Written by: Jordi Visser
Translated by: Luffy, Foresight News
When I was five years old, my father took me to the Monticello Racetrack in upstate New York for the first time.
He handed me a racing guide and began teaching me how to interpret the information: past performance, jockey records, track conditions. Those numbers and symbols were like a mysterious language to me.
For years after, we often went there. That racetrack became his "classroom." He never asked me to "pick the winner," but always guided me to focus on something else: Is there betting value in this race?
Every time I finished predicting the odds for a race, he would press me on the basis for my assessment. Then, using his experience, he would point out information I missed or dimensions I should have explored further. He taught me:
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How to identify patterns in racehorse performance
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How to weigh the importance of different influencing factors
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How to give realistic odds rather than ones based on imagination
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Most importantly, how to continuously reassess odds based on new information
He inadvertently trained me to use Bayesian methods to predict the probability of future outcomes. I have used this skill in every decision in my life, especially during my 30+ years on Wall Street.
Now, this analytical framework has led me to the most mispriced bet of my career: bitcoin.
When I analyze bitcoin using the horse racing odds method my father taught me, I see an asset with 3:1 odds, while many of the smartest people I know assign it 100:1 odds or even consider it worthless.
This valuation gap is not only huge, but also the kind of rare opportunity one seldom encounters in a career.
Learning to Bet on the Future
The method my father taught me is rigorous, not arbitrary. Before setting odds for any horse, I had to do my homework. I treated studying the racing guide as a serious assignment:
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The horse’s past performance under different track conditions
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Jockeys who excel in specific scenarios
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Changes in the horse’s competition level, equipment, and anticipated race pace
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Pedigree and training patterns
He even taught me to remain skeptical and not easily trust human factors. Not every horse gives its all; some are "saving energy" for future races, and some trainers have fixed tactical routines. All these factors must be considered.
Then comes the actual betting phase.
I learned to observe when smart money enters and the fluctuations in odds in the final minutes before the race. But the core rule was only one: I had to write down my predicted odds before looking at the betting display.
This wasn’t about guessing, but about building a logical foundation for my judgment. For example, why should this horse have a 20% chance of winning (5:1 odds), rather than 10% (10:1) or 5% (20:1)? Only after completing this homework and being able to clearly explain my reasoning would he allow me, a novice, to look at the public betting situation.
It was at this point that wonderful opportunities appeared. Sometimes, a horse I predicted at 5:1 odds would actually be listed at 20:1 on the betting screen.
This advantage didn’t come from being smarter than others, but because most people setting odds hadn’t done enough research, and the biggest opportunities lay in their oversights.
He also repeatedly instilled another key principle: If a race’s odds fully reflect its value, just skip the bet. "There will always be another race."
Choosing to stand aside when there’s no edge is one of the hardest disciplines in the market and a lesson many investors never learn.
Thinking in Bets
It was only years later that I realized the method my father taught me was actually a professional methodology that poker players and decision theorists have studied for decades.
Annie Duke’s "Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts" provided the theoretical framework for the lessons I learned at the racetrack. Her core insight is simple yet profound: All decisions are bets on an uncertain future; the quality of the decision must be judged separately from the outcome itself.
You may make an extremely wise decision and still lose. Even if the odds are reasonable, a horse with 5:1 odds still has an 80% chance of losing the race.
What really matters is:
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Whether the decision-making process is rigorous
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Whether the odds are set logically
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Whether you have an edge when placing the bet
A few years ago, I spoke with Annie in person and told her that her book and my father’s racetrack philosophy were perfectly aligned. I always knew this logic helped my investments; it even shaped how I think about health and happiness.
We talked more about her psychology background than about poker or the book itself, because at its core, it’s all connected. This framework isn’t just for poker or investing—it applies to all fields where decisions must be made with incomplete information.
But the core insight is consistent: We live in a world of incomplete information, and learning to make decisions probabilistically—separating the decision process from the outcome—is key to long-term progress.
Munger: The Market Is Like a Racetrack
Charlie Munger once put forward a view that ties all this logic together: The stock market is essentially a pari-mutuel betting system.
In a pari-mutuel system, prices are not determined by some objective intrinsic value, but by the collective betting behavior of all participants. The odds on the betting screen don’t tell you how much a horse is "worth," only the proportion of total bets placed on each horse.
The market works the same way.
Stock prices, bond yields, and bitcoin valuations are not determined by TV commentators or social media narratives, but by the actual flow of capital.
