2016: Is American Express's future as bright as is past?

CLIFF GALLANT: You’ve long stressed the importance of taking a long-term view when investing. Over the decades, your substantial returns in American Express seem to support your point. Now, you’ve talked in the past about the ability of American Express to reinvent itself over time, but today it seems to be a company that doesn’t have alternative businesses and its brand doesn’t seem to have the same cachet as it once did. Shouldn’t a prudent investor — shouldn’t Berkshire — periodically reassess its reasons for owning an investment?

WARREN BUFFETT: Well, we reassess our reasons for owning all investments on almost a continuous basis. And both Charlie and I do that, and we’re usually in a general range of agreement, but sometimes we are a fair distance apart, perhaps.

There’s no question that payments are an area of intense interest to a lot of very smart people, who have got a lot of resources, and —

CHARLIE MUNGER: And rapid change.

WARREN BUFFETT: Yeah. And rapid change, and it will change. And I personally feel OK about American Express. We — and I’m happy to own it. I think — but their position — and it has been under attack for decades, more intensively lately — and it will continue to be under attack.

I mean, it’s too big a business, and it’s too interesting a business, and it could be too attractive a business, for people to ignore it. And it plays to the talents of some very smart people. I mean, it’s a natural, that a great many organizations that are really quite able, think about it. And it’s big. So —

CHARLIE MUNGER: A lot of great businesses aren’t quite so great as they used to be. The packaged goods business, the Procter & Gambles and so forth of the world — General Mills — they’re all weaker than they used to be at their peak and —

WARREN BUFFETT: And the auto companies. I mean, when Charlie and I were —

CHARLIE MUNGER: Oh, my God. When I think of the power of General Motors when I was young, and what happened — they wiped out all the shareholders — I would no more have predicted that. When I was young, General Motors loomed over the economy like a colossus. It looked totally invincible. Torrents of cash. Torrents of everything.

WARREN BUFFETT: Trying to hold down market share.

CHARLIE MUNGER: Yes, because they — yeah, they were afraid they’d be too monopolistic. And so the world changes, and we can’t make a portfolio change every time something is a little less advantaged than it used to be.

WARREN BUFFETT: But you have to be —

CHARLIE MUNGER: Alert.

WARREN BUFFETT: — you have to be thinking all the time and alert to whether there’s been something that really changes the game in a big way. And that’s not only true for American Express, that’s true for other things we own, including things we own 100 percent of.

And we’ll be wrong sometimes. We’ll be late sometimes, we’ll be wrong sometimes. But we’ll be right sometimes, too. But it’s not that we’re not cognizant of threats. Assessing the probabilities of those threats being a minor problem, or a major problem, or a life-threatening problem, you know, it’s a tough game, but that’s what makes our job interesting.

CHARLIE MUNGER: I think anybody in payments, probably has — with an established long-time player with an old method — has more danger than used to exist. It’s just — there’s more fluidity in it.