Written by: Jordi Visser
Compiled by: Luffy, Foresight News
When I was five years old, my father took me to the Monticello Raceway in upstate New York for the first time.
He handed me a racing form 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 many years after that, we often went there. That racetrack became his "classroom." He never asked me to "pick the winner," but always guided me to focus on another question: Is there betting value in this race?
Whenever I finished assessing the odds for a race, he would question the basis of my evaluation. Then, drawing on his own experience, he would point out information I had missed or dimensions I should have explored more deeply. He taught me:
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To identify patterns from past racing performances
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To weigh the importance of different influencing factors
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To set realistic odds based on facts, not conjecture
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Most importantly, to continuously reassess the odds based on new information
He inadvertently trained me to use Bayesian methods to predict the probability of future outcomes. This is a skill I have used in every decision in my life, especially during my more than 30 years on Wall Street.
Today, this analytical framework has led me to what I believe is the most mispriced bet of my career: Bitcoin.
When I analyzed Bitcoin using the horse racing odds method my father taught me, I saw an asset with 3:1 odds. Yet, many of the smartest people I know assign it 100:1 odds, or even think it's worthless.
This disparity in valuation is not only huge; it's the kind of rare, excellent opportunity one seldom encounters in a career.
Learning to Bet on the Future
The method my father taught me was rigorous, not casual. Before setting odds for any horse, I had to do my homework. I treated researching the racing form as schoolwork:
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The horse's past performance under different track conditions
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Jockeys skilled in specific scenarios
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Changes in the horse's class, equipment, and predictions about the race pace
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Pedigree and training patterns
He even taught me to be skeptical and not to trust human factors easily. Not every horse runs its hardest; some are "saving energy" for future races, some trainers have fixed tactical routines. All these factors had to be considered.
Then came the actual betting.
I learned to watch for when the smart money came in and how the odds fluctuated in the final minutes before the race. But there was only one core rule: I had to write down my predicted odds *before* I could look at the tote board.
This wasn't about guessing; it was about building a defensible logic for my judgment. For example, why this horse should have a 20% chance of winning (corresponding to 5:1 odds), not 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 see what the public was betting.
And it was at this moment that wonderful opportunities emerged. Sometimes a horse I predicted at 5:1 odds would actually be showing 20:1 on the tote board.
This edge didn't come from being smarter than others, but because most people setting the odds simply hadn't done enough research. The biggest opportunities were hidden in their omissions.
He also instilled another key principle: if the odds for a race already fully reflect its value, simply skip the bet. "There will always be another race."
Choosing to stand still when you have no edge is one of the hardest disciplines to master in the market, and a lesson many investors never learn.
Thinking in Bets
Years later, I discovered that the method my father taught me was actually a professional methodology that professional poker players and decision theorists had been studying for decades.
Annie Duke's book, *Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts*, provided a theoretical framework for the experience I gained at the racetrack. Her core insight is simple yet profound: all decisions are bets on an uncertain future; the quality of a decision must be judged separately from the outcome itself.
You can make an extremely wise decision and still lose. Even with fair valuation, that horse with 5:1 odds still has an 80% chance of losing the race.
What truly matters is:
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Whether the decision-making process is rigorous
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Whether the odds are set with sound reasoning
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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 aligned perfectly with the concepts my father taught me at the racetrack. I always knew this logic helped my investing; it even shaped my thinking about health and happiness.
We talked more about her background in psychology than about poker or the book itself, because it's all essentially connected. This framework isn't just for poker or investing; it's for making decisions in all areas where information is incomplete.
But the core revelation is consistent: we live in a world of incomplete information. Learning to make decisions with probabilistic thinking and separating the decision process from the outcome is the key to long-term progress.
Munger: The Market as a Racetrack
Charlie Munger once proposed an idea that ties all the 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 are shaped by the collective betting behavior of all participants. The odds on the tote board don't tell you what a horse is "worth"; they only tell you the proportion of the total betting pool wagered on each horse.
The market operates on the same logic.
Stock prices, bond yields, Bitcoin valuations are not determined by TV commentators or social media narratives, but are defined by the actual flow of capital.
