Founders PodcastNick & Zak’s Excellent Adventure: How Nick Sleep & Qais Zakaria Built Their Partnership
CHAPTERS
- 0:00 – 4:24
Nick Sleep's Unusual Path and the Nomad Experiment
David Senra introduces Nick Sleep, who drifted into fund management in Edinburgh and was shaped by Zen and the Art of Motorcycle Maintenance. Nomad Investment Partnership grew money tenfold in about 14 years before Sleep and Zak retired at 45. Senra frames the episode around chapter six of William Green's Richer, Wiser, Happier.
- •Sleep entered investing with no finance background after reading Investment Trust Explained
- •He was comfortable being an outsider from high school onward
- •Zen and the Art of Motorcycle Maintenance taught him to pursue quality in everything
- •Nomad was created in 2001 as a laboratory for investing in the highest-quality way
- •Nomad made tenfold returns over about 14 years, and Sleep and Zak then tripled their wealth in five years of retirement
- 4:24 – 6:41
Zak's Background and the Path to Marathon
Zak's family fled Iraq, and his father lost his fortune speculating with borrowed money on things he didn't understand. Zak ended up in a job he hated at Deutsche Bank, where he met Nick Sleep. Sleep, meanwhile, left a large firm and joined Marathon Asset Management in 1995, mentored by Jeremy Hosking.
- •Zak's father made money on things he understood and lost it on things he didn't
- •Zak was laid off in Hong Kong after his boss was fired and fined, then took a sell-side job he called absolute hell
- •Senra says opportunity often appears after a loss
- •Sleep found big companies stifling and settled at Marathon
- •Hosking, an iconoclast, liked buying the most despised assets
- 6:41 – 11:15
The Asian Financial Crisis and Starting Nomad
Sleep, Hosking and Zak teamed up buying bargains during the 1997 Asian financial crisis, and Marathon recruited Zak in 2000. A trip to Berkshire's annual meeting cemented Buffett as their model, and in 2001 Nomad was launched with Zak as co-manager. Senra repeatedly compares their story to Li Lu's.
- •Marathon invested about $500 million in Southeast Asia during the crisis, buying at a quarter of replacement cost
- •Zak moved to London in 2000 to work with Nick
- •The Berkshire meeting convinced Zak that investing is about real businesses, not a casino
- •Nick saw Buffett as the embodiment of quality
- •Nomad launched in 2001 as an act of rebellion
- 11:15 – 15:33
Never Mind the Bollocks: Ignoring Ephemeral Information
Nick and Zak set a simple goal of a tenfold increase and worked backwards by deciding what to ignore. They dismissed ephemeral news with a short shelf life and practiced intentional disconnection. Senra ties this to Sam Walton, Jim Sinegal and his own daily routine.
- •The goal was a tenfold increase in net asset value, in keeping with the maxim that genius has the fewest moving parts
- •William James: the art of being wise is knowing what to overlook
- •Information has a sell-by date, and they called news-chasers junkies
- •They told stockbrokers not to call with sales pitches
- •Senra describes his own routine of reading, thinking and talking to founders
- 15:33 – 18:11
Destination Analysis and Quality Over Money
They researched deeply and asked questions about a business's destination 10 or 20 years out. Senra extends destination analysis to personal life. The firm was organized around quality rather than money, down to turning away irritating investors.
- •They read annual reports and visited companies extensively
- •Three questions: the destination, what management must do today, and what could prevent arrival
- •Senra says the method works for health and relationships too
- •Zen reinforced resisting low-quality, self-serving behavior
- •They turned away irritating investors regardless of wealth
- 18:11 – 21:11
Staying in the Driver's Seat: Ogilvy and Li Lu
Senra connects Nick and Zak's no-jerks policy to David Ogilvy's willingness to resign accounts and Li Lu's insistence on the driver's seat. He argues entrepreneurs are motivated by control more than money. He tells the story of Ogilvy walking out of a committee pitch.
- •Ogilvy resigned clients he personally disliked because we pass this way only once
- •Senra argues control, not money, motivates entrepreneurs
- •Li Lu insisted on sitting in the driver's seat of his own life
- •Ogilvy left a pitch to a 12-person committee when he learned they would all decide and approve the advertising
- 21:11 – 23:13
A Long, Simple Game: From Cigar Butts to Quality
Nomad avoided leverage, shorting, options and macro bets, and played a long simple game with a few well-researched stocks. They began by buying cigar butts but found the strategy did not scale. The Stagecoach mistake pushed them to Munger's view of buying and holding high-quality businesses.
