#365 Nick Sleep's Letters: The Full Collection of the Nomad Investment Partnership Letters to Partners

The best investors are not investors at all. They're 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. If you want to read all of Nick Sleep’s partnership letters you can do so here for free You can also read William Green’s book Richer, Wiser, Happier: How The World's Greatest Investors Win In Markets and Life —which both Nick and I recommend. It has an excellent chapter on How Nick and Zak built their firm. ---- Ramp gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud by going to Ramp and learning how they can help your business control your costs and save more. ---- Founders Notes gives you the superpower to learn from history's greatest entrepreneurs on demand. You can search all my notes and highlights from every book I've ever read for the podcast. Get access to Founders Notes here. ---- Join my free email newsletter to get my top 10 highlights from every book ---- Follow Founders Podcast on YouTube (Video coming soon!) ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  One of the most interesting things that Nick Sleep writes about is the importance of understanding the underlying reality of a company. He calls this the engine of its success. What I actually found most interesting in these letters is Nick's analysis of the engine of success of Costco, Amazon, and Walmart, and how those three founders, Jim Sinegal, Jeff Bezos, and Sam Walton, designed their business in a way that ensured that they would survive over the long term. All three of them were what Nick Sleep calls honestly-run compounding machines. This emphasis that all three founders placed on the long-term success of their business allowed them to never make the fatal mistake of interrupting the compounding. And to do so, Bezos, Sinegal, and Walton all adopted a key trait.

• 0:45David Senra?

  They were, in the words of Warren Buffett, "a demon on costs." Having a lower cost structure than any of their competitors was a competitive advantage that compounded over the decades, and Nick is going to mention that several times, including one time when he realizes back in 2006 that Amazon's costs are so low and they're so efficient that the game was already over. Everybody else just didn't know it yet. This is something that I was talking about with my friend Eric, who's the co-founder and CEO of Ramp. Ramp is now a partner of this podcast. I've gotten to know all the co-founders of Ramp and spent a bunch of time with them over the last year or two, and they all listen to the podcast, so they've picked up on the fact that the main theme from the podcast, one that recurs over and over again, is the importance of watching your costs and controlling your spend.

• 1:28David Senra?

  The managers that are able to do so develop a massive competitive advantage, and that is the reason that Ramp exists. Ramp exists to give your business everything you need to control your spend and watch your costs. All of history's greatest entrepreneurs made cost control an obsession. Ramp helps you control costs all in a single platform. Ramp gives you easy-to-use corporate cards for your entire team, automated expense reporting, and cost control. In his autobiography, Sam Walton said, "Our money was made by controlling expenses. You can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient." Ramp helps you run an efficient organization and greatly enhances your company's engine

• 2:12David Senra?

  of success. Ramp's website is incredible. Make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business control costs today. That is ramp.com.

• 2:25David Senra?

  Dear Mr. Buffett, after 13 happy years of running the Nomad Investment Partnership, Zach and I have decided to close the fund. The process requires us to return cash to our investors, and so after many years as shareholders in Berkshire, we have recently sold our shares. It appears to all the world that the performance that Nomad has enjoyed over the years was created by Zach and me. That is not the case. As time goes by, the performance that our clients have received is the capitalization of the success of the firms in which we have invested. In other words, the real work is done by you and the good people at Berkshire. The purpose of this letter is to say a very big thank you and let you know that you have made a real difference.

• 3:09David Senra?

  Nomad was not a particularly large fund, but over the years, it did make around $2 billion for its clients, which were predominantly charities and educational endowments. Berkshire was a big part of that. That strikes us as capitalism working well. For our part, Zach and I are keen to leave the professional industry behind and spend our time in more caring pursuits. Zach has his various charitable causes, and I have in my mind to set up a center to provide respite care. Both of these activities will require long-term funding, and so while you lose us as professional investors, we will be able to repurchase our shares, both privately and for the charities that we run. You don't get rid of us that easily. We will be keeping the office, and a new sign will be hung above

• 3:54David Senra?

  our somewhat shabby front door. We look forward to seeing you at the next AGM and extend an invitation to visit us at Bernsall Street. With the warmest regards, Nick Sleep. And then Buffett writes back, Dear Nick, thanks for sending along the update. You and Zach have made the right choice. I predict you will find life is just beginning. Best regards, Warren E. Buffett. And so those letters appear at the very front of another homemade book that I have created. I read all 110,000 words. This is the full collection of the Nomad Investment Partnership Letters that were written to partners between the years 2001 and 2014, and they were written by Nick Sleep. I printed Nick's letters out and put all 219 pages in a binder.

• 4:38David Senra?

  And so I want to begin with something that Nick repeats and something that he leaves at the end of a lot of his partnership letters. And so he writes, "A final word on the need for patience. We are aware that several investors are new to the fund, and so it may be worth reiterating some ground rules so that you know where we stand. One of Nomad's key advantages will be the aggregate patience of its investor base. We are genuinely investing for the long term. Few are. If Nomad is to have a competitive advantage over our peers, this will come from the capital allocation skills of your manager, if any, and the patience of our investor base. Only by looking further out than the short-term crowd can we expect to beat them.

• 5:19David Senra?

  It is for this reason we named Nomad an investment partnership and not a fund. The relationship we seek is quite different." And so the note I left myself on this page is really two ideas of why I spent two weeks, why I did an episode last week that gives an overview of how Nick and Zach built their investment partnership, and then why I would spend another week reading, you know, 110,000 words of Nick Sleep's investment partnership letters. And so it's obvious from reading the book last week and then reading Nick Sleep's letters this week, 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. And then I would argue that it's their willingness to do the work necessary to trust their own

• 6:02David Senra?

  judgment that allowed them to arrive at a very valuable earned secret, and then the willingness to change their behavior to build their entire partnership around that earned secret. So that's really what I'm going to focus on and I want to talk to you about today. A lot of what I found interesting in the partnership letters has nothing to do with investing. It's their analysis of how Jim Senegal ran Costco. It's their analysis of how Jeff Bezos ran Amazon. It's their analysis of, wait, this is kind of strange. This business model keeps reappearing throughout history, and gifted founders are able to use it and apply it to vastly different industries and keep having wild success. And so Nick writes about Charlie Munger's cancer surgery approach. He's analyzing this business that they made an investment in. I talked about it last week. It's called Stagecoach. The founder retires. New management kind of runs it into the ground. So the founder comes back out.

