We tried a number of different models, and the valuations were all over the place before Schmidt and his partner devised a multiple-model combination that produced a value that they trusted. Pairs of students each choose two companies to research, and after weeks of preparation, they bring their recommendation to semi-annual meetings with the group of mentors, who act jointly as an Investment Advisory Committee. The committee chooses the companies to invest in based on the student presentations. But during the year, the students meet and pitch changing the fund s position with individual companies, based on their continuing research. Invariably there are failures, Brakke said, and learning to handle mistakes may be the most important lesson students can learn.
Mistakes are inevitable, and there s an individual psychology involved.
You ve got to understand that and how it affects decisionmaking. You ve also got to recognize the psychology in the market. There s social science here as well as understanding the fundamentals of a company. And that human element may be the most important pedagogical component in the Gopher fund, Brakke said. It s like walking a tightrope.