- •Nomad never used leverage, shorted, or made macro bets
- •Nick believes that good things grow
- •The fund began trading on September 10, 2001 and started with deep-value buying
- •Cigar butts must be sold once they rebound, forcing a hunt for new bargains
- •They sold Stagecoach at 90 cents for a 6X gain, and it later rose to almost four dollars
- 23:13 – 28:14
Scale Economies Shared and the Costco Investment
Realizing they could subcontract capital allocation to great managers, they sought the traits of long-lived companies and identified scale economies shared. Costco was their first example: Wall Street disliked its low margins, but Nick and Zak saw a virtuous cycle that kept customers loyal.
- •Subcontracting capital allocation to strong managers avoids constant trading
- •Scale economies shared was the business model they put at the top
- •They first invested in Costco in 2002 after the stock fell from $55 to $30
- •Costco's low margins were an asset, with members saving about $5 for every dollar Costco kept
- •They held Costco 18 years as it rose from $30 to $380
- 28:14 – 32:05
The Earned Secret and the Historical Pattern
Free to read and think, they discovered what Senra calls an earned secret. They found the same model in Walmart, Dell, Southwest, Tesco, Geico, Nebraska Furniture Mart and Henry Ford, usually led by passionate founders. Nick said it was the single best thought you could have and should dominate everything.
- •Cedric Chin's idea of an earned secret exploited for decades
- •Studies of Walmart's 1970s reports and other firms showed a common pattern
- •Ford cut the Model T price from $850 to under $300
- •Such models need to be pursued with evangelical zeal
- •Founders obsess over detail, customers and cost cutting
- 32:05 – 34:35
Amazon: Finding a Corporate Soulmate
Nick first saw Amazon in 1997, but only later grasped its advantage. They recognized Bezos was running the Costco and Ford playbook, with relentless cost control and patient reinvestment. When Prime launched, they recognized it as Costco's membership equivalent and began buying aggressively in 2005.
- •Nick heard Bezos present in London in 1997 and his boss asked what Amazon did that no one else could
- •Amazon even removed vending machine light bulbs to save money
- •Wall Street grumbled about the lack of reported profits
- •Bezos's 2005 shareholder letter described a virtuous cycle of returning efficiencies to customers
- •They began buying at around $30 per share in 2005
- 34:35 – 37:48
Slow, Then Fast: Encyclopedic Knowledge
Senra pauses to argue that a deep base of knowledge lets investors and founders act quickly when opportunity appears. He cites Sam Walton, Li Lu's Value Line reading and Alice Schroeder's observation of Buffett. He applies it to Nick and Zak recognizing Amazon Prime as Costco on the internet.
- •Walton spent years on one store, then expanded fast to Sam's Clubs
- •Li Lu read Value Line cover to cover multiple times
- •Buffett reads annual reports faster because his knowledge compounds as a filter
- •Nick and Zak's years of study let them move fast on Amazon
- •Knowledge can't be shortcut
- 37:48 – 39:21
Surviving 2008 and Closing the Partnership
Nick and Zak went independent in 2006, lost a quarter of their clients over concentration, and saw Nomad fall 45.3% in 2008. They used the panic to upgrade the portfolio and returned 404% over four years. They closed Nomad in 2014 with about $3 billion in assets, saying the money was a byproduct of the process.
- •A quarter of clients left over exposure to one stock
- •Nomad fell 45.3% when Amazon halved in 2008
- •Temperament let them upgrade into Amazon, Costco and Berkshire
- •Nomad returned 404% in the next four years
- •Nick said the cake was a happy byproduct of solving the investment problem
- 39:21 – 41:32
Life After Nomad and Closing Thoughts
After retirement, Zak held about 70% of his money in Amazon and Nick held almost everything in three stocks. Nick sold half his Amazon stake in 2018 and hated doing so. Senra recommends the book and previews next episode on Sleep's partnership letters.
- •Buffett told them life was just beginning
- •Zak had never sold an Amazon share and had about 70% in it
- •Nick held Amazon, Costco and Berkshire
- •Nick sold half his Amazon stake at $1,500 a share when it passed 70% of his net worth
- •Next episode covers the Nomad partnership letters
