RWH064: A Soulful Path To Stellar Returns w/ Nima Shayegh
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Podcast Summary
This episode features an illuminating conversation between William Green and Nima Shayegh, founder of Rumi Partners, a concentrated hedge fund focused on long-term compounding. Shayegh, still in his thirties, shares profound insights about moving beyond purely quantitative analysis to embrace qualitative assessment of businesses. (06:41) The discussion explores how his mentor, the legendary investor Lou Simpson (Warren Buffett's former GEICO investment chief), taught him to focus on the "roots" rather than the "branches" of investing. (27:31) Throughout the conversation, Shayegh demonstrates how spiritual wisdom from the 13th-century Persian mystic Rumi informs his investment philosophy, emphasizing the importance of intuition, humility, and surrender in navigating market volatility. • Core themes include the limitations of purely analytical investing, the power of qualitative business assessment, and the integration of ancient wisdom with modern investment practice
Speakers
William Green
William Green is the host of the Richer, Wiser, Happier podcast and author of the bestselling book of the same name. He has spent decades interviewing some of the world's greatest investors and exploring the intersection between successful investing and meaningful living. Green has worked as a journalist for publications including Time, Fortune, and The Economist.
Nima Shayegh
Nima Shayegh is the founder and portfolio manager of Rumi Partners, a concentrated investment firm in California. A protégé of legendary investor Lou Simpson (former GEICO investment chief), Shayegh previously worked at PIMCO and SQ Advisors. He holds degrees in mathematics and economics from UCLA and is known for his philosophical approach to investing, integrating spiritual wisdom with rigorous business analysis in managing a concentrated portfolio of fewer than 10 holdings.
Key Takeaways
Focus on Business "Roots" Rather Than "Branches"
Shayegh emphasizes the critical distinction between quantifiable metrics (branches) and qualitative business fundamentals (roots). (10:41) While the investment industry obsesses over last quarter's margins, unit growth, and inflation data, the real drivers of long-term business success are unmeasurable qualities like management motivation, company culture, product quality, and customer alignment. These "root qualities" require intuition rather than spreadsheet analysis, but they're actually the most predictive of future business economics. For example, when evaluating Tesla's full self-driving technology, the quantifiable data matters less than the experiential "blown awayness" that reveals true quality and innovation potential.
Embrace Volatility as Your Friend
Great investors consistently experience severe drawdowns - Ben Graham's fund declined 70% in the 1930s, Charlie Munger lost more than half his portfolio in the 1970s, and even Lou Simpson underperformed the S&P 500 by 50-60 points in the late 1990s. (36:01) Rather than fearing these inevitable periods, investors should structure their lives and portfolios to benefit from volatility. During down markets, you can "coil the spring" by recycling capital from positions down 40% into opportunities down 70-90%. This requires surrendering the illusion of control over short-term outcomes and focusing entirely on owning resilient businesses with long-term reinvestment runways.
Build Alignment Across Your Entire Ecosystem
Success requires alignment between your investment time horizon, your business partners, and the management teams you invest in. (59:50) Shayegh structures Rumi Partners with performance-oriented fees (no reward for "simply existing"), limited partners who share long-term thinking, and investments in companies like Brookfield where management thinks in 20-year timeframes. This ecosystem alignment allows for patient capital allocation and the ability to weather inevitable volatility without redemptions or pressure to trade around positions. The firm has had zero redemptions in over six years, enabling truly long-term thinking.
Distinguish Between Ego-Driven and Emotion-Guided Decisions
Conventional wisdom says to eliminate emotions from investing, but Shayegh argues the real problem is ego, not emotion. (21:59) Emotions can provide valuable pre-intellectual awareness about business quality, management trustworthiness, and long-term value creation. The ego, however, distorts perception through fear-based self-preservation, inability to admit mistakes, and the illusion of control. When you notice yourself becoming more impressed with a business over time rather than discovering its mediocrity, that's emotional intelligence worth heeding. The key is making decisions from curiosity and love rather than fear and ego protection.
Practice "Love-Based" Rather Than "Fear-Based" Selling
Shayegh categorizes sell decisions into fear-based and love-based choices. (106:47) Fear-based selling involves trimming positions simply because they've grown too large or due to anxiety about potential declines. Love-based selling happens when you feel compelled to own more of an exceptional business and need to source capital from elsewhere. This approach ensures you capture the full benefit of great investments rather than constantly rebalancing away from your winners. Since markets can do "literally anything" in the short term, positioning decisions should be driven by conviction about long-term business quality rather than short-term fear management.
Statistics & Facts
- Lou Simpson compounded capital at GEICO for 31 years (1979-2010) and was 50-60 points behind the S&P 500 in the late 1990s, which wiped out a decade of outperformance, yet his overall record remained exceptional. (38:01)
- AppFolio has compounded at more than 30% annually for a decade since going public, yet more than half of all trading days were spent in drawdowns greater than 20%, demonstrating the volatility required for exceptional long-term returns. (73:35)
- Carvana's stock declined 93% from its peak before Shayegh bought shares, falling from $370 to $25, and then declining another 85% to $3.50, with short interest reaching 75% of the free float as the market expected bankruptcy. (95:05)
