Nick Sleep
Nomad Investment Partnership
Core Principles
competitive advantage
Recognize that low profit margins can be a competitive advantage and an asset rather than a weakness when paired with customer obsession.
Wall Street initially dismissed Costco for its low 15% margins versus competitors' 30% markups. Nick and Zach understood this was Costco's genius: satisfied customers returned more frequently and spent more, creating a virtuous cycle that drove down costs and improved the franchise value.
culture
Reject clients and relationships that don't align with your values, regardless of how profitable they would be.
Nick and Zach took delight in turning away investors who seemed irritating, no matter how wealthy. They believed in staying in the driver's seat of their own business and not compromising on the people they worked with.
customer obsession
Create a virtuous cycle where customer satisfaction drives volume, volume drives scale savings, scale savings enable lower prices, and lower prices drive more customer satisfaction.
Nick and Zach identified this flywheel across Costco, Walmart, Southwest Airlines, Amazon, and other great businesses. Companies that relentlessly reinvested savings back into customer value created durable competitive advantages that lasted decades.
“Increased revenues begets scale savings, begets lower costs, begets lower prices, begets increased revenues.”
finance
Control your spend and costs ruthlessly, as costs can be strictly controlled while prices and profits are subject to market cycles.
Nick and Zach observed this pattern across all the great businesses they studied: Henry Ford, Sam Walton, Costco, Southwest Airlines, Amazon. Each company treated cost control as an obsession. Amazon even removed light bulbs from office vending machines to save $20,000 annually.
Capital discipline means knowing when not to deploy capital. The ability to wait, to sit still, and to say no to mediocre opportunities is as important as the ability to deploy capital. This is especially true during irrational market moments.
In 2008, during the financial crisis panic, Amazon's order volumes grew 16% year-over-year while the retail industry declined 10%. Rather than chase other opportunities or panic-sell, Nick recognized this as the time to hold or increase positions in truly great businesses with competitive moats.
“In our opinion, just a few things in life are noble. And it is because just a few things are noble that no bad has just a few investments.”
focus
The art of being wise is the art of knowing what to overlook; eliminate everything that isn't central to your mission.
Nick and Zach used this principle from philosopher William James to structure Nomad. They eliminated all peripheral activities and focused obsessively on finding and analyzing great businesses. This extreme focus contributed to their outperformance.
“The art of being wise is the art of knowing what to overlook.”
Keep the main thing the main thing. If you identify a single best thought or insight, it must dominate everything you do because genuine insights of that caliber are rare.
Nick Sleep identified 'scale economies shared' as his single best insight about business. Once identified, he reorganized his entire partnership around this principle, refusing to dilute it with other ideas or strategies. This required discipline and focus similar to how Jim Sinegal committed everything to EDLP.
“If it's the single best thought you have ever had in your life, it needs to dominate everything because you're not going to get many insights like that.”
Concentrate on what to ignore rather than what to focus on, using quality as your filter for everything.
Nick and Zach began by asking what they should ignore rather than what they should do. They disregarded ephemeral information, irrelevant market news, and non-quality businesses. This radical simplification clarified their strategy.
Filter out ephemeral information and focus only on insights with long shelf life to avoid being distracted by transient market noise.
Nick and Zach recognized that most investors chase fleeting news and daily volatility. They deliberately disconnected from real-time information and instead spent their time reading annual reports, visiting companies, and thinking deeply. This intentional disconnection allowed them to make better long-term decisions.
“You need to be wired not to believe the bullshit, to not be listening. We became very happy not hearing it.”
innovation
Identify and exploit your earned secret by studying history deeply, then pursue it with evangelical zeal for decades.
Nick and Zach studied the history of great retailers and discovered the power of the scale economy shared business model. Once identified, they made this their fund's organizing principle and found Amazon, Costco, and similar businesses that embodied this model.
“It does need to be pursued with evangelical zeal.”