• 6:46David Senra?

  And when you realize like, there's this beautiful business under here, but you kind of layered all this crap on top of it. And so what Munger realizes is there's many times in business history where, well, you just need to do the cancer surgery approach. He says, "This often works because there's normally a jewel at the heart of most companies that has often been used to fund new ventures. That jewel's been taken for granted by inpatient management. As the jewel becomes diluted by less successful projects, aggregate performance declines." And so Nick talks about the fact that Munger and Buffett saw this in Coca-Cola in the mid 1980s, because at that time Coca-Cola had become a poorly-defined conglomerate, including a shrimp farm, winery, and a film studio. "As the poorer businesses were cut away to reveal the jewel that is syrup manufacturing

• 7:29David Senra?

  and marketing operation, the shares of Coca-Cola rose over tenfold in the succeeding decade." There's a hilarious story that comes to mind when Mark Parker, who's the former CEO of Nike, asked Steve Jobs if he had any advice for him. And Steve said, "Nike makes some of the best products in the world, products that you lust after. They're absolutely beautiful, stunning products, but you also make a lot of crap. Just get rid of the crappy stuff and focus on the good stuff. Just get rid of the crappy stuff and focus on the good stuff." This idea that a jewel can become diluted by less successful projects as aggregate performance declines. The reason I started here is because what's fascinating about reading these letters, but also, and I'm going to go through these in chronological order,

• 8:13David Senra?

  so we can see the evolution of Nick Sleep's thinking. It's also the same phenomenon that you and I see when you go through a biography and you go through somebody's life chronologically. You see them slowly figure it out. They struggle and they're trying to really get to the idea, the main idea and the main focus of their life. And what's fascinating about reading this part, this is at the very beginning. Nick doesn't understand. He's describing the cancer surgery approach. He's describing Coca-Cola. He's describing Stagecoach. At this point in his life, he doesn't understand he's going to also use this principle in building his business. He is going to take the advice of Steve Jobs, even if he never heard it. He's going to get rid of the crap, which is these other investments and just focus on the good stuff.

• 8:55David Senra?

  And he's already stumbled onto a really great business and this is the beginning of his understanding. He doesn't know how deep he's going to go on Costco. So this is 2002 and he's like, well, Costco, you know, we just bought the stock. There's really no need to fix this business because it's performing well already. And so there's something that Nick will mention later on. He's like, well, you know, we're trying to analyze, analyze businesses that like are a mouse now, but may turn into an elephant and try to reverse engineer like how that happens. And so you start to see this at the very beginning when he starts talking about Costco. He's like, well, they operate on this everyday low pricing strategy, which he'll refer to moving forward as EDLP. The way I would describe that is if you have not listened to episode 360, listen to episode 360 after you listen to this episode. Try to find that book.

• 9:38David Senra?

  It is written by Bob Kirland, who's the founder of Fastenal. That book and the way Bob ran Fastenal all centers around this one idea that the leader of a company has to keep the entire organization committed to a common goal. Costco's common goal is that we are going to commit to this everyday low pricing strategy. And they commit to it every single minute of every single hour of every single day. As we're about to hear with this great Jim Senegal story in a minute, but I gotta, before I leave this page, this is 2002. And he's just started talking about the scale economy shared. And he's just starting to try to think about and understand. It's going to take a long time to understand how powerful this idea is. But he starts talking about this new idea of scale economy shared,

• 10:22David Senra?

  which is going to be their earned secret. The single best thought that they ever had, the one that they're going to let dominate everything that they do. And so Nick is like, okay, so Costco is committed to this strategy of EDLP. And by them sticking to the standard markup is a way that they, all the benefits that they get from scale as a company are returned to the customer in form of lower prices, which in turn encourages growth and then extends scale advantages. And it illustrates the level of commitment that the founder has to this idea. This is what he says, "To understand how important EDLP is to Jim Sinegal, Costco's founder considered the following story." So Costco gets this incredible deal, a better deal than they normally get when they buy 2 million pairs of designer jeans. They went to getting them for $22, so $10 less than Costco has sold the jeans for in the past.

• 11:07David Senra?

  So they offer this huge markup. You could essentially market up another 50% and you'd still be half the cost of most other retailers. So one of Costco's buyers recommends taking a higher gross margin than usual, more than the normal 14% markup, since no one would know. So he says that to Jim Sinegal, and Sinegal insists on the standard markup, arguing that if I let you do it this one time, you'll do it again. The contract with the customer, which is very low prices, must not be broken. This is a really important point to consider. Think about this. What the buyer is trying to do is do what's better for the company, what he thought was better for the company, at least what was better for the company in the short term. What Jim Sinegal and other great founders do is they always do what's better for the customer.

• 11:50David Senra?

  Because if you do that over the long term, that is then what is better for the company. And so when I read this section, this entire paragraph, I just stared at the page. I was like, I've seen this before. This reminds me of Walt Disney. So then I go to Founder's Notes, I type in the keyword search, Disney Leather Straps. And what is remarkable is we see a very similar story play out when Walt Disney is building Disneyland. They are over budget, they don't have enough time, they have a specific date that they have to open by. And so you see this conversation that Walt Disney is having with one of his employees. And his employee does the same thing. Let's cut a corner here, let's compromise a principle. Because short term, it's better for the company, at least in their misunderstanding. And so they are finalizing a ride, and funny, it's stagecoaches because they're horse-drawn stagecoaches.

• 12:35David Senra?

