Nick Sleep - Purposefully Detached
Physical environments prompt psychological environments
This profile is about the remarkable investor Nick Sleep, who’s been so true to his mantra of disentangling himself from the high pace narrative shift and information overload that has become modern finance, to the point that it's almost annoying. He might rank among my top three favorite investors, but he’s nowhere to be found on the public ether - no interviews, YouTube clips, podcasts, nothing.
(There's a chance I'm falling victim to confirmation bias. Whether I admire Nick Sleep's detachment because I aspire to keep a low profile, or whether I keep a low profile because of my admiration for those who do, is not an easy tell.)
It’s a funny paradox: my admiration for him expands in lockstep with the frustration that grows when I can’t find anything on him.
(From 2001 to 2014, Nick Sleep sent a letter to shareholders every six months. All quotes in italics are derived from these letters.)
The road to quality
Alongside his partner, Qais Zakaria, The Nomad Partnership achieved an astonishing total return of 921% (vs 117% for the world index) during the fund’s term of 13 years from 2001 to 2014. Among some of their homerun investments were Berkshire Hathaway, Costco, and Amazon.
Sleep's approach to investing aligns with the unconventional qualities I appreciate in investors. Of all things, his background is in geology and geography. “Human geography deals with sociology, psychology, statistics, economics – so it is the ultimate polymath [also known as generalist expert] course.”
What he discovered and later applied to the endeavor of investing, is that in geography “practitioners have to ask themselves questions that other more homogenous subjects such as physics or chemistry have not.”
This is precisely how it is with investing: you have to pull insight from various fields. Just as a mosaic gains its beauty from a diverse collection of tiles, successful investing thrives on insights harvested from various sources.
Geography and geology became a bedrock for Sleep’s thinking, but so did philosophy, and a book called “Zen and the Art of Motorcycle Maintenance” by Robert Pirsig in particular.
(Sounds familiar? Like Bill Miller, we once again observe how philosophy and one book in particular shape the thinking of a great investor.)
There's no doubt that the book mentioned above has been instrumental for him. Throughout his letters, Nick Sleep demonstrates an unwavering dedication to the pursuit of quality, a central theme in this book. His incredible passion for this ideal offers us inspiration that extends beyond just investing, filtering into the fabric of our very lives, which resonates with the core of this newsletter.
In essence, Pirsig’s book is about how something called dynamic quality, in contrast to static quality, is associated with the notion of fully experiencing and engaging with the ever-changing and subjective nature of the world. It is a way of perceiving reality as the interconnectedness of all things. It invites us to cultivate a mindful and engaged approach to life, and a deep appreciation for the inherent value of each moment.
I view it as an enduring curious approach to what’s genuinely real, true, and important.
In order to achieve such a sound internal framework, Sleep starts externally.
External design
Working with finance can lure you into thinking that constant exposure to information is necessary. “We all know logically and rationally, it’s utterly nonproductive”.
They endorse the advice of Pat Dorsey: “The single best thing any investor can do is to not have a TV and a Bloomberg terminal (financial information system) in their office”.
They will disconnect from the day-to-day market fluctuations. If they require information from the Bloomberg terminal, they'll have to walk to the corner of the floor and sit by the most inconvenient and uncomfortable desk.
What about media appearances? Nope - “Zak and I spend all our time thinking about good business practices.”
William Green, who’s written in deep about Nick and Zak in his book, “Richer, Wiser, Happier” (which has been an excellent source for this profile) said in an interview: “Part of what they did is they structured this physical environment in a way that was totally counter to what everyone else does on Wall Street.”
“All is quiet at Galactic HQ. Each day Zak and I shuffle in, swop trainers for slippers, pull up a pile of annual reports, and set about analyzing and re-analyzing our investments.”
Psychology
Similar to Bill Miller, Nick has recognized the crucial importance of psychology in long-term investing. There's no doubt that the way he structures his physical environment directly contributes to enhancing this awareness.
“The most enduring advantages are psychological. And the trick here is to first understand [the biases]. And then train yourself out of them!”
Our physical environment, no matter the field, should be considered a type of training ground. Here we can design a structure to optimize our inputs, which should be front and center of what we do. One such input for effective decision-making is sound thinking, and closely related to this is stress reduction.
In one of Nick’s letters, he writes about how a study (McClure, Laibson, Loewenstein and Cohen, 2004) has shown that immediate gains and deferred gains, will trigger different parts of the brain.
When we’re stressed there’s an activation in the “survival area”, which will override the “analytical area”.
“So, the more stressed we are, the more we value short-term outcomes!”
A careful design of our surroundings is warranted, as physical environments will prompt psychological environments.
And our psychology is the arena for our inputs to thrive in.
“After Nomad’s share price tripled, it was easy to feel that God was in heaven but, as prices decline, spirits sag. We would counsel you to think about the inputs to investing rather than the outputs. It is in times like these that the hard psychological and analytical work is done and the partnership is filled with future capital gains: this is our input. The output will come in time.”
In the spirit of Nick Sleep, who concluded one of his letters by offering a source of his guidance - Saint Ignatius Loyola and his Serenity Prayer - I'd like to do the same:
”Give me the strength to accept that which I cannot change,
The courage to change that which I can,
And the wisdom to tell the difference.”
References:
“Nomad Investment Partnership Letters to Partners” by Nick Sleep
Book: "Richer, Wiser, Happier" by William Green
Podcast: TIP492: “The Best Investor You’ve Never Heard of”
Podcast: Investing by the Books: “Author interview: William Green, “Richer, Wiser, Happier”
Article: “Learning From Nick Sleep” by Investment Master Class