When I look at bitcoin from this perspective, the real odds are never about what a few wealthy people say on CNBC, but are reflected in the relative size of various asset pools:
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Bitcoin versus fiat currencies
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Bitcoin versus gold
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Bitcoin versus total global household wealth
These ratios and relative performance trends reflect the true views of collective bettors, regardless of public statements.
Even more interesting: If someone says bitcoin is worthless, from a pari-mutuel betting perspective, they’re not entirely wrong.
Despite bitcoin’s strong performance, growing user base, and a decade of global monetary experiments and fiat currency devaluation, bitcoin’s scale remains small. Compared to traditional stores of value, the capital allocated to bitcoin is negligible.
In pari-mutuel terms, the public has shown its attitude through action: They’ve barely bet on bitcoin.
And this is exactly where my odds prediction begins.
Jones, Druckenmiller, and the Power of Positioning
The two greatest macro traders in history—Paul Tudor Jones and Stanley Druckenmiller—built their careers on a core principle most investors overlook: Position sizing often matters more than fundamentals.
Jones once said, "The public is always a step behind." Druckenmiller’s view is even sharper: "Valuation can’t tell you when to get in; position sizing tells you everything about risk."
Once everyone is on the same side of a trade, marginal buyers disappear. Market moves are never about opinions, but about passive buying and selling behavior.
This aligns with Munger’s pari-mutuel insight. What really matters is not just the size of the capital pool, but also:
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Who is betting
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Who is on the sidelines
When I analyze bitcoin from this perspective, a noteworthy phenomenon emerges: The wealthiest group in the fiat system—those with the most capital—mostly do not favor bitcoin.
Demographic data clearly shows:
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The older you are, the less likely you are to hold bitcoin
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The more traditional financial education you have, the more likely you are to see bitcoin as a scam
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The more wealth you have, the greater your potential loss from betting on bitcoin
That’s why I never talk about bitcoin at Wall Street dinners—it’s as sensitive as politics or religion.
But the experience of Jones and Druckenmiller tells us: You don’t need to be certain about bitcoin’s future.
You just need to realize that the extremely low position allocation of global capital holders is creating the kind of asymmetric opportunity they’ve exploited throughout their careers.
Predicting Bitcoin Like a Horse Race
So, how do I predict bitcoin’s odds?
I start with the first step my father taught me: Do the homework before looking at market odds.
Bitcoin was born in an era of exponential technological growth, sprouting from the global financial crisis and rooted in distrust of government and centralized control.
Since its inception:
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Government debt has exploded
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Traditional system repair options have been exhausted
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The future path will heavily depend on technological innovation such as artificial intelligence
I believe artificial intelligence is a deflationary force, but paradoxically, it will further force governments to increase spending and accelerate currency devaluation, especially in the context of the global AI race with China.
We are moving toward an era of material abundance, but this path will disrupt almost all large institutions.
Companies built on code and holding current power and wealth are now forced to act like governments:
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"Printing money" in the form of massive data center capital expenditures
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Taking on more debt
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Pre-spending to seize future dominance
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Shorts focus on bubbles; I focus on the despair of the wealthy.
Ultimately, AI will also make such expenditures deflationary, squeezing corporate profits and triggering large-scale wealth redistribution.
In such a world, the financial regulatory framework needs digital currencies that can keep up with the speed of AI agents, and this is where network effects matter.
But bitcoin is no longer just an innovation; it has evolved into a belief system.
Innovation can be disrupted by better innovation, but belief systems operate differently. Once they reach critical mass, they behave more like religions or social movements than ordinary commodities.
When I assign probabilities to bitcoin’s different future paths, its risk-reward ratio is about 3:1 to 5:1, already factoring in risks such as quantum computing threats, government policy shifts, and new competitors in crypto.
Only then do I look at the "betting screen."
What I focus on is not the price of bitcoin itself, but the position allocation of the group I know best—those who hold vast wealth, are well-educated, and have successfully compounded capital for decades.
Most of them still assign bitcoin 100:1 or even lower odds, and many openly say it’s worthless. Their portfolios confirm this view: either no bitcoin allocation at all or extremely low allocation.
The gap between my odds assessment and theirs is enormous.
According to Druckenmiller’s framework, this is exactly a "high-quality asset + extremely low position allocation" combination, and this is precisely the moment to pay attention.