When you identify a business model or system that works, look for other instances of it throughout history and in other industries. The same principles that built Ford's empire 100 years ago built Walmart's in the 1970s, Southwest's in the 1990s, and Amazon's today.
Nick Sleep noticed that EDLP and cost discipline appeared repeatedly throughout business history across industries. Recognizing these timeless patterns allowed him to identify Amazon as potentially the next instantiation of this model, though with digital advantages.
“The business model that built the Ford Empire 100 years ago is the same that built Sam Walton's in the 1970s, Herb Kelleher's in the 1990s, or Jeff Bezos's today. And it will build empires in the future, too.”
mindset
Choosing not to act is itself a decision and often the more difficult one. In a world that rewards activity, the discipline to hold and wait is a competitive advantage.
Seth Klarman noted that each day Buffett chose not to trade was itself an investment decision. Nick Sleep applied this during the 2008 crisis, recognizing that holding Amazon through panic selling required as much decision-making discipline as making the initial investment.
Dedicate yourself to quality in all actions and decisions, even mundane ones, as this becomes the organizing principle for sustainable success.
Nick Sleep was shaped by reading Zen and the Art of Motorcycle Maintenance at age 20, which taught him that caring intensely about quality transforms even ordinary work into something transcendent. This philosophy became the foundation of Nomad Investment Partnership, where quality obsession drove every decision from stock selection to client relationships.
“You really want to do everything with quality as that is where the satisfaction and peace is.”
The best investors are not investors at all, they are entrepreneurs who never sold. This mindset difference explains why founders hold concentrated positions and build compounding machines rather than chasing short-term returns.
Nick Sleep observed that Sam Walton, Bill Gates, Andrew Carnegie, and John D. Rockefeller never diversified their holdings significantly. They operated from an entrepreneur's perspective of building something great for the long term, not an investor's perspective of optimizing returns.
“The best investors aren't investors at all. They're entrepreneurs who never sold.”
Embrace being an outsider and use your unconventional perspective as an advantage, not a liability.
Nick Sleep got comfortable being different from everyone else in high school and remained an outsider throughout his career. His willingness to be different allowed him to see value in business models that others dismissed, like Costco's low-margin strategy and Amazon's long-term investment approach.
“I got comfortable with being different from everyone else early on. I was happy being outside the group.”
Build an encyclopedic base of knowledge over years or decades so that when opportunities appear, you can recognize and act on them quickly.
Nick and Zach spent years reading annual reports, visiting companies, and discussing their findings. This accumulated knowledge allowed them to instantly recognize Amazon Prime as the internet equivalent of Costco's membership model when they saw it announced.
resilience
During market panics, upgrade your portfolio by buying more of your highest quality companies rather than panic selling.
In 2008, when Amazon lost half its value and Nomad fell 45.3%, most investors panicked. Nick and Zach exploited the market mayhem to concentrate even more heavily on their highest quality holdings. Over the next four years, Nomad returned 404%.
The biggest investment mistake is not owning something that goes bankrupt, but selling a compounding machine too early. History is littered with investors who sold IBM, Walmart, or other businesses in early stages only to watch them appreciate tenfold.
Nick Sleep referenced a Baltimore fund management company that sold IBM shares in the 1950s, only to watch them appreciate so much that the stake would later be worth more than the entire fund. Decades later, the same firm sold Walmart, committing the same error.
“The biggest mistake an investor can make is to sell a stock that goes on to rise tenfold, not from owning something into bankruptcy.”
simplicity
Never use leverage, short stocks, speculate with options, or trade hyperactively; instead play a long, simple game of buying quality and holding.
Nomad's investment rules were deliberately restrictive: no leverage, no shorting, no speculating with derivatives, no macroeconomic bets, no hyperactive trading. This simplicity forced discipline and long-term thinking.
strategy
Focus on the smallest number of highest-conviction investments rather than diversifying. Knowledge reduces risk, not increases it. Owning many stocks when you deeply understand only a few actually increases portfolio risk.
