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Nick Sleep's Letters: The Full Collection of the Nomad Investment Partnership Letters

The best investors are not investors at all. They are entrepreneurs who have never sold. — Nick Sleep Nick Sleep’s letters are a masterclass on the importance of understanding the underlying reality of a business — what he calls the engine of its success. I read all 110,000 words of Nick’s letters (twice!) to make this episode and what I found most important is Nick’s ability to develop a deep understanding of “honestly run compounding machines” (like Costco and Amazon) years before everyone else. Nick explains clearly how Jim Sinegal and Jeff Bezos set up their companies for long term success —from the very beginning — and gives us a few hints along the way on how we can do the same in our business. And the absolute entrepreneurial history nerd in me loved the references to Henry Ford, Sam Walton, Rockefeller and other greats from the past that are sprinkled throughout Nick’s letters. No surprise that someone who was able to make $2 billion for his clients has a deep understanding of the great work that came before him. https://www.founderspodcast.com/ Full Transcript and Show Notes: https://www.founderspodcast.com/episodes/365-nick-sleeps-letters-the-full-collection-of-the-nomad-investment-partnership-letters-to-partners David Senra: https://x.com/FoundersPodcast?s=20

David Senrahost
Oct 15, 202450mWatch on YouTube ↗

At a glance

WHAT IT’S REALLY ABOUT

Nick Sleep's Letters: Scale Economies Shared and Patient Concentration

  1. Senra reads the 2001–2014 Nomad letters in order to show how Nick Sleep's thinking evolved, from early diversified holdings to heavy concentration in Costco, Amazon and Berkshire.
  2. The central idea Sleep identified is 'scale economies shared': companies like Costco and Amazon pass cost savings back to customers, which drives growth and makes competition very hard.
  3. Senra links Sleep's analysis to founders such as Jim Sinegal, Sol Price, Jeff Bezos, Sam Walton and Walt Disney, who protect the customer relationship and a single guiding principle over short-term gains.
  4. Sleep argues that the biggest investing mistake is selling great compounding businesses too early, and that the best investors are entrepreneurs who never sold.
  5. Senra's closing point is that these business principles are timeless and transferable, and he recommends reading the letters or William Green's book Richer, Wiser, Happier.

IDEAS WORTH REMEMBERING

5 ideas

Scale efficiencies are powerful only when shared

Sleep says most companies pursue scale efficiencies but few share them, and the sharing is what makes Costco's model so hard to compete with.

Founders protect the principle even when a shortcut looks profitable

Senra pairs Jim Sinegal refusing to raise the markup on cheap designer jeans with Walt Disney insisting on good leather straps on the stagecoaches. In both stories the founder holds the line because 'if I let you do it this one time, you'll do it again.'

Focus on the one best idea and let it dominate

Senra says that if scale economies shared was the single best thought Sleep ever had, it should drive everything he does, and he cites a Palantir co-founder's post on not dividing attention.

The costliest investing error is selling a great business too early

Sleep tells the story of a fund firm that sold IBM and later Walmart, each stake eventually worth more than the whole firm. He says the fix is to understand a company's underlying engine of success rather than only its outputs.

Concentration follows from knowing only a few things

Sleep argues that few things are knowable, so owning more stocks raises risk rather than lowering it. He notes that Walton, Gates, Carnegie and Rockefeller held portfolios that were essentially 100% in one company.

WORDS WORTH SAVING

5 quotes

What Jim Sinegal and other great founders do is they always do what's better for the customer, because if you do that over the long term, that is then what is better for the company.

— David Senra

In other words, sometimes it turns out that the best financial decision is not a financial decision at all.

— David Senra

It's arrogant to think that you're not capable of making the same mistake.

— David Senra

Sam Walton is not looking at his stock in Walmart and maximizing for the best return on the most dollars in his bank account. He was focusing on building something great that served other people over a very long period of time.

— David Senra

They didn't copy their peers. Nick and Zach ran their business based on the outcome of their own thinking, and then they invest in founders that do too.

— David Senra

Scale economies sharedCostco's Everyday Low PricingAmazon versus eBay in 2004Concentration versus diversificationSelling winners too earlySuper high quality thinkers and the terminal portfolioFounder-style long-term thinking

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