Quote · My First Million
We found an app that lets you buy anything for $0
Where this was said
Nick Sleep's shared economies of scale
At 18:13 · chapter starts 13:14
Triggered by Sam's observation that TCL TVs keep getting better while staying at $200, Shaan pivots to Nick Sleep — the mysterious investor who ran a fund for about 15 years, compounded at more than 20%, and then just quit [1] — Shaan Puri "Nick Sleep beat the market for 15 years by measuring something no analyst tracks: how much surplus a company passes to customers instead of…" 13:14 . Sleep's edge wasn't a diversified portfolio or clever macro calls; it was a single idea he called 'shared economies of scale.' The standard playbook for a scaled retailer is to buy cheap and sell at a markup that grows over time. Costco does the opposite: it uses its bulk-buying power to shrink the markup and pass the savings to members. The result is that a $100 membership unlocks $1,000 in annual grocery savings — an invisible consumer surplus that doesn't appear on any balance sheet. Shaan does the math live: Costco generates around $5 billion in membership fees but passes roughly four times that in savings to customers. Amazon ran the same playbook for two decades, reinvesting everything into wider selection, faster shipping, and lower prices rather than paying dividends. Sleep's insight was to track the growth rate of this surplus, not the earnings. The companies growing it fastest are the ones that will run away from all competition.
Nick Sleep beat the market for 15 years by measuring something no analyst tracks: how much surplus a company passes to customers instead of shareholders. Costco generates $5B in membership fees by giving away far more in savings. Amazon did the same. The companies that grow this 'consumer surplus' fastest tend to run away from all competition.
Costco generates approximately $5 billion annually from membership fees alone, while making essentially no profit on the food it sells.
SpaceX has already cut the cost to orbit by 100x — and instead of keeping the savings, it passed them on, capturing 80% of all global payloads. Starlink follows the same Costco/Amazon membership playbook. By Nick Sleep's framework, SpaceX might be the most undervalued company on Earth right now.
SpaceX lowered the cost to orbit by approximately 100x and now controls roughly 80% of all payload launches by passing savings on to customers rather than extracting profits.
Elon Musk publicly dismissed moats, arguing fast innovation is the only real protection. Buffett shot back with a perfect analogy: if a store doesn't have Snickers and offers an unbranded chocolate bar, the customer just walks across the street. The power of brand is that you'd have to pay someone to switch — and they still wouldn't.
Nick Sleep averaged more than 20% compounding returns over roughly 15 years by concentrating his fund in Costco, Amazon, and Berkshire Hathaway.