  Same name as Nick, as one of Nick's investments on the previous page. And so let me read from this book called Disney's Land. "They were among the first of the park's attractions to be finished, but the pressure of time was already weighing on everyone. One day, John Hench stopped by to check the progress on the coaches and had an idea which he brought up to Walt. "Why don't we just leave the leather straps off, Walt? "The people are never going to appreciate all the close-up detail." Disney treated Hench to a tart little lecture. "You're being a poor communicator. "People are okay. "Don't you ever forget that. "They will respond to it. "They will appreciate it." Hench didn't argue. He said, "We put the best damn leather straps on that stagecoach you've ever seen." "I think what Walt understood is what Jim Sinegal said.

• 13:20David Senra?

  "If I let you do it this time, you'll do it again. "This entire organization is going to be committed to this one common goal: "Everyday low prices." Or as Jim Sinegal's mentor Sol Price, who we'll talk about later, says, "Focus on getting the lowest possible price to the customer always." So back to Nick's letters. "Many retailers do not operate in such a way. "Costco's management describes this strategy as 'easy to understand and hard to operate.'" Now, a few years later, in 2004, you see this. This is one of my favorite parts because this is, this happening, this should be happening as you know, you're reading more biographies, you're studying more entrepreneurs, studying more companies. You start to see that their ideas, right? You're applying them to your own business. And so they're studying all these, what they, they want to, you know,

• 14:03David Senra?

  hopefully think and will turn into like large, wonderful business, businesses. You know, Costco is going to only get a lot bigger from here. And then they're going to use the insights that they derive from Costco to make a massive investment in Amazon. But with this paragraph, you can't help but notice that they're, oh, they're, they're applying it to the, how the businesses they're building and how they're spending their time. So this is job one, two, and three for your manager is investment performance. "Few practice this approach. "We work under the assumption that if performance is reasonable, "then the level of interest in what we're doing will increase "and the partnership will grow in time." The principle behind what they're saying is very similar to the, the same principle that they identified with the way Jim Sinegal ran Costco.

• 14:45David Senra?

  It's like, well, if we just focus on getting the lowest possible price to the customer, if that is job one, two, and three, then the customers will respond with loyalty. That will compound over the years and Costco will get bigger, just like they said Nomad, the partnership will get, will grow in time. And so the note I have is actually longer than the paragraph. So the first thing is keep the thing, the importance of keeping the main thing, the main thing, the importance of focusing and concentrating. And that is related to part two, which is one of my favorite ideas. When they knew that they had uncovered a deep truth and Nick says, 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. And if it's your single best insight, your single best idea, then obviously it's what

• 15:29David Senra?

  you're spending all your time on. There is a post written by one of the co-founders of Palantir, talks about what he learned from working with Peter Thiel. And this part of the post I have saved on my phone, and I think it applies to exactly what's taking place here. Do not divide your attention. Focusing on one thing yields increasing returns for each unit of effort. At a micro level, an extra hour of focus on the current project has a much higher return than an hour on something new, or worse, five minutes each on 12 new things. Before you ever do something new, you should understand the opportunity cost versus existing things. Don't rationalize that something you want to do is complimentary when it's not. At a macro level, understanding that applied effort has a convex output curve is a very

• 16:13David Senra?

  useful discipline when considering new market areas. This convexity means that the opportunity cost of transferring resources from existing projects to new ones is high. Unless the new area is incredibly valuable, anything we can do to extend an existing convex curve is worth so much more. And so towards the end of the partnership, they are known for their heavy concentration in just three things. And like you and I talked about last week, in one case, 70% of their net worth, I think this was Zach's net worth, 70% of Zach's net worth was in Amazon, just one stock. But we're in the 2004 letters and they haven't yet learned the importance of betting heavy yet.

• 16:57David Senra?

  This is what's so remarkable about reading them is you see this constant evolution of thinking. So at this point, they have holdings ranging anywhere from at most, their highest one is 7% of their entire portfolio, down to 0.3%. And you see that Nick is thinking about this. He's like, well, this is just like Charlie Munger. Charlie Munger is right when he says it's aggravating to buy just a little bit, but this is a hard question to answer. So it says, in reality, opportunities in which we are comfortable to deploy capital are rare, and the highest conviction idea is the rarest of them all. The issue then is how much to invest in each idea. And this is Nick's takeaway from thinking about the Kelly criterion. The common sense outcome of that equation is that if one is certain of being right, one should invest the entire portfolio in that idea. But does anyone do that? So he goes back to history.

• 17:42David Senra?

  As far as we are aware, only the early Buffett partnership portfolios had anyone near this level of concentration, and then mainly in companies in which Buffett was a controlling shareholder. But is this not the right way to think? The logical extension of this line of thought is that Nomad's portfolio concentration has been at times too low. And so in the margin of this homemade book I have, I was like, all right, start and change their mind. When do their actions reflect that? And on the very next page, he has a section called the likely evolution of the partnership investments. I love this part. I underlined almost the entire part. In the office, we keep a list of companies assembled under the title, super high-quality thinkers. This is not an easy club to join, and the list currently runs to 15 businesses.

• 18:27David Senra?

  Entry is reserved for the intellectually honest and economically rational, but that alone is not enough. There are many companies that do the right thing when their backs are against the wall. The anointed few are there because they have chosen to outthink their competition and allocate capital over many years with discipline to reinforce their firm's competitive advantage. Good capital allocation takes many forms and does not necessarily require a firm to grow. This goes back to the Charlie Munger's cancer surgery approach. Okay, so he says, the partnership's successful investment in Stagecoach has been due to the firm's shrinking strategy, not its growth.

• 19:10David Senra?

  At National Indemnity, which is an insurance subsidiary of Berkshire, the firm's ability to write insurance only when pricing is good and stand back when pricing is poor, even if revenues decline, is a wonderful example of capital discipline and good capital allocation. After all, why grow if returns are going to be poor? Surprisingly, few companies have the strength to just sit it out. This part made me laugh out loud. We ask companies with poor economics why they want to grow. And senior management look back at us incredulous at our line of questioning. I guess their answer is, we'd like to grow so we can lose even more money. The super high-quality thinkers are our best guests as those firms whose shareholders

• 19:55David Senra?

  could abdicate their right to trade stock. Which means you're abdicating the right to allocate capital themselves, right? Nick is outsourcing that to the Buffets, the Bezos, the Cinnegals. So the super high-quality thinkers are the best guests of those firms whose shareholders could abdicate their right to trade stock. Sure in the knowledge that their capital will be well allocated for years to come within the business. This list is a group of wonderful, honestly-run compounding machines. That is what he's looking for. Honestly-run compounding machines. We call this the terminal portfolio. This is where we want to go.