By 2008, Nick Sleep and Zach Leeloo had concentrated their fund heavily in a few holdings, including Amazon at approximately 70% of one partner's net worth. This concentration was not reckless but based on doing the work necessary to understand a few businesses extremely well.
“If knowledge is a source of value add and few things can be known for sure, then it logically follows that owning more stocks does not lower risk, but raises it.”
Build something with permanence by investing in high-quality businesses that will compound for decades, not trading constantly.
Nick and Zach initially traded cigar butts but realized this didn't scale. They shifted to buying and holding wonderful businesses for the long term, eventually realizing some positions for 15+ years. This required patience and conviction.
“You want to build something that has permanence. I believe that good things grow.”
When facing strategic choices, start by inverting the portfolio construction process. Instead of diversifying from zero, start at 100% weighting and only subtract when you find better opportunities. This mirrors how founders think about their own companies.
Nick Sleep recognized that successful founders like Sam Walton never diversified their holdings. They were 100% allocated to their own company. This inverted thinking helped him justify concentrated positions in Amazon and Costco rather than spreading capital across dozens of holdings.
“The other way to construct a portfolio that's different from how other people do it is to invert and start at 100% weighting and work down. This is what founders do.”
Defer profits today to extend the life and franchise value of your business, rather than maximizing short-term earnings.
Bezos and the great businesses Nick and Zach studied reinvested profits into price reductions, shipping subsidies, and innovation. This deferred near-term profits but built moats that lasted decades and created far more shareholder value long-term.
“The firm is deferring profits today in order to extend the life of the franchise.”
The willingness to do deep work today to understand a business thoroughly, before investing, determines whether you will have the conviction to hold through volatility. Preparation and knowledge enable patience.
Nick Sleep and Zach Leeloo read 1,000 annual reports and visited 300 companies over 18 months. This work gave them the confidence to hold Amazon through the 2008 financial crisis when others panicked, because they understood the underlying business better than the market.
“The trick is to do the work today so that we are ready. If you go back to the Lee Lewis lecture with the Columbia business school students, that's what he kept telling them. You have to be a learning machine.”
Frameworks
Destination Analysis
A framework for evaluating long-term business potential by working backwards. Start by imagining where you want the business to be in 10-20 years, then determine what management must do today to reach that destination, and finally identify what could prevent the company from arriving there. This framework applies equally well to personal goals, health outcomes, and legacy planning.
Use case: Evaluating investment opportunities, setting long-term personal or business goals, assessing management quality
Scale Economy Shared
A business model where companies ruthlessly control costs as they grow, then pass most savings directly to customers through lower prices. This creates a virtuous cycle: satisfied customers return more frequently and spend more, generating volume that drives additional scale savings, enabling even lower prices. The resulting customer loyalty and competitive moat becomes nearly unbreakable.
Use case: Identifying durable, long-term investment opportunities and understanding which business models create sustainable competitive advantages
Intentional Disconnection
A deliberate practice of removing yourself from ephemeral information, news cycles, and market noise to think clearly and undisturbed. Replace constant consumption of perishable information with deep research, annual reports, company visits, and extended thinking time with trusted partners. This creates space for insight and prevents reactive decision-making.
Use case: Improving decision-making quality, managing information overload, protecting deep work time, avoiding panic-driven choices
Earned Secret
A deep insight or principle discovered through years of dedicated study and observation that can be exploited for competitive advantage across decades. An earned secret cannot be shortcut or rushed, as it requires accumulated knowledge and pattern recognition. Once identified, it should dominate everything because such insights are rare.
Use case: Building sustainable competitive advantage, identifying career-defining opportunities, finding the core insight worth pursuing for a lifetime
Slow Then Fast
A progression strategy where you spend years building encyclopedic knowledge and foundations (slow phase) so that when opportunities aligned with your expertise appear, you can recognize and execute them quickly (fast phase). The slow phase is not wasted time; it's essential preparation that enables rapid decisive action later. Knowledge compounds, creating a filter to separate signal from noise.
