.
Microsoft Volume I: The Complete History and Strategy of founding through Windows 95 (Audio) · Acquired
- ▶ 40:47 David Rosenthal Other companies in the partner network include Oracle, American Express, MasterCard, Accenture, and many more, including, friends of the show, Modern Treasury.
- ▶ 3:46:44 Ben Gilbert Apple is in many ways like the Amex, where Microsoft is the Visa.
Visa (Audio) · Acquired
- ▶ 17:26 David Rosenthal Diners Club and American Express arrive on the scene.
- ▶ 19:35 Ben Gilbert And just to start tracking a certain number here, when we were talking about checks earlier that were getting a discount, and even in this era of early Diners Club, early American Express, we're talking about a five to seven percent…
- ▶ 23:29 David Rosenthal Which, of course, brings us to the brand you're all probably thinking about here, American Express.
- ▶ 23:35 Ben Gilbert Which is the diner's club of today.
- ▶ 23:37 Ben Gilbert It's the favored card by businesses.
- ▶ 23:39 Ben Gilbert It is the card that is most used for travel and entertainment and meals.
- ▶ 23:47 David Rosenthal And so, as you might remember from our Berkshire Hathaway series a couple years ago, Amex at this point in time was primarily a traveler's checks business.
- ▶ 24:01 David Rosenthal Do you know who started American Express?
- ▶ 24:23 Ben Gilbert It was something like they started American Express, but then had a conflict, and so they left and they started Wells Fargo after that.
- ▶ 24:32 David Rosenthal The infrastructure of America was getting built out, so American Express, it's called American Express, it was an express mail company.
- ▶ 24:50 Ben Gilbert I think it's fascinating that Wells Fargo came after Amex.
- ▶ 24:58 Ben Gilbert American Express is even older than that.
- ▶ 25:00 David Rosenthal So, Amex, by this point in time, had become a traveler's checks, primarily.
- ▶ 25:15 David Rosenthal A hundred dollar travelers check and pay Amex a little fee or whatever, but the float and the breakage, like there's travelers checks out there today that are 50, a hundred years old that have never been cashed.
- ▶ 25:25 David Rosenthal And Amex has just been sitting on that cash for decades, investing it.
- ▶ 25:33 Ben Gilbert Okay, so Amex observes Diners Club and says, hey, we need to get into this, and we actually have an ability to get into this fast.
- ▶ 25:40 David Rosenthal And they actually try to buy Diners Club, but they can't get their own price, and so they're like, well, we don't need to pay you a lot of money, because we can just do this too, and like I was just saying, not only can we do it too, we…
- ▶ 26:06 David Rosenthal So just within like a year or maybe even two from when Amex launches their charge card, you know, business traveler program, they sign up 700,000 members, which is almost as much as diners club had signed up, you know, many years of…
- ▶ 26:58 David Rosenthal Amex launched their charge card program in 1958.
- ▶ 27:20 David Rosenthal But hopefully as we painted the picture, their motivation and Diners Club and Amex and even the merchants and retailers motivations are very different.
- ▶ 29:10 Ben Gilbert The charge card that had been happening over in diners club, Amex, the gas stations, the retailer land, then the second pillar is this consumer lending, and the third thing is, it is now from a real and proper bank that you already have…
- ▶ 35:50 David Rosenthal Amex was so proud in the first year or two, they get to 700,000.
- ▶ 36:27 David Rosenthal Like, it wasn't just that they copied MX and Diner's Club or anything else.
- ▶ 46:44 Ben Gilbert And this is the first moment that we start to see a departure from what American Express was doing.
- ▶ 46:50 Ben Gilbert The original Bank AmeriCard was very similar to American Express and Diners Club where they were closed loop systems.
- ▶ 1:31:29 David Rosenthal And importantly, as we'll get into in a little bit, this is a huge problem for American Express, too.
- ▶ 1:38:12 David Rosenthal They're already way bigger than Amex because Amex is a different customer segment, which we'll talk about in a sec.
- ▶ 1:38:25 Ben Gilbert Yeah, and it's worth a moment on Amex here because I would have thought just like Facebook or WhatsApp or Google, when you have this sort of winner-take-all massive network effect business that the single centralized player network effect…
- ▶ 1:38:44 Ben Gilbert Why wouldn't Amex win with their closed loop system where they own the whole thing end to end and can provide the most incredibly custom experience for
- ▶ 1:39:21 Ben Gilbert This strategy makes it so that they have far more scalability than something like Amex.
- ▶ 1:39:27 Ben Gilbert Amex also is a bank themselves, so is highly regulated, and they're a bank by this point in history, I believe, on both sides of the transaction.
- ▶ 1:42:09 Ben Gilbert It's probably actually worth sharing the Amex thing.
- ▶ 1:42:11 Ben Gilbert So Amex tried this crazy strategy in the eighties, and I'm flashing forward 10 years here, but they would basically cut their interchange, the discount rate that they were charging merchants massively if those merchants would go exclusive…
- ▶ 1:42:33 Ben Gilbert Went all the way to 2016, where they had the exclusive agreement with, ah, Amex, and if you were gonna use a credit card at Costco, it had to be Amex.