• 20:34David Senra?

  The question is, why is this list not the same as the current nomad portfolio? And what I write there is answering the question on the previous page, and I wrote, "Fucking bingo." On the previous page, "Starting to change their mind. When will their actions reflect that?" He's having a very honest conversation. He's like, "This is the outcome of our own thinking. We have this group. We've identified a handful of potential honestly-run compounding machines. This is our terminal portfolio. This is where we want to go. But then we compare that list to our portfolio, they don't match." And so then Nick elaborates on the honestly-run part of this. Now, he doesn't want just a compounding machine. He wants an honestly-run compounding machine. What does that mean?

• 21:17David Senra?

  There are only two reasons companies behave well. Because they want to and because they have to. Our preference is to invest in those that want to. If we can find enough of these heavenly opportunities, they will in fact put us out of a job. We will be pleased if a little bored. And he arrives at that conclusion because he's like, well, if we can invest in them early, we can invest in Costco and Amazon early. We don't have to do anything else because time is a friend of a good business. In fact, I like the way Buffett put this in his shareholder letters better. He says, "Time is a friend of the wonderful business and the enemy of the mediocre." And so Nick says, "Today in 2004, we have made two investments in wonderful compounding machines, and only one of those is meaningfully represented in our portfolio."

• 22:00David Senra?

  That's Costco. "What is the probability that, say, over the next 10 years, a good portion of these super high-quality thinkers will be priced at 50 cents? So there's some kind of pullback in the stock, right? Our betting is that odds are reasonable. The trick is to do the work today so that we are ready." If you go back to the Lee Lu's lecture with the Columbia Business School students, that's what he kept telling them. "You have to be a learning machine. You have to be doing the work now." He referenced many times that it takes a long time now, but it makes you go faster later on, but that you'll study something. He would study like an American company for like 15 years. It'd take him 15 years to find the Asian counterpart. Nick is telling us something very similar here. "We're going to think this through. We're going to analyze this business model. We're going to try to find these super high-quality thinkers, these compounding machines, and

• 22:44David Senra?

  then we are going to be patient. We are going to wait because the probabilities are high to be able to get a good price to buy in. The trick is to do the work today so that we are ready." And so in addition to spending time analyzing companies and industries and trying to find these compounding machines, they also talk a lot about, or Nick talks a lot about, all the mistakes that his peers and other people in the industry make. He says, "Successful investing is a minority sport." When I had dinner with Charlie Munger, I have a list on my phone of all the notes I took from the conversation. And one of the last things that Munger said to me at dinner was that being good at investing is a very rare skill. It is not distributed widely and will never be. And that has to

• 23:25David Senra?

  do with behavior. So Nick Sleep says the best talk on investing wasn't about investing, and it was Charlie Munger's talk, "The Psychology of Human Misjudgment." And so what Nick is doing here, he's thinking through. He's like, well, the problem is, what if we're right? What if these are wonderful businesses? What if Costco's going to get much bigger from here? Why is it then, when you look at the history of investing, that so few people cannot see success? And what he means by that is they sell way too early. So he says, "We take no comfort from the fact that not seeing success is a perennial investment mistake." In the 1950s, a large Baltimore-based fund management company sold their clients' shares in IBM, only for the shares to appreciate to the point that the value of the shares sold would become bigger than the whole fund management company itself.

• 24:07David Senra?

  Remember this because he tells the same story many years in the future, and I think he does an even better job. What we are trying to do today is to avoid the Baltimore company's second mistake, which was to sell an equally big stake in Walmart in the 1970s. The point he's obviously making is, hey, just hold on to IBM and Walmart, and you didn't have to do anything else. So how does one avoid these mistakes? The answer lies in analyzing not the effects and outputs of a business, but digging down to the underlying reality of the company, the engine of its success. One must see an investment not as a static balance sheet, but as an evolving compounding machine. And if you did that, you would not have sold Walmart in the 1970s. And so Nick starts sharing his thinking about what is the engine of Costco's success?

• 24:52David Senra?

  And is there some traits, some actions that it's taking that would cause their customers to maintain this loyalty and this commitment to Costco over a long period of time? I told you last week, you know, my wife's family's been shopping there for almost 30 years. They are extremely committed to Costco. So Nick says, number one, operating costs are low, indeed very low. It is indicative of the paranoia with which the company is run that costs are measured in basis points. Number two, the wholesale price is as competitive as it can be. The key to negotiating terms is that the number of items in a store, so the SKUs, are fixed at 4,000, and the right to fill one of those spaces is auctioned with the supplier that provides the best value proposition to the customer, winning space on the shop floor.

• 25:37David Senra?

  So he talks about how ruthless they can be with their suppliers that on their website, it lists a criteria required to become a Costco supplier. And Nick highlights this one section. "We expect all vendors to consistently and voluntarily quote the lowest possible acquisition price available on all items. A vendor who does not consistently and voluntarily quote its lowest price to our buyers will be permanently discontinued as a purchasing source for Costco." This is Nick's response to that. Good grief, one strike and you're out. Number three, revenues need to be very high. Revenues will be high if the other factors, number one and number two, are favorable.

• 26:18David Senra?

  If operating costs are low and prices are as competitive as they can be. The issue is what the company then does with the revenue advantage. In the case of Costco, scale efficiency gains are passed back to the consumer in order to drive further revenue growth. That way, customers at one of the first Costco stores outside of Seattle benefit from the firm's expansion into, say, Ohio, as they also gain from the decline in supplier prices. This keeps the old stores growing, too. The point is that having shared the cost savings, the customer reciprocates. In the office, we have a whiteboard on which we have listed the very few investment models that work and that we can understand. Costco is the best example we can find of one of them.

• 27:03David Senra?