Control Bet Size to Avoid Losing Everything
Even if the odds are favorable and position allocation is extremely low, that doesn’t mean you can act recklessly.
My father never let me bet all my principal on the horse with 20:1 odds, and the same principle applies here.
Druckenmiller has a simple rule of thumb: high-quality asset + extremely low position = increase the bet, but "increase" should always be tied to conviction and risk tolerance.
For most people, this tolerance is determined by two factors rarely discussed in bitcoin conversations:
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Age and investment horizon
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Future spending needs and obligations
If you’re young with decades of human capital ahead, your ability to withstand volatility is completely different from someone in their 70s who needs to draw retirement income from their portfolio. A 50% drawdown at 30 is a learning experience; at 70, it could be a crisis.
Therefore, I believe bitcoin allocation should follow a gradient principle:
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The longer the investment horizon, the higher the future income, and the lower the short-term debt, the higher the reasonable allocation
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The shorter the investment horizon, the more fixed the income, and the more real short-term spending obligations (children’s tuition, medical expenses, retirement withdrawals, etc.), the more conservative the allocation should be
In fact, the industry is gradually moving toward a new normal. Institutions like BlackRock and major banks now openly recommend allocating 3% to 5% of a diversified portfolio to bitcoin or digital assets. I don’t think this number should be blindly copied by everyone, but it’s a useful reference—it shows that the market discussion has shifted from "zero allocation" to "how much to allocate."
My view is clear: Everyone needs to do their own homework and arrive at an allocation that suits them.
But I also believe that the "recommended allocation range" proposed by institutions will not remain static. Over time, the exponential and disruptive development of AI will make it harder to predict traditional cash flows for the next three years, and asset allocators will be forced to seek growth opportunities in a world where business models are continually rewritten by algorithms.
By then, bitcoin’s appeal will go beyond digital gold and become more like a "belief moat" rather than a traditional "competitive growth moat."
A competitive growth moat relies on code, products, and business models, all of which can be easily disrupted by better code, products, and new entrants. In the AI era, the lifespan of such moats will be greatly shortened.
A belief moat, on the other hand, is built on a solidifying collective narrative—a collective belief in the value of a monetary asset in an era of currency devaluation and rapid technological iteration.
As AI accelerates, picking the next top software or platform winner will become increasingly difficult. I expect more asset allocators will shift part of their "growth asset positions" to those with advantages built on network effects and collective belief, rather than those in industries vulnerable to AI disruption. The exponential development of AI is continually shortening the lifespan of innovation moats. But bitcoin’s belief moat has time defensibility—the faster AI develops, the more powerful it becomes, like a hurricane passing over warm water. It is the purest trading asset of the AI era.
Therefore, there is no allocation number suitable for everyone, but the framework is universal:
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Start with a small enough position to ensure that even a 50% to 80% drawdown won’t ruin your future
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Determine position size based on age, investment horizon, and actual needs
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Recognize that as AI makes traditional growth assets harder to predict and bitcoin’s belief moat deepens, the "acceptable allocation ratio" for bitcoin in institutional portfolios will likely rise over time
You wouldn’t bet your entire fortune on a 3:1 odds asset, but you also shouldn’t treat such an opportunity as a $5 side bet.
Timeless Wisdom Beyond Bitcoin
Thinking back to those afternoons at Monticello Racetrack, I can’t remember the specific races or horses, only the analytical framework.
My father never taught me how to pick a winner; he taught me a way of thinking that can compound over decades:
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Do your homework before looking at market odds
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Build an independent probability assessment system rather than blindly following the crowd
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Focus on position allocation and capital flows, not just narratives and headlines
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Stand aside when you have no edge
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When your research conclusions differ greatly from consensus and the asset’s position allocation is extremely low, bet boldly
The racetrack taught me how to predict odds, Annie Duke taught me to make decisions with a betting mindset and separate process from outcome, Munger made me realize the market is a pari-mutuel system, and Jones and Druckenmiller taught me that position sizing can sometimes matter more than valuation.
Through this framework, bitcoin today is like the horse my father described as "should be 3:1 but is listed at 20:1," with the added twist that very few big-money investors are betting on it.
My father often said that not betting when you have no edge is as important as betting big when you do.
At this moment, in my view, bitcoin is at one of those rare points: research conclusions, odds predictions, and position allocation all align perfectly.
The public will eventually enter—they always do. And by then, the odds will be worlds apart.
