Anthony Scilipoti is one of the sharpest minds in investing. He’s the President and CEO of Veritas Group of Companies.
He called the collapses of both Valeant Pharmaceuticals and Nortel before they happened, and now he has some thoughts on AI.
Featured clips
The Enron Scandal
The AI 'Bubble' and the State of the Market
Parallels Between the Internet Bubble and Today
Investing Rules
The Rise and Fall of Valeant Pharmaceuticals
The Power of the Retail Investor
We talk about asking better questions, reading the fine print, the role of short selling, and what it means to be wrong. We explore why AI gives you information but not insight, why cheap risk is often the most expensive, and why nothing matters until it does.
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It’s a conversation about the difference between seeing and understanding and the discipline to notice what everyone else ignores.
This episode is not investment advice.
It’s time to listen and learn.
Summary
- Experience teaches pattern recognition and judgment that AI cannot replicate because you must already know where you want to go before AI can help you get there faster.
- Junior analysts learning with AI as a crutch will never develop the ability to connect second- and third-order consequences across financial statements.
- Current markets show euphoria where “fundamentals” have lost meaning.
- Circular investment patterns in today’s AI ecosystem mirror the dot-com era: Nvidia invests in OpenAI while supplying chips; Microsoft funds OpenAI while being its customer; CoreWeave went public with Nvidia as investor and chip supplier.
- The accounting doesn’t capture these interconnected relationships because individual transactions are immaterial to giants like Nvidia, yet hundreds of such deals create systemic vulnerability.
- Read financial statement notes BEFORE reading the statements themselves because notes reveal how management chose to account for transactions and what they modified.
- “Avoid embarrassing loss” is a better rule than “don’t lose money” because any investment involves risk, and investing out of fear prevents returns.
- The three-stage forensic framework: understand the business and control environment, identify flammable items (not red flags), then watch for the spark that ignites them.
- Negative cash flow isn’t inherently bad: it depends on lifecycle stage, return on invested capital, and business model—which is why context-blind red flags fail.
- EBITDA is “the mother of all disastrous measures” because investors treat it as cash flow, even though it’s merely an operating performance metric with no standardized adjustments.
- Stock options are an expense that should be treated as such; companies paying in options versus cash have identical economic impact but different reported earnings.
- Most buybacks simply offset stock option dilution, making them an expense disguised as capital allocation—especially dangerous when funded with debt.
- Passive index investing is momentum investing in disguise: money flows to largest market caps, which drags the index higher until those same companies drag it lower.
- The retail investor now has more power and access to information than ever, yet 40% single-day price moves on earnings news prove information hasn’t improved price discovery.
- Structure enables strategy: Berkshire works because Buffett controls shares and operates cash-generating businesses, avoiding the agency problems that paralyze traditional fund managers during crises.
- Price creates narrative—after repeated success, investors accept increasingly suspicious accounting because the stock keeps rising, making it psychologically difficult to maintain skepticism.
Lessons
Learn the hard way. Anthony’s children wanted to use calculators in elementary school. “You need to learn it without the calculator, and then you can use the calculator.” Same with AI. If you never learn to read financial statements the hard way, you’ll never know when AI results matter and when they don’t. The calculator gives you the answer, it doesn’t teach you math. Master the fundamentals before using tools to go faster.
Information without understanding is noise. Steve Schwarzman told me that analysts today know the numbers but don’t know what the numbers mean. Anthony sees it constantly. Someone pulls up a company’s capitalized costs. They know the number, but they don’t know what it means for operating earnings, the balance sheet, or cash flow. “You need someone with experience to know which of those references matter and what that means to the business,” Anthony says.
Nothing matters until it does. You don’t think about oxygen until you need it; the same goes for cash. When you need it, you need it a lot. Most people ignore the symptoms because nothing’s broken yet. The careful watch for familiar patterns. When the music stops, those who weren’t paying attention get crushed.
People buy narrative and resist facts. If you want to sell the positive side, you have to sell the dream. AI will change the world. Margins will expand. Healthcare will improve. People buy dreams. They resist facts. (LuLu mentioned this too: you can’t fight a story with a fact). When Anthony points to intricate transactions with no disclosure, people wave it off. “We’re changing the world, buddy.” People who point out facts are the person in the basement looking at the cracks in the foundation, while everyone else is in the penthouse admiring the view.
Don’t trust, verify. One of Anthony’s investing rules. “I’m sure there are many good management teams,” he says. “It’s not that you shouldn’t trust anything they say, but again, it’s a mindset.” If you go in with the mindset of “don’t trust,” you’ll be curious. You’ll ask questions. It doesn’t mean they’re bad people. It means you verify first. Then you trust.
Always read the fine print. Before looking at the financial statements, read the footnotes. “The notes tell you how the company modified the accounting. It made accounting choices: We decided to account for these types of transactions in this way.” Once you know how they’re prepared, you can interpret them properly.
Complicated is a choice. Complexity is often the camouflage for problems management doesn’t want you to see.
Price creates narrative: When prices keep going up, the narrative becomes “it works.” The company makes an acquisition. It seems questionable, but the stock goes higher. They do something strange, and the stock goes higher again. They change their accounting, and the stock goes up. As the price rises, belief follows. The independent thinkers trust their analysis even when prices disagree.
Experience is a handicap in a bull market. “During raging bull markets, knowledge is superfluous and experience is a handicap.” If you’ve seen the blowups, you know how painful it gets. That makes you cautious. But if you’ve never experienced a crash, and every dip just rallied back, you think it will continue forever. Bull markets reward the reckless until they don’t.
Success is something you share. “Success is achieving something that I can share with those that I love and care about—my family and my friends, my employees, and my customers.” Winning alone means nothing.
Short Lessons
- Nothing matters until it does.
- A calculator can give you the answer, but it can’t teach you math.
- Risk is highest when you think it’s priced the lowest.
- Price creates narrative.
- You can’t fight a story with a fact.
- Structure enables strategy. Anyone looks like a genius in a good position, and an idiot in a bad one.
- “Don’t trust management.” Verify.
- Read the footnotes first.
- Experience teaches judgment.
- Positioning beats predicting.
- “The four most dangerous words in investing are: ‘This Time It’s Different.’” – John Templeton
- Focus on what’s the same, not what’s different.
- Cash is optionality.
- Experience is a handicap in a bull market.
- If stock options aren’t an expense, what are they?
- EBITDA is the mother of all disastrous measures.
- The answer is always “it depends.”
- The road to implosion starts with us needing a few cents this quarter to hit a number.
- You learn by being immersed in the details.
- Culture and values aren’t what you read in press releases. Watch what they actually do.
- Stock buybacks mean you’re admitting you have no better investment opportunities in your business.
- AI makes you get to the answer faster, but only if you already know where you want to go.
- Passive investing is momentum investing—you’re buying what’s already biggest.
- You can’t buy good company, you have to earn it.
- Success is achieving something you can share with those you love.