- ▶ 1:42:42 Ben Gilbert But interestingly, Visa and MasterCard cried foul when, ah, you know, all of their banks were multi-homing, and Amex, with their virtue of a slightly different business model, was allowed to go and try to lock up merchants to be exclusive…
- ▶ 1:47:45 David Rosenthal Now, they wanted to use them in specific use cases, like Ben, you pointed out, when you want to make a credit purchase, when you want to essentially do what installment financing was before, when you have any number of XYZ other set of…
- ▶ 1:54:14 David Rosenthal We've been in secret negotiations with American Express for months to create a joint venture together, Bank of America and American Express, that will create an automated system for transaction authorization for multiple credit card…
- ▶ 1:55:08 David Rosenthal Because they and American Express both see that, hey, this is a really, really, really valuable piece of technology.
- ▶ 1:55:21 David Rosenthal As D then tells the story, Bank of America and Amex go out and they try and pitch the other banks in NBI and
- ▶ 1:55:47 David Rosenthal The whole thing then morphs into a tripartite consortium of Interbank, American Express, and Bank of America, and thus by association, NBI.
- ▶ 2:17:56 David Rosenthal And up until this .1 of the mainstay largest Olympic sponsors in America was American Express.
- ▶ 2:18:06 David Rosenthal Because this fits perfectly with American Express.
- ▶ 2:18:17 David Rosenthal Goes to Amex to try and sign them up to take this marquee global sponsorship slot.
- ▶ 2:18:24 David Rosenthal They give Amex a sweetheart introductory offer deal.
- ▶ 2:18:31 David Rosenthal Amex declines.
- ▶ 2:18:34 David Rosenthal So they had their bite at the apple, and they missed it.
- ▶ 2:19:20 David Rosenthal After this happens, Visa brings on a new global chief marketing officer, a guy named John Bennett, who came from 20 years at American Express.
- ▶ 2:19:32 David Rosenthal So he and his team see that Amex has passed on this new amazing global opportunity with the Olympics.
- ▶ 2:20:05 David Rosenthal The path to victory is positioning against American Express.
- ▶ 2:20:10 David Rosenthal Not because we want to kill American Express.
- ▶ 2:20:14 David Rosenthal We're way, way, way bigger than American Express.
- ▶ 2:21:23 David Rosenthal The strategy is use American Express to eliminate the stigma around Visa, and by association, paint MasterCard as having that stigma, because we're not even bothering to talk about them.
- ▶ 2:21:37 David Rosenthal So, how do we go after American Express?
- ▶ 2:21:43 David Rosenthal The American Express merchant network at the time was about 25% the size of Visas.
- ▶ 2:21:48 David Rosenthal So they design a whole marketing campaign around going after American Express, and the tagline of the campaign, you know, they show these exotic locales, the type of customers who would be using American Express, that they would be dining…
- ▶ 2:22:12 David Rosenthal If you go there, remember to take your Visa card, because they don't take American Express.
- ▶ 2:22:26 David Rosenthal After Amex declines, John and the team get in touch with the IOC, the price tag has gone up to seventeen million dollars just for the rights.
- ▶ 2:24:33 David Rosenthal Position against Amex.
- ▶ 2:24:38 David Rosenthal The type of people who go to the Olympics, the type of people who use Amex, they use their Visa cards and they're proud of it.
- ▶ 2:26:41 Ben Gilbert Amex was already public.
- ▶ 3:02:54 David Rosenthal I do think Visa made a genius move, positioning against American Express, going up market in perception and partnering with the Olympics.
- ▶ 3:04:40 David Rosenthal I think there's totally also a story that's beyond the scope of this episode, but how banks, and in particular Chase, ate American Express's customer base over the last set of years.
- ▶ 3:04:54 Ben Gilbert I mean, in part, that's just bad strategy on Amex's part that, you know, eventually it was going to happen that they would not be the scale player.
- ▶ 3:05:21 Ben Gilbert I think there are less affluent people in our generation who have Amexes versus the premium products from banks or merchants.
- ▶ 3:26:29 Ben Gilbert As it happens right now, you need to have a card issued by a bank that likely is issued on Visa or MasterCard or Amex or Discover, and then it goes over those payment rails.
- ▶ 3:35:57 David Rosenthal Amex is a closed loop system, it's a bank.
Costco (Audio) · Acquired
- ▶ 1:59:20 David Rosenthal So that deal, which you may know, Ben, used to be with American Express, and then they essentially kind of held an auction, as you say.
ACQ Sessions: Jason Calacanis · Acquired
- ▶ 2:14:59 Jason Calacanis I'm in my office, and I got Bank of America, and I got like, low thousands of dollars in my Bank of America, and I got an American Express card with 10, -10 on it, and a Visa with negative,