  Scale efficiencies shared. Most companies pursue scale efficiencies. Few share them. It's the sharing that makes the model so powerful. The company grows by giving back. That is why competing with Costco is so hard to do. The firm is not interested in today's static assessment of performance. It is managing the business as to raise the probability of long-term success. When Costco continues to recycle cost savings to the consumer, it is lowering the probability of failure. And before I read this next sentence to you, remember it is 2004 when he is writing this. Amazon.com may be following this path as well.

• 27:46David Senra?

  And so then he tries to reconcile, like, this business model makes sense to us. This is phenomenal if you're a customer. But why are the shares mispriced? Why is this so cheap? And so he lists what some criticisms that Costco gets at the time. The company has low margins. And it's funny that he's mentioning both Costco and Amazon at this time, because remember, one of Jeff Bezos' most famous quotes is that "your margin is my opportunity." So people are like, "Well, we don't want to buy the stock because Costco has low margins." And Nick Sleep says, "True, but that's the point. The firm is deferring profits today in order to extend the life of the franchise." And so as he continues to analyze Costco, he says, there's an interesting question. What characteristics could one bestow on a company that would make it the most valuable in the world? What would it look like?

• 28:31David Senra?

  And he says, such a firm would have a huge marketplace that would offer size. They would have high barriers to entry, which would offer longevity and very low levels of capital employed, which would offer free cash flow. Costco has some of these attributes. It is also more asset light than its peers, but it's not the lightest of them all. For that, one must turn to the internet. I'm going to pause here before I read the next sentence because I promise you, you're not going to be able to guess what the next sentence is. We just got going through the benefits of Costco. They mentioned Amazon. They mentioned they can only understand a few business models, and this is one of them. Costco is great, but imagine if you had Costco on the internet.

• 29:15David Senra?

  And given all that, we take this strange turn right here because they said, well, for that one, you got to turn to the internet. So in our opinion, a business such as eBay could be the most valuable in the world. So no, Costco is not perfect. Perhaps we should own eBay as well. No, I wrote on the, this is the next page. So you can read these for free online. And if you like reading physical things like I do, you can print them out. So I'm on page 52. On 51, on page 51, they're talking about, you know, the benefits of Costco. They talked about the fact that Michael Dell is also using this model by keeping costs low and passing back scale benefits

• 29:57David Senra?

  to the buyer of his PCs and that amazon.com might be following this path as well. On page 52, it's like, well, Costco would be great, but what if it was on the internet? So maybe it's eBay. And I wrote in giant letters in the margin, the answer was on the previous page. The answer is Amazon. They just don't know it yet. Now they will arrive at that. And I think that they're the most, the majority of like that $2 billion that they made. I think the single company that contributed most to that, if I'm not mistaken, is Amazon. And it is always helpful to think about what was going on when these words were written. So if you go, I went and looked up like what, because you read about early days of Amazon. You know, I've read every single book I can find. And for the longest time, people thought that Bezos has no chance against eBay.

• 30:37David Senra?

  And think about this, in the end of 2004, the market cap of Amazon, when Nick Sleepy was discovering this earned secret, was $18 billion. 18 billion. The market cap in that same time for eBay was 77 billion. In today's world we're living in, that sounds silly. But if you go back to the early 2000s, there was a ton of stuff written on the fact that Amazon stands no chance against eBay. And so on the next page, he gives us his summary of thoughts on Costco. "In our judgment, Costco is a cost-disciplined, intellectually honest, high-product-integrity, perpetual-motion machine trading at a discount to value. I think we will do quite well. Your manager has already made his first mistake in investing in Costco: from not buying enough."

• 31:23David Senra?

  Towards the end of his partnership letters, Nick Sleep writes something that's excellent. The fact that, you know, these ideas that work today, they worked in the past, and they will build empires in the future too. That is why I read 110,000 of these words. This is what I'm choosing to focus on as I speak to you. The one, the first thing that got me really interested in Nick Sleep is not his investment performance, it's his observation that he lays out in the following quote. He says, "The best investors aren't investors at all. They're entrepreneurs who never sold." And since Nick is an investor, he's trying to learn from that, from learning that, why these entrepreneurs not sell. He says, "The biggest mistake an investor can make is to sell a stock that goes on

• 32:05David Senra?

  to rise tenfold, not from owning something into bankruptcy. But that's what everyone thinks, at least judging by the questions that we get from our clients. We got questions about our holding in Northwest Airlines rather than the sale of Apple earlier this year, but selling Apple has cost us more." So again, that speaks to Nick's own point about how difficult this was. When he's talking about that firm that sells IBM in the 50s and Walmart in the 70s, he's not like, "Hey, look at these idiots, they're so stupid." He's making the point that that mistake is repeated over and over and over again when you look through history. It's arrogant to think that you're not capable of making the same mistake. So how do we avoid that? And I think we'll talk about this later, but just in case I forget,

• 32:50David Senra?

  the idea that the best investors aren't investors at all, they're entrepreneurs who never sold. That has to do with the love that an entrepreneur feels for the business that they're making, that they're creating. 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. In other words, sometimes it turns out that the best financial decision is not a financial decision at all. Now, we get to 2006 and they start to realize, oh, my God, it's not eBay. He doesn't say that. It's not eBay, it's Amazon. Before he gets into analyzing Amazon, though, I think he hits on something that's very

• 33:35David Senra?

  fascinating that is related, it's on the page before he gets into Amazon, but I think is related to how he thinks about Amazon. And he's like, you know, this is a really weird thing in how we teach economics. He says, there's a blind spot as the overwhelming methodology for research in economics has been to take observations over a short period of time, as if cause and effect sit on top of each other. Remember that line for when we get to Jeff Bezos's own shareholder letters, who are quoted heavily in Nick Sleep's partnership letters, okay? It's this really weird thing. We're assuming that, you know, observations happen over a short period of time, as if

• 34:18David Senra?

  cause and effect sit on top of each other. And really, this all ties to his main point of why having a longer view, a longer term view can be just a massive advantage. And he makes the point that both Costco and Amazon, at this time, they're penalized by the public markets because they're giving so much of their scale efficiencies back to the consumer. And so he goes, okay, well, how should we think about this? He calls them price givebacks. Here's what Jeff Bezos says, had to say in his last year's annual report. We have made a decision to continuously and significantly lower prices for customers year after year as our efficiency and scale make it possible. This is an example of a very important decision that cannot be made in a math-based way.

