Handicapping the Future: What Horses, Poker, and Macro Legends Taught Me About Bitcoin

How a racetrack lesson, a poker book, and three investing legends has led me to the most mispriced bet of my career.

I was five years old the first time my father took me to Monticello Raceway in upstate New York.

He handed me a racing program and started teaching me how to read it, the past performances, the jockey records, the track conditions. All those numbers and symbols looked like a secret language.

Over the years, we went often. That track became his classroom.

As those of you know who have read my Kentucky Derby analysis over the years, he never told me to “find the winner.” It was always about something else: Is there value in this race?

When I handicapped a race, he would ask me how I came to my assessment. Then he’d show me based on his experience what I’d missed or where I could have dug deeper. He taught me to:

• Spot patterns in the racing form

• Weigh different factors against each other

• Assign odds that reflected reality, not hope

• And most importantly, constantly reassess the odds with new information

Without realizing it, he was training me to put odds on future outcomes in a Bayesian process, a skill I’ve used in every decision I make, especially over 30 years on Wall Street.

Today, that same framework has led me to what I believe is the most mispriced bet I’ve ever encountered: Bitcoin.

When I handicap Bitcoin the way my father taught me to handicap horses, I see something like 3-1 odds on an asset some of the smartest people I know are pricing at 100-1 or even calling it worthless.

That divergence isn’t just large. It’s the kind of setup that only comes along once or twice in a career.

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Learning to Put Odds on the Future

The process my father taught me was rigorous, not casual.

Before I could assign odds to any horse, I had to do the work. I studied the racing form like homework:

• Past performances on different track conditions

• Jockeys who excelled in certain situations

• Class changes, equipment changes, pace scenarios

• Breeding and training patterns

He even taught me to be cynical and not trust humans.

Not every horse was trying as hard as it could. Some were being set up for future races. Some trainers had very specific patterns. All of that had to go into the equation.

Then there was the betting itself.

I learned to watch when the smart money came in, how the odds shifted in the final minutes before post time. But the key rule was this:

I had to write down my odds before I was allowed to look at the tote board.

This wasn’t about guessing. It was about building a defensible case for why a horse had a 20% chance of winning (5-1) versus 10% (10-1) or 5% (20-1).

Only after I’d done that work, only after I could explain my reasoning, would he let as a novice handicapper look at what the crowd was betting.

That’s when the magic happened.

Sometimes my 5-1 horse was 20-1 on the board.

The edge wasn’t in being smarter than everyone. It was understanding that most people creating the odds hadn’t done the work, and that the greatest opportunities came from what they missed.

The other crucial lesson he drilled into me:
If a race was fairly valued, you sat it out.

“There will always be another race.”

Sitting on your hands when you don’t have an edge is one of the hardest disciplines in markets and one many investors never learn.

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Discovering Thinking in Bets

Years later, I discovered that my father had been teaching me a formal discipline that professional poker players and decision theorists had spent decades refining.

Annie Duke’s Thinking in Bets gave me the intellectual scaffolding for what I’d learned at the track.

Her core insight is simple but profound:
All decisions are bets on an uncertain future, and the quality of a decision must be judged separately from its outcome.

You can make a brilliant decision and still lose. The 5-1 horse loses 80% of the time even when properly valued.

What matters is:

• Whether your process was sound

• Whether your odds were well-reasoned

• Whether you had an edge when you placed the bet

A few years ago, I sat down with Annie and told her how her book mirrored what my father taught me at the track. I’d always known it helped me in markets, but it has also shaped how I think about health and happiness.

We spent more time talking about her background in psychology than about poker or the book itself, because it’s all connected. The framework isn’t just about poker or markets. It’s about how we make decisions under uncertainty in every domain.

(Separately for those interested in the pursuit of health and happiness, I’ll be publishing a Substack on how this mindset helped me radically improve my HRV over the last six years and why I think HRV is one of the best real-time measures we have for decision quality under stress and for true happiness.)

But the core lesson is the same: we live in a world of incomplete information. The discipline of thinking probabilistically, and separating process from outcome, is what allows us to improve over time.

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Munger: Markets as Racetracks

Charlie Munger once observed that the stock market is nothing more than a pari-mutuel betting system.

That line ties everything together.

