Nothing Ventured, Nothing Gamed: Gabe Newell on the Business of Video Games

 

Building a company is similar to designing a video game: Each requires creativity, teamwork, and the freedom to challenge conventional thinking. Gabe Newell knows this from experience.

Newell, co-founder of Valve Corp., discussed the business and politics of making video games with an audience at the LBJ School of Public Affairs on Jan. 30. The one-hour talk touched on topics ranging from the shortcomings of corporate hierarchies to the rise of micro-economies within online gaming communities.

Here are a few highlights, followed by a video of Newell’s talk.

Investing in Talent — At the time Valve Corp. was founded in 1996, many other companies were following recruitment strategies that Newell saw as self-defeating — such as cutting costs by outsourcing jobs to lower-wage countries. He reasoned that because the success of a business is determined by the talent of its employees, recruitment is not a time to cut corners.

“There was a movement toward outsourcing