• 34:59David Senra?

  When we lower prices, we go against the math, which always says that the smart move is to raise prices. We have significant data related to price elasticity. With fair accuracy, we can predict that a price reduction of a certain percentage will result in an increase in units sold of a certain percentage. With rare exceptions, the volume increase in the short term is never enough to pay for the price decrease. However, our quantitative understanding of elasticity is short term. We can estimate what a price reduction will do this week in this quarter, but we cannot estimate the effect that consistently lowering prices will have on our business over five or 10 years.

• 35:42David Senra?

  It's exactly what Nick was saying on the other, the mistake that the academics and economics make. They act like cause and effect sit on top of each other. Jeff is saying, yeah, okay, you can quantitatively understanding what this price reduction will do this week or this quarter, but you can't say what effect it will have on the business for five or 10 years. This is why, one of my favorite lines about what, what the role of the founder actually is, "The founder is the guardian of the company's soul." This is an example of that. Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices create a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow and thereby to a much more valuable Amazon.

• 36:27David Senra?

  We have made similar judgments around free super saver shipping and Amazon Prime, both of which are expensive in the short term and we believe important and valuable in the long term. The timing in which Jeff is writing this and which Nick is commenting on it is really important. This is a time when few people are buying Amazon. Nick and Zach have their earned secret. They are half a decade into their partnership. And so Nick writes, "This is a summary of the scale efficiency shared model that we dealt with in detail in our analysis of Costco years before," and is deployed by companies which have now come to dominate Nomad, which is his holding in Costco, Dell, Amazon, and Berkshire.

• 37:12David Senra?

  If the share price is being set by those with an eye on the next data point, then they can't also be looking out for the long-term value. There are few traders that disagree with Bezos' value equation process, but they don't think it'll show up in the numbers just yet. The traders have many small ideas, and we have one big idea. Good luck to them. It is not strictly a math-based equation, and there's no guarantee that investment spending will always work. And he quotes Bezos again. "Math-based decisions command wide agreement, whereas judgment-based decisions are rightly debated and often controversial, at least until put into practice and demonstrated. Any institution unwilling to endure controversy

• 37:56David Senra?

  must limit itself to decisions of the first type. In our view, doing so would not only limit controversy, it would also significantly limit innovation and long-term value creation." That is the end of Bezos' quote. This is Nick's one-word response. Amen. And the next sentence, he says, "I think Bezos would run a good investment fund." But that is the point. Good investing and good business decisions are synonymous. And so, in one of the 2007 partnership letters, he talks about how and why Amazon can get even better. Now, keep in mind, the following year, he doesn't know this yet. The following year, you're gonna be able to buy Amazon stock for like $35, okay? So he's asking the question like,

• 38:40David Senra?

  "How do we know that a business will actually grow from a mouse to an elephant?" And he identifies the same traits that, in the physical world, that Costco has, and then it can be superpowered by the internet. So, you know, several things are important. A business ought to be able to self-fund its own growth. Second, barriers to entry should increase with size. That way, the company's moat is widened as the firm grows. And then the giant advantage that Amazon has over Costco is that, on the internet, power law is very high. And this implies that businesses like Amazon have a shot at being far bigger, quicker, and more profitable than their physical world equivalents. And the fact that it's led by a customer-centric founder. This combination makes us think

• 39:22David Senra?

  that we may have a mouse that can turn into an elephant. To those who argue that Amazon is large already, we ask you two questions. What do you think e-commerce will be as a proportion of US retailing in 10 years' time? And what do you think it was last year? So the answer to that second question is 3.1% of all retail sales happened online in the year 2006. And so then he goes back to this unresolved problem. It's like, everybody else is diversified. That doesn't make a lot of sense to us. How should we be thinking about this? This is very difficult. And so since they had bought Amazon, it went up twice. So said after the doubling of the share price, it'd be easy for Zach and me to claim victory, high five, and sell our shares in Amazon.

• 40:06David Senra?

  In previous Nomad Letters, we have argued that the biggest error an investor can make is the sale of Walmart or Microsoft in the early stages of the company's growth. We wonder, would selling Amazon today be the equivalent mistake of selling Walmart in 1980? And so he talks about, let's invert. Let's invert the way to construct a portfolio. 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. He's really saying, without saying, what if you invested like founders invest? Right? It's 100%. Sam Walton, 100% of his net worth was in his company. And he says, now we are not advocating all the fund in Amazon. Well, just not yet, at least. And here's the crazy thing.

• 40:49David Senra?

  That would have been their best performing decision, assuming you're going to put all your money into what you've already invested in. They didn't know it then, obviously, but the best performing decision would have to do just that. Allocate the entire fund to Amazon. And he tells a wonderful story why this is so difficult, and this is hilarious. He says, "It was recently reported that oil had been found, not in the far-flung reaches of the globe, but under the headquarters of Exxon in Irving, Texas, and not by Exxon. Sometimes what you are looking for is right in front of you. If Exxon can make that mistake, we all can." So now we're in the great financial crisis of 2008. Remember, Nick said that the greatest speech on investment wasn't about investment.

• 41:34David Senra?

  It was about the psychology of human misjudgment. And he's talking about, you know, everybody's panicking, I think. They're going to wind up being down like 40% this year, 45% at the end of the year. And he says in the letters before this even happens, I think he's only down at 20% at this time, he goes, "I know it doesn't seem like it, but I promise you, this is the best possible time to be an investor." And he's looking at the underlying strength of Amazon. It's completely uncorrelated to stock price, and he cannot believe it. This next section goes over many, many pages. It's one of my favorite parts of his entire letters. And so he's about to make the point using Amazon as an example that, hey, customers respond to incentives, like all people do, and Amazon's sharing of these benefits of its scale will make them grow much farther from here.