In a pari-mutuel system, prices aren’t set by some objective notion of intrinsic value. They’re set by the collective bets of all participants.

The odds on the tote board don’t tell you what a horse is “worth.” They tell you how much money has been wagered on each horse relative to the total pool.

Markets work the same way.

Stock prices, bond yields, Bitcoin, none of these are determined by TV pundits or social media narratives. They’re determined by where capital is actually allocated.

When I look at Bitcoin through this lens, the real “odds” aren’t what a few wealthy people say about it on CNBC. The real odds show up in the relative size of the pools:

• Bitcoin vs. fiat currency assets

• Bitcoin vs. gold

• Bitcoin vs. total global household wealth

Those ratios and the relative performance trends tell you what the collective bettors actually think, regardless of public pronouncements.

And here’s the fascinating part:

When someone tells me Bitcoin is worthless, they’re not entirely wrong from a pari-mutuel perspective.

Despite its outperformance, user growth, and a decade of monetary experimentation and currency debasement, Bitcoin is still small. The pool of capital allocated to it is tiny relative to traditional stores of value.

In pari-mutuel terms, the crowd has spoken: they have barely placed any bets.

That’s where my handicapping starts.

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Jones, Druckenmiller, and the Power of Positioning

Two of the greatest macro traders in history, Paul Tudor Jones and Stan Druckenmiller, built careers around a principle most investors miss:

Positioning is often more important than fundamentals.

Jones has said, “The crowd is always late.” Druckenmiller has been even sharper:
“Valuation tells you nothing about timing. Positioning tells you everything about risk.”

Once everyone is on the same side of a trade, the marginal buyer disappears. Markets move not on opinions, but on forced buying and selling.

That folds back into Munger’s pari-mutuel insight. What matters isn’t just the size of the pool, but:

• Who is placing the bets

• Who is sitting out entirely

When I look at Bitcoin through this lens, something remarkable appears.

The wealthiest people in the fiat system, the ones who control the most capital, largely don’t like Bitcoin.

The demographics are clear:

• The older you are, the less likely you are to own it.

• The more educated you are in traditional finance, the more likely you are to call it a scam.

• The wealthier you are, the more you have to lose in believing

I’ve learned to avoid Bitcoin at Wall Street dinners for this reason. It gets treated like politics or religion.

But here’s what Jones and Druckenmiller have taught us:

You don’t need Bitcoin’s future to be certain.

You just need to recognize that extreme under-positioning among the world’s capital owners creates an asymmetry they’ve spent their careers exploiting.

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Handicapping Bitcoin Like a Race

So how do I handicap Bitcoin?

I start the way my father taught me: do the work, independent of the board.

Bitcoin was born during the acceleration of exponential technology, from the smartphone to modern machine learning. It emerged from the Global Financial Crisis out of distrust in governments and centralized control.

Since then:

• Government debt has exploded.

• Traditional “fixes” to the system have been exhausted.

• The likely path forward depends heavily on innovation, especially AI.

I see AI as an accelerating deflationary force that paradoxically increases pressure for governments to spend more and debase more, particularly in a global AI race with China.

We’re heading toward abundance, but that path will disrupt almost every large institution.

The companies built on code, with all the current power and profits, are already being forced to act like governments:

• Printing “money” in the form of massive data-center capex

• Taking on more debt

• Front-loading spending for future dominance

• Bears focus on a bubble, I focus on desperation by the wealthy

Eventually, AI makes that spending deflationary too, compressing margins and forcing a massive redistribution.

In that world, the financial guardrails need digital money that moves at the speed of AI agents. That’s where network effects matter.

But Bitcoin is not just an innovation anymore. It’s become a belief system.

Innovations can be disrupted by better innovations. Belief systems operate differently. Once they reach critical mass, they behave more like religions or social movements than like products.

When I assign odds to the different paths ahead, I get something like 3-1 or 5-1 in terms of risk-reward. This includes quantum risks, government support reversals and a new competitor in crypto dominance belief.

Then I look at the board.

Not the Bitcoin price itself, but the positioning of the people I know best: wealthy, educated allocators who have spent decades successfully compounding capital.

Most of them are still pricing Bitcoin at 100-1 or worse. Many say “worthless.” And their portfolios reflect that conviction: they own none, or close to none.

