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Few serious investors were excited about Amazon in the early 2000s. The company was less than 5 years old, and despite rapid revenue growth over the previous years, was still reeling under deep losses at the operating and the net levels. What’s more, the dot-com bubble had recently burst, and the stock had fallen more than 90% from its highs.
Most investors, big and small, saw it as just another overhyped internet company struggling to find a path to profits. Analysts worried about its mounting losses and doubted whether selling books, CDs, and DVDs online could ever be a sustainable business. The consensus was that Amazon was a risky and uncertain venture, and not worth the trouble.
But in 2001, just as the market’s faith in internet companies was collapsing, Nick Sleep and his partner Qais Zakaria at the Nomad Investment Partnership began buying Amazon shares. Nomad was a small, unknown fund out of London, far from the noise of Wall Street. Sleep wasn’t interested in guessing the next quarter’s earnings per share or reacting to each headline about Amazon’s “bleak” prospects. Instead, he was asking a much rarer question: If Jeff Bezos is serious about building the world’s most customer-centric company, what could this business look like in 10 or 20 years?
This way of thinking, which involved stretching the investment horizon far beyond the market’s usual attention span, was the cornerstone of Nomad’s philosophy. Sleep understood that the real advantage in markets wasn’t found in better financial modelling but in patience. Painful patience.
Most professional investors couldn’t afford to think in decades. They had clients to please and career risks to manage. This constant short-term pressure meant they often sold great businesses simply because they weren’t performing right now. Sleep had no interest in playing that game. He called his approach “patient capital” and saw time horizon as one of the last true edges available to investors.
“Patient capital,” simply put, is money that doesn’t need to be moved around constantly, but can sit in a great business long enough for the underlying value to unfold. Patient capital oils basically “committed capital.” It means you’re giving the business the time it needs to compound, without forcing it to meet your emotional need for activity.
Sleep once expressed it this way:
We own the only permanent capital in a company’s capital structure – everything else in the company, management, assets, board, employees can change but our equity can still be there! Institutional investors have never really reconciled their ability to trade daily with the permanence of equity.
This is the essence of time horizon arbitrage. Most investors hold something that, in theory, could last forever, yet behave as if it has an expiry date of months. Nomad flipped that mindset.
Over the years, Sleep and Zakaria kept adding to Amazon and holding it, even when the market had other favourites. They were willing to endure the uncomfortable years when Amazon’s reinvestment in infrastructure and customer experience meant lower short-term profits. This was precisely what gave Amazon its long-term advantage. By the time Nomad closed to outside investors in 2014, its investment in Amazon had multiplied many times over, turning a small fund into one of the most successful of its era. A $1 million investment in Nomad at inception had grown to around $12 million, which was an extraordinary result built on the discipline to hold through uncertainty while others cycled in and out.
The lesson here is simple to say and hard to live. It is that if you can stretch your time horizon, you enter a game with far less competition.
The market is filled with intelligent people, but most are constrained by short-term performance metrics. If they have a great business in the portfolio and it lags for 12 months, they risk redemptions, criticism, or even losing their jobs.
However, you, as an individual investor, can turn this into your advantage, provided you structure your life so you genuinely can wait. This is what Sleep did. He built a fund and an investor base that understood the approach and was aligned with it. Without that foundation, even the best ideas get cut short by impatience.
Now, patient capital doesn’t mean blind faith. Sleep and Zakaria didn’t buy Amazon and then stop paying attention. They studied its business model, understood how reinvestment was building long-term moats, and reassessed their thesis periodically. But they didn’t confuse volatility with risk. They understood that the road to compounding is rarely smooth. Also that the years when it feels like “nothing is happening” are often the years when the foundations of future growth are quietly being laid.
For you, as an individual investor, practicing time horizon arbitrage means first deciding which pool of money you can truly afford to leave untouched for 10 years or more. Essentially, if you know you don’t need a certain amount of your savings for 10 or 15 years, you can genuinely treat it as patient capital. It’s money you’ve given permission to stay invested through recessions, falling market, and dull years when “nothing seems to be happening.” It’s because you know the compounding is happening underneath. The key is to separate this capital from the money you’ll need sooner, so you’re never forced to sell just because life or market throws you a googly.
It also, very importantly, means choosing businesses with durable advantages, strong cultures, and management teams who think beyond the next quarter’s earnings. And it means preparing yourself emotionally for the inevitable stretches when you will look wrong, sometimes for years, before being proven right.
The most difficult part of this deal is that it’s not really an intellectual challenge, but a psychological one. The market will test you, just as it tested Nomad’s resolve when Amazon’s profits were thin or when competitors were getting more media attention. It will tempt you to swap the long-term winner for something that looks better right now. And it will make you question whether you have the patience you think you do. The key is to remember that your edge lies in being willing to endure those stretches when others can’t.
Jeff Bezos has often said that he designs Amazon’s strategy on a multi-year horizon, because the further out you think, the less competition you have:
If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue.
In some cases, things are inevitable. The hard part is that you don’t know how long it might take, but you know it will happen if you’re patient enough.
Nick Sleep simply mirrored that principle in his investing. By aligning his time horizon with the business’s own growth horizon, he avoided the constant churn of the market’s short-term mood swings. And by doing so, he proved that patient capital, though rare, is one of the most powerful forces in wealth creation.
You see, the real edge in investing isn’t in knowing more or moving faster (machines do that much better than humans in today’s day and age), but in staying the course when others can’t.
Nick Sleep didn’t own Amazon because he thought he could guess next quarter’s margins better than anyone else. He owned it because he could see what it might become, and also because he was willing to wait through the years when nothing seemed to be happening, except that everything was.
Don’t see time horizon arbitrage as some trick. It’s also not about being smarter than others. It’s simply about setting yourself up so you can hold, emotionally and financially, while others churn themselves to exhaustion.
If you can do that well enough, for long enough, one day you’ll look back at the years you spent holding (high quality businesses), and realise they were the most valuable thing you ever did.
Two Books. One Purpose. A Better Life.
“Discover the extraordinary within.”
—Manish Chokhani, Director, Enam Holdings
“This is a masterpiece.”
—Morgan Housel, Author, Psychology of Money