• 42:18David Senra?

  And you can see it with how they're actually performing in the middle of this great financial crisis that's happening in 2008. And so he's comparing Amazon's strength with the lack of strength that normal retailers have. So he calls them high-low, you know, people that say, hey, you know, they get you in the door by essentially heavily discounting, having like a loss leader, and the hopes that once you're in the store, you're going to buy something that they have a higher margin on. So he's going to call them high-street peers, okay? "Amazon's high-street peers could price their products at net income breakeven and still not undercut Amazon's prices or profitability. For these high-street competitors, the game is over." He's writing this in 2008, when everybody's panicking. "Nick is thinking very rationally and seeing things unbelievably clearly. They will leak revenues to more efficient rivals as customers respond to the incentives

• 43:01David Senra?

  of consistently low prices and convenience. Scale economics works well in bad economic times as well as good. On the busiest day in the run-up to Christmas this year in 2008, order volumes at Amazon were 16% higher than the previous year, compared to the overall retail industry, which are down 10%. In the last few months, Amazon has been priced in the market as if it would not grow in the future, despite some of the best growth prospects we can imagine. That is a very rare combination." And there's a hilarious illustration of this point that he, Nick's right, scale economics works well in bad economic times as well as good. This is happening in 2008, back when there was a recession in the early 1990s.

• 43:43David Senra?

  Sam Walton was asked about the recession that was happening, and he said, "I've thought about it, and I've decided not to participate." When you have order volumes at Amazon growing 16% year over year in one of the worst financial crises that the, in, you know, half a century or whatever the timeframe was, that's Jeff Bezos saying, "Yeah, I thought about it. I'm not going to participate." And so it's exactly when everybody's panicking, when he's investing in Amazon. He says, "In our opinion, just a few things in life are noble. And it is because just a few things are noble that nobody has just a few investments." "The church of diversification is seen as an insurance against any one idea being wrong. We would propose that 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."

• 44:27David Senra?

  Sam Walton did not make his money through diversifying his holdings, nor did Bill Gates, Andrew Carnegie, or John D. Rockefeller. Great businesses are not built that way. Indeed, the portfolios of these men were more or less 100% in one company and they did not consider it risky. Go back to that quote. "The best investors of all time are not investors at all. They're entrepreneurs who never sold." And so he's asking the question, "Why is it that no one but the founding Walton family owned Walmart all the way through?" Zach and I were told a story which we enjoyed enormously and might help illustrate this point. In the early 1970s, a large, successful fund management company analyzed its portfolio and discovered that their sale of IBM 30 years earlier had been a huge error of omission. If they had instead kept their IBM shares for the last 30 years,

• 45:12David Senra?

  that stake alone would have been larger than the total funds under management. They all agreed to learn from that particular mistake and, as so often happens, went back to their desks and got on with life before as if nothing had happened. Around the same time that they realized their mistake, they also made the decision to sell their stake in Walmart, which 30 years later would be worth more than their then-to-be funds under management. In terms of dollars of opportunity loss, it is likely to be the biggest single error that firm will make. And so then he makes a point a few pages later, like you cannot just focus on the outputs. If you do, you're going to sell. You have to really understand the central engine of success. You have to understand that business deeply. This is why he says so few things can actually be known.

• 45:54David Senra?

  And if you can only know a few things well, then of course you need to be heavily concentrated and bet heavily. It could be argued that lots of things had to go right for Walmart to grow for 40 years. That is certainly true, but at its heart, a very few, simple things really mattered. In our opinion, the central engine of success at Walmart was a thrift orientation. So low costs, low waste, fueling growth with the savings shared with the customer. That is the deep reality of the business. And so you could pause there if you're interested in investing. You say, okay, so who's doing this now? Who today is the Walmart of the 1970s? Or you can ask yourself, okay, how do I apply this to my own business? So my business, the one I'm running today, can compound for decades. And he wraps this up beautifully because he's at, they're asking essentially the reason they're studying the Walmart,

• 46:38David Senra?

  and the reason they did all the work on Costco is they're like, is Amazon our Walmart? And I absolutely love this section because it's really comes to what you and I have been talking about the past few weeks. Effort and opportunity costs. Munger says that all wise people, the way wise people make decisions is through opportunity costs and then effort. So it says, "When Zach and I trawl through the stock market these last 18 months, we read 1,000 annual reports and visited and interviewed 300 companies. We had four main choices. One, we can add to our existing holdings. Two, we can invest in new businesses. Three, we can invest in growth businesses. Or four, we can invest in cigar butts. Overwhelmingly, we have preferred our existing businesses to the alternatives. We are not saying that Amazon is the next Walmart. Time will tell on this front.

• 47:22David Senra?

  But we are asking the question, what if it is? And if the answer is yes, then the answer is on the next page. It talks about the investor Seth Clareman, who wrote Margin of Safety, was once challenged on whether Buffett's track record was statistically significant since he traded so little, to which Clareman answered that each day Buffett chose not to do anything was a decision taken too. When I read that, I assume that Nick is seeing himself in that story. Right now, in 2008, he's like, I got Costco, I got Berkshire, I got Amazon. The key is to not mess that up. The key is to not interrupt these honest compounding machines, which in itself is a decision, a daily decision not to do anything.

• 48:07David Senra?

  And arguably more difficult than to do something because I think we're naturally wired to do something, to take action. And what made me want to spend time studying Nick's sleep and Zach and Lulu and Bezos and everybody else is because of this idea. Remember what Lulu said? He was asked, he's just like, well, how is your approach different than other investors that are less successful than you? He's like, I don't spend any time worrying about what other investors do. I spend all my time studying great companies and studying great industries. If Nick and Zach were worried about what other investors were doing at this time, they wouldn't be doing what they're doing. They wouldn't have been buying Amazon, they wouldn't have been talking about Costco. And so there's this unnamed founder that is running one of Nomad's investments that said this in a private meeting.

• 48:49David Senra?