That gap between my odds and their odds is enormous.

In Druckenmiller’s framework, this is a good idea with no positioning, which is precisely when you should be most interested.

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Sizing the Bet (Without Blowing Up)

Even with favorable odds and light positioning, this is not a call to be reckless.

My father never let me put my whole bankroll on the 20-1 horse. The same principle applies here.

Druckenmiller has a simple rule of thumb:

Good idea + no positioning = big
But “big” is always relative to conviction and risk capacity.

For most people, that “capacity” is shaped by two things that almost never get discussed in Bitcoin conversations:

• Your age and time horizon

• Your future spending needs and obligations

If you’re young, with decades of human capital ahead of you, your ability to ride out volatility is very different from someone in their 70s drawing down a portfolio for retirement. A 50% drawdown at 30 is an education. The same drawdown at 70 can be a crisis.

So I think about Bitcoin sizing on a sliding scale:

• Longer time horizon, more future earnings, fewer near-term liabilities → you can justify a higher allocation.

• Shorter horizon, fixed income, real near-term obligations (kids in college, healthcare, retirement withdrawals) → you size more conservatively.

We’re already seeing the industry inch toward a new normal. Firms like BlackRock and major banks now openly suggest that up to around 3–5% of a diversified portfolio can be allocated to Bitcoin or digital assets. I don’t think that’s a number anyone should blindly copy but it’s a useful reference point. It tells you the conversation has moved from “0% forever” to “what’s the right slice?”

My view is simple:

Everyone needs to do the work and arrive at their own sizing.

But I also don’t think those institutional “suggested ranges” will stay static. As the years pass, and as AI’s exponential disruption makes it harder to predict traditional cash flows even three years out, asset allocators will be forced to search for growth in a world where business models are being continuously rewritten by algorithms.

That’s where Bitcoin becomes interesting not just as “digital gold,” but as something closer to a growth belief moat rather than a competitive growth moat.

• A competitive growth moat is built on code, products, and business models that can be disrupted by better code, better products, and new entrants. In an AI world, those moats erode faster.

• A belief growth moat is built on a shared narrative that hardens over time, a collective conviction about what a monetary asset represents in a world of debasement and technological acceleration.

As AI accelerates and makes it harder to pick the next great software or platform winner, I expect more asset allocators to shift a slice of their “growth bucket” into assets whose edge comes from network effects and belief, not from a fragile competitive advantage in an industry being eaten by AI. AI moves at a exponential pace which is why the time of an innovation moat shrinks. Bitcoin’s belief moat has a time defense. It strengthens the more AI speeds up like a hurricane over warm water. It is the purest AI trade.

So, no single number fits everyone. But the framework does:

• Start small enough that a 50–80% drawdown doesn’t break your future.

• Size it relative to your age, horizon, and real-world needs.

• Recognize that, over time, the “acceptable” Bitcoin weight in institutional portfolios is likely to drift higher as AI makes traditional growth harder to handicap and as Bitcoin’s belief moat deepens.

You don’t bet the house on a 3-1 edge. But you also don’t treat a 3-1 edge as a $5 flyer.

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What Endures, With or Without Bitcoin

When I think back to those afternoons at Monticello, I don’t think about specific races or specific horses.

I think about the framework.

My father wasn’t teaching me to pick winners. He was teaching me a way of thinking that could compound over decades:

• Do the work before you look at the odds.

• Build independent probability assessments rather than copying the crowd.

• Watch positioning and flows, not just narratives and headlines.

• Sit out when you don’t have edge.

• Bet bigger when your work diverges sharply from consensus and positioning is light.

The track taught me to handicap. Annie Duke taught me to think in bets and separate process from outcome. Munger taught me that markets are pari-mutuel systems. Jones and Druckenmiller taught me that positioning can matter more than valuation.

Through that lens, Bitcoin today looks like my father’s 20-1 horse that should be 3-1 with the added twist that almost nobody with serious capital is even at the window.

My father used to say that not betting when you don’t have edge is as important as betting big when you do.

Right now, as I handicap it, Bitcoin is one of those rare moments when the work, the odds, and the positioning all align.

The crowd will come eventually. They always do.

By then, the odds will be very different.