When I look at Bitcoin through this lens, the true odds are never the statements of a few wealthy people on CNBC, but are reflected in the relative sizes of various asset pools:
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Bitcoin vs. fiat currency
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Bitcoin vs. gold
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Bitcoin vs. total global household wealth
These ratios and relative performance trends reflect the true views of the collective bettors, unrelated to public statements.
What's more interesting: if someone says Bitcoin is worthless, from a pari-mutuel perspective, they are not entirely wrong.
Despite Bitcoin's strong performance, growing user base, and a decade of global monetary experimentation and fiat currency devaluation, Bitcoin's size remains small. Compared to traditional stores of value, the amount of capital allocated to Bitcoin is minuscule.
In pari-mutuel terms, the public has already shown their stance through action: they have barely bet on Bitcoin.
And this is the starting point for my odds prediction.
Jones, Druckenmiller, and the Power of Positioning
Two of history's top macro traders — Paul Tudor Jones and Stanley Druckenmiller — have a core principle in their careers that most investors overlook: positioning is often more important than fundamentals.
Jones once said, "The masses are always wrong." Druckenmiller's view is more pointed: "Valuation can't tell you when to get in, but positioning can tell you all about risk."
Once everyone is on the same side of a trade, marginal buyers disappear. Market movements never depend on opinions, but on passive buying and selling behavior.
This aligns with Munger's pari-mutuel insight. What's truly key is not just the size of the capital pool, but also:
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Who is betting
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Who is watching from the sidelines
When I analyze Bitcoin with this perspective, a notable phenomenon emerges: the wealthiest group within the fiat system, those holding the most capital, are largely not optimistic about Bitcoin.
Demographic data clearly shows:
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The older you are, the less likely you are to own 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 the potential loss from betting on Bitcoin
This is why I never discuss 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 positioning of global capital holders towards it is creating the kind of asymmetric opportunity they have always exploited in their careers.
Assessing Bitcoin Like a Racehorse
So, how did I assess Bitcoin's odds?
I started with the first step my father taught me: do your homework first, then look at the market odds.
Bitcoin was born in an era of exponential technological growth. It sprouted from the global financial crisis, rooted in distrust of governments and centralized control.
Since its inception:
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Government debt has exploded
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Traditional system fixes have been exhausted
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The future development path will heavily rely on technological innovations like AI
I believe AI is a deflationary force, but paradoxically, it will further force governments to increase spending and accelerate currency devaluation, especially against the backdrop of the global AI race with China.
We are moving towards an era of material abundance, but this path will disrupt almost all large institutions.
Those companies built on code, 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 expenditures
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Taking on more debt
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Overspending upfront to seize future dominance
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Shorts focus on the bubble; I focus on the desperation of the wealthy.
Ultimately, AI will also make this type of spending deflationary, squeezing corporate profits and triggering massive wealth redistribution.
In such a world, the financial regulatory framework will need digital currencies that can keep up with the speed of AI agents, and this is where network effects become valuable.
But Bitcoin is no longer just an innovation; it has evolved into a belief system.
Innovations can be disrupted by better innovations, but belief systems operate completely differently. Once they reach a critical mass, they behave more like a religion or social movement than a ordinary commodity.
When I assign probabilities to Bitcoin's different future paths, its risk-reward ratio is roughly between 3:1 and 5:1. This already incorporates risk factors like the threat of quantum computing, a shift in government support, and new competitors in the crypto space.
Only then do I look at the "tote board."
I focus not on Bitcoin's price itself, but on the positioning of the people I know best — those asset allocators with significant wealth, good education, and decades of successful capital growth.
Most of them still assign Bitcoin 100:1 odds or worse; many outright call it worthless. Their investment portfolios confirm this view: either no Bitcoin allocation at all, or a very minimal allocation.
The gap between my odds assessment and theirs is enormous.
According to Druckenmiller's framework, this is precisely a combination of a "quality asset + extremely low positioning," and this is the moment most worth paying attention to.