Use case: Career building, expertise development, recognizing and seizing aligned opportunities, accelerating decision-making in your domain
Scale Economies Shared
A business model where a company commits to passing cost savings from scale and operational efficiency directly to customers through lower prices. Rather than retaining margin gains, the company uses price reductions to drive volume growth, which extends the company's cost advantages further. This creates a virtuous cycle that compounds over decades and produces far greater total cash flow than margin maximization.
Use case: For evaluating whether a business will remain competitive and compound in value long-term. Use this framework to identify businesses that align customer incentives with company incentives rather than setting them at odds.
The Engine of Success
A framework for deeply understanding what actually drives a business's competitive advantage and durability. Rather than analyzing outputs or financial metrics, look at the operating system that produces those outputs: cost structure, supplier relationships, capital allocation discipline, customer relationship model, etc. Understanding this engine determines whether you will hold through cycles or sell prematurely.
Use case: When analyzing any business or building your own company, identify the core engine that creates competitive advantage. Use this to test whether current strategy protects the engine or accidentally threatens it.
Super High Quality Thinkers
A framework for identifying the rarest class of companies: those led by intellectually honest and economically rational founders who have consistently chosen to outthink competition rather than outspend it. These companies demonstrate capital discipline (knowing when not to deploy capital), commitment to core strategy, and willingness to sacrifice short-term profits for long-term advantage. Nick Sleep maintained a written list of such companies as his 'terminal portfolio' target.
Use case: For both investing and hiring, use this framework to identify organizations that prioritize long-term thinking and operational discipline. These are the businesses worth committing to long-term, and these are the kinds of employees worth hiring.
Inverted Portfolio Construction
Rather than starting from zero and building a diversified portfolio by adding small positions to many ideas, start with 100% allocation to your highest conviction idea and only subtract when you identify something clearly better. This mirrors how founders think about their own businesses and prevents dilution of capital across mediocre opportunities.
Use case: For capital allocation and resource prioritization in any organization. Use this to combat the natural tendency toward dilution and to build concentration in the few areas where you have genuine competitive advantage.
The Kelly Criterion Application
The mathematical principle that if you are confident in being right on an investment thesis, you should bet the full portfolio in that idea. In practice, even Buffett only achieved near-100% concentration in controllable situations. But it establishes that portfolio concentration should increase with conviction, not decrease.
Use case: For understanding optimal capital allocation. Use this to question why you would ever own a stock or pursue a strategy in which you have only mild conviction.
Stories
Nick and Zach bought Stagecoach at 14 cents, expecting it to reach 60 cents. When it rebounded to 90 cents, they sold for a 6x return, feeling successful. But Stagecoach turned out to be a much higher-quality business than they realized, eventually trading near $4. Nick said this made them feel like horse's asses.
Lesson: A costly mistake that taught them to shift from trading cheap assets to holding wonderful businesses long-term, fundamentally changing their investment approach.
When Amazon crashed 50% in 2008 and Nomad fell 45.3%, most investors panicked and withdrew money. Nick and Zach didn't crack. Instead, they exploited the market panic to upgrade their portfolio by concentrating even more heavily on Amazon, Costco, and Berkshire. Over the next four years, Nomad returned 404%.
Lesson: Temperament and conviction matter more than intelligence; those who can act calmly while others panic capture enormous value.
Nick first encountered Amazon in 1997 as an upstart bookseller going public. His boss asked what Amazon could do that no one else could do. It took years for Nick and Zach to understand Amazon's true competitive advantage. When Amazon Prime launched, Nick instantly recognized it as Costco's membership model applied to the internet.
Lesson: Recognizing competitive advantage requires deep context built over years; when you have encyclopedic knowledge, insight can arrive in a moment.
Sam Walton and his wife visited Costco's stores repeatedly, studying their model. Charlie Munger noted that Jim Sinegal was largely unknown despite his success because he was too busy working. Nick and Zach also avoided publicity and self-promotion, staying focused on the work itself.