  This has got to be Bezos. They don't say it's Bezos, but listen to this. And I think, again, let's just assume this is Bezos. Bezos is running his business this way. I would argue that Lulu ran his business this way. And then Nick and Zach were running their business this way. If you want to be successful, and we do, then you have to be willing to be misunderstood. Okay, go on, this has been a main theme in the last month. And do things that do not seem sensible to most people. For example, if you, the employees, come into the office in the morning thinking, how are you going to beat number one, number two, and number three in the industry? Then our business is the wrong place for you. We start with the customer and work backwards. He continued that rather than set your standards by what others do, the business benefited from a divine discontent with the status quo,

• 49:33David Senra?

  which kept us on our toes and the business improving irrespective of what the competition was doing. In other words, his company had an internal compass with true north pointing to what was right for the customer. Sounds a lot like what Jim Sinegal did at the beginning. He was like, hey, suppliers like, hey, we got such a good deal on these designer jeans. We can mark them up, you know, another, another $10. No one will notice. And he's like, no, I'm not going to do that because that violates my internal compass, which, which points to always doing what's right for the customer. And Jim Sinegal's thinking on this was heavily, heavily influenced by his mentor, Sol Price. I've done two episodes on Sol Price. If you haven't listened to them yet, it's episode 304, Sol Price, the founder who taught Jim Sinegal, Sam Walton, Jeff Bezos,

• 50:17David Senra?

  Bernie Marcus. It's based on a biography written by his son. His son listened to that episode and sent me a very, very kind email. So Zach and Jim, or Nick and Zach, rather, are meeting with Jim and he says, Jim suddenly stopped in mid-sentence. His face lit up. I must show you this, he said. And he disappeared into a filing cabinet. He emerged with a memo from 1967, written by Sol Price. And he gave them a copy. They framed it and hung it on the office wall. The memo says this, this is Sol Price. And this is what Jim thought was super important. Although we are all interested in margin, it must never be done at the expense of our philosophy. Margin must be obtained by better buying, emphasis on selling the right kinds of goods we want to sell, operating efficiencies, lower markdowns, greater turnover.

• 51:02David Senra?

  Increasing the retail prices and justifying it on the basis that we are still competitive could lead to a rude awakening, as it has with so many. Let us concentrate on how cheap we can bring things to the people, rather than how much traffic, how much the traffic will bear. And when the race is over, FedMart will be there. This is Nick's commentary. The, that is the best summary of the business case for scale economics shared that we have come across. Forty-three years later, Costco is the most valuable retailer of its type in the world. Cultures that care about the little things all the time are very hard to create, and in the opinion of Jeff Bezos, almost impossible to create, if not put in place, at the firm's genesis.

• 51:49David Senra?

  And then I want to end on what I think is the main point and the main idea behind this episode, that these ideas are timeless and are transferable to our work. When we study truly great businesses, we find that very often it has been simple human attributes that have led to their success. You feel differently drinking a Coke than a no brand cola, or you may feel differently towards a business that consistently undercuts the competition in price, or a delivery service that literally goes the extra mile and picks up returned items. And the reason you have these feelings and the stimuli that produce them have hardly changed in millennia. It is interesting to note that the business model that built the Ford empire 100 years

• 52:28David Senra?

  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. And that is where I'll leave it. For the full story, I highly recommend reading the shareholder letters, all of them, they're available for free on Nick's charity website. I will leave a link down below. And then if you don't want to read all 218, 219 pages of the shareholder letters, I would heavily recommend buying William Green's book, the one I covered that did the chapter last week on Nick and Zach. The book is called Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life. The author, William Green, listened to the episode and he loved it. A bunch of my friends have bought that book this week.

• 53:13David Senra?

  I will leave a link down below. If you buy the book using that link, you'll be supporting the podcast at the same time. That is 365 books down, 1,000 to go, and I'll talk to you again soon. When I was reading these letters, and it was very clear that Jim Sinegal and Costco's obsession was this total commitment to this everyday low price strategy that they had. Everything they were doing was serving that one goal. And when you read that, or when you listen to that, you start to think, okay, what is my organization's goal? And so my goal, my one goal, the central organizing principle of my entire life's work, is that I want to help other people learn from history's greatest entrepreneurs, and I want to do that better than anybody else in the world. And so as a byproduct of making this podcast, in order to make the podcast, I have to collect and distill the knowledge, the collective knowledge of history's

• 53:58David Senra?

  Greatest entrepreneurs. And then I use the podcast to spread that knowledge far and wide because I really do think these biographies, these shareholder letters, these autobiographies, I really do think it is an act of service that other people can benefit from a, you know, four, five, six decade-long career. And so this obsession takes form of a podcast, but now I've made a tool to make sure that I never forget the lessons and that I can pull them up on demand when I need them. And that tool is Founders Notes, which you can now get access to that tool as well. Founders Notes lets you tap into the collective knowledge of history's greatest entrepreneurs on demand. And it's a very simple way because for the last six years, I've been putting all of my notes and highlights for everything that I read for the podcast into a giant searchable database that you can now tap into.

• 54:43David Senra?

  And even if you didn't know about this tool, you hear me use it over and over again because every time you listen to the podcast and I'm referencing past ideas from past episodes, from past books, like when I brought up Jeff Bezos, or when I was talking about Walt Disney in this episode, or Sam Walton, or Munger, or Buffett, or all of this, that is me searching through Founders Notes and pulling up those ideas. And that is a really important point to get across, what you see. If you subscribe to Founders Notes, that is the same tool that I use. You see the exact same thing that I use. It is a tool that I made for myself and I had for years before I even thought about making it a tool that other people can get access to. Existing subscribers to Founders Notes have been using it to help them think through issues they're having from anything in their company, from hiring to recruiting to marketing to leadership

• 55:27David Senra?

  to preparing for board meetings, to preparing sales presentations. If you are already running a successful company, I think it's a no-brainer to invest in this tool. You can tap into the collective knowledge of history's greatest founders on demand by going to foundersnotes.com. That is founders with an S, just like the podcast, foundersnotes.com and subscribing today. Thanks for the extra support. Thanks for listening and I'll talk to you again soon.