Nick Sleep & Qais Zakaria

The story

Nick Sleep and Qais “Zak” Zakaria launched the Nomad Investment Partnership in 2001 with a small amount of capital and an unusual habit for professional fund managers: writing extremely long, extremely honest letters to their partners, twice a year, explaining exactly what they were thinking and why — including their mistakes. Over the next 13 years those letters built a cult following among serious investors, not because they were clever marketing, but because they were some of the plainest, least self-promotional writing in the entire industry.

The fund returned 921% from 2001 to 2014, against 117% for the MSCI World Index over the same period. Then, in 2014, at the peak of their success, Sleep and Zakaria did something almost no fund manager does: they closed the partnership and gave the money back. Their reasoning, stated plainly in their final letters, was that the businesses they owned were exceptional enough to hold for decades without an actively managed fund sitting in between — so continuing to charge fees for a job that no longer needed doing would not be honest.

The core idea — “scale economics shared”

Nomad’s central investment thesis, and the idea Sleep is now best known for, is what he called scale economics shared: a small number of businesses reach enormous scale and then, instead of using that scale to widen profit margins, deliberately hand the savings back to customers as lower prices or better service — building a moat not through secrecy or pricing power, but through relentless fairness that competitors structurally cannot match.

• Costco was Nomad’s defining case study. Costco caps its markup at roughly 14–15% on merchandise — a policy embedded in the company’s culture, not a temporary promotion — so that as its purchasing scale grows, customers capture the benefit rather than shareholders capturing wider margins in the short run.
• Nomad applied the same lens to Amazon in its early years, recognizing that Amazon’s willingness to reinvest scale advantages into lower prices rather than near- term profit was the same structural pattern, long before it was conventional wisdom on Wall Street.
• The insight requires patience most fund managers don’t have: a business deliberately suppressing near-term margins to compound customer trust looks unattractive on a standard valuation screen — you have to understand why the low margin is a feature, not a warning sign.

Why we rate this 9.5 / 10 — Trusted

• A fully documented, published track record and a body of letters that let any reader check the reasoning behind every major decision, in real time, for over a decade.
• An almost unheard-of act of integrity — voluntarily closing a highly successful, fee-generating fund because continuing to run it stopped being the honest thing to do.
• A genuinely original, teachable framework (scale economics shared) that identifies durable competitive advantage from the customer’s side of the table, not just the balance sheet.

Fair cautions

• The strategy demands holding through long periods where a business looks “expensive” by conventional metrics — it isn’t a quick or easy read, and requires real conviction to apply.
• Nomad’s specific record is closed and cannot be invested in directly; the value to readers today is entirely in the framework and the letters, not access to the fund.

Find the next Costco: AI prompt

Nomad’s entire edge was one repeatable question: does this business share its scale advantage with customers? Paste this into any AI assistant with a company you’re evaluating:

Act as a long-term investor applying Nick Sleep and Qais Zakaria's "scale economics
shared" framework (the thesis behind Nomad's Costco and early Amazon investments). I
will describe a company. Evaluate it as follows:

1. Does scale get shared or hoarded? As this company has grown larger, has it used its
   growing purchasing power, data, or efficiency to lower prices or improve service for
   customers — or has it used scale to widen its own margins instead? Name specific
   evidence (pricing policy, stated strategy, margin trends over time).
2. Is the low margin a deliberate policy or a weakness? A thin margin can mean either a
   structurally uncompetitive business, OR a company deliberately passing scale
   benefits to customers to build unbeatable loyalty. Determine which, and explain the
   difference.
3. Durability of the model. Would a competitor need to sacrifice years of profit to
   match this company's prices/service at the same scale? That sacrifice is the moat.
4. Culture and management incentives. Does management talk about customers or
   shareholders first in their own communications? Sleep viewed this as a genuine,
   checkable signal of which side of the "share scale or hoard it" question a company
   will land on.
5. Patience required. This kind of company can look "expensive" on conventional
   near-term metrics for years. Am I evaluating this with a multi-year view, or reacting
   to this quarter's margin numbers?

Conclude with whether this looks like a genuine "scale economics shared" business or a
conventional margin-maximizer. This is a long-term qualitative framework, not financial
advice.

Bottom line

Two managers who found a real, durable form of competitive advantage — sharing scale with customers instead of hoarding it — and then closed a winning fund because they believed the job was done. The clearest test of whether a manager’s incentives are aligned with yours is what they do when doing right by you costs them money.

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