Lesson: The most successful founders are too busy building to promote themselves; busyness with the right work creates better outcomes than marketing.
Nick Sleep read Zen and the Art of Motorcycle Maintenance at age 20 and was transformed by its meditation on dedicating your life to quality, even in mundane tasks. The book taught him that when you care intensely about quality, even motorcycle maintenance becomes a spiritual exercise. This philosophy shaped everything he did as an investor.
Lesson: The quality of your approach to your work determines the satisfaction and meaning you get from it, regardless of the specific domain.
Nick and Zach sold half of Nick's Amazon stake in 2018 at $1,500 per share because it had grown to 70% of his net worth. He worried about concentration risk. Later, he felt conflicted about the decision, unsure if it was good. Amazon continued soaring after the sale.
Lesson: Even with perfect analysis and conviction, conviction-testing moments (like concentrated positions) create genuine uncertainty; the outcome is unknowable in real-time.
A large Baltimore-based fund management company analyzes its portfolio in the 1950s and realizes it sold IBM shares 30 years earlier, a decision that cost them enormous wealth. Learning from this mistake, they commit to change. Years later, they repeat the identical error by selling Walmart in the 1970s, missing out on returns that would eventually exceed their entire fund under management.
Lesson: The most expensive investment mistakes are selling compounding machines too early, not owning businesses that fail. These mistakes repeat throughout history because knowledge alone does not prevent them, only deep understanding of business engines does.
In 2006, Nick Sleep realizes that Amazon's cost structure is so low and their operational efficiency so superior that 'the game was already over.' Competitors simply did not know it yet. By 2008, when the financial crisis panics the market, Amazon's order volumes grow 16% year-over-year while retail declines 10%, validating his insight.
Lesson: Understanding the underlying business engine allows you to see competitive outcomes before they appear in stock price. Operational excellence compounds regardless of market cycles. The work to understand business fundamentals is the highest ROI activity an investor can do.
An oil company (Exxon) discovers oil underneath its own headquarters, but not through its own exploration. The oil was always there. Nick Sleep uses this story to illustrate how even sophisticated organizations miss what is in front of them, and why extreme focus and deep work are necessary to see what others overlook.
Lesson: What you are looking for may already be in front of you. Deep understanding of the fundamentals prevents you from overlooking the most valuable assets or opportunities because you are distracted by other possibilities.
Notable Quotes
“The best investors are not investors at all. They are entrepreneurs who have never sold.”
Commenting on the wealth creation available to UPS early employees and partners who never sold their stock, referencing the power of long-term ownership alignment.
“You really want to do everything with quality as that is where the satisfaction and peace is.”
Discussing the lasting impact of Zen and the Art of Motorcycle Maintenance on his approach to investing and life
“I got comfortable with being different from everyone else early on. I was happy being outside the group.”
Reflecting on his comfort with unconventional thinking from high school onward
“The art of being wise is the art of knowing what to overlook.”
Citing philosopher William James to explain Nomad's approach to eliminating noise
“You need to be wired not to believe the bullshit, to not be listening. We became very happy not hearing it.”
Describing their practice of intentional disconnection from financial news and market gossip
“Increased revenues begets scale savings, begets lower costs, begets lower prices, begets increased revenues.”
Describing the virtuous cycle of the scale economy shared business model as seen in Costco
“It does need to be pursued with evangelical zeal.”
Discussing how the scale economy shared business model must be pursued with complete commitment
“You want to build something that has permanence. I believe that good things grow.”
Explaining the shift from trading cheap assets to holding quality businesses long-term
“There are very few businesses that are investing in the future the way they are. They don't care about Wall Street. They don't care about trends. They don't care about fads. They're just doing the right thing long term.”
Explaining what he and Zach admire about Amazon, Costco, and Berkshire Hathaway
“The firm is deferring profits today in order to extend the life of the franchise.”
Explaining how Costco and Amazon use low margins as a competitive strategy
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