Controlling Bet Size, Avoiding Ruin
Even with favorable odds and extremely low positioning, it doesn't mean acting recklessly.
My father never let me bet my entire bankroll on that 20:1 horse, and the same principle applies here.
Druckenmiller has a simple rule of thumb: Quality asset + Low positioning = Increase the bet, but "increase" must always be tied to conviction strength and risk tolerance.
For most people, this tolerance is determined by two factors rarely mentioned in Bitcoin discussions:
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Age and investment horizon
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Future spending needs and obligations
If you are young with decades of human capital ahead, your ability to handle volatility is completely different from someone in their 70s who needs to draw retirement income from their portfolio. A 50% drawdown at age 30 is a learning experience; the same drawdown at 70 can be a crisis.
Therefore, I believe Bitcoin allocation should follow a gradient:
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Longer investment horizon, more future income, fewer short-term liabilities → Can reasonably increase allocation
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Shorter investment horizon, fixed income, tangible short-term spending obligations (children's tuition, medical expenses, retirement withdrawals, etc.) → Allocation needs to be more conservative
In fact, the industry is gradually moving towards a new normal. Institutions like BlackRock and major banks now publicly suggest allocating 3% to 5% of a diversified portfolio to Bitcoin or digital assets. I don't think this number should be blindly followed by everyone, but it is a useful reference — it shows 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 their own suitable allocation.
But I also believe the "suggested allocation range" proposed by institutions will not remain static. Over time, the exponential disruptive development of AI makes predicting traditional cash flows even three years out more difficult, and asset allocators will be forced to seek growth opportunities in a world where business models are continuously rewritten by algorithms.
At that point, Bitcoin's appeal will extend beyond digital gold to become something akin to a "belief moat," rather than a traditional "competitive growth moat."
Competitive growth moats rely on code, products, and business models, which can easily be disrupted by better code, products, and new entrants. In the AI era, the lifespan of such moats will shorten significantly.
Belief moats, however, are built on continuously solidified collective narratives — the collective belief in the value of a monetary asset in an era of currency devaluation and accelerating technological iteration.
As AI accelerates, the difficulty of picking the next top software or platform winner will increase. I expect more asset allocators to shift part of their "growth asset allocation" towards assets whose advantage is built on network effects and collective belief, rather than industries with advantages vulnerable to AI disruption. The exponential development of AI is constantly compressing the lifespan of innovation moats. Bitcoin's belief moat, however, possesses time defensiveness — the faster AI develops, the stronger it becomes, like a hurricane passing over warm waters. It is the purest AI-era trade.
Therefore, there is no one-size-fits-all allocation number, but the framework is universal:
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The initial position should be small enough to ensure that even a 50% to 80% drawdown does not ruin your future
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Determine the 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 continues to deepen, the "acceptable allocation percentage" for Bitcoin in institutional portfolios will likely gradually increase
You wouldn't bet your entire fortune on a 3:1 bet, but you also shouldn't treat this opportunity like a $5 wager.
Timeless Wisdom Beyond Bitcoin
Thinking back to those afternoons at Monticello Raceway, I don't remember the specific races or horses, only the analytical framework.
My father never taught me how to pick winners; he taught me a way of thinking that could compound over decades:
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Do your homework first, then look at the market odds
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Establish an independent probability assessment system, don't blindly follow the crowd
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Focus on positioning 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 conclusion differs greatly from consensus *and* the asset has extremely low positioning, increase your bet decisively
The racetrack taught me how to predict odds, Annie Duke taught me to think in bets and separate process from outcome, Munger made me understand the market is a pari-mutuel system, and Jones and Druckenmiller taught me that positioning can be more important than valuation.
Looking at current Bitcoin through this framework, it is like the horse my father described as "actually 3-to-1 but priced at 20-to-1." More uniquely, few investors with heavy capital are betting on it.
My father often said that not betting when you have no edge is as important as betting boldly when you do.
Right now, in my view, Bitcoin is in that rare moment: research conclusion, odds assessment, and positioning are perfectly aligned.
The masses will eventually come in; they always do. And by then, the odds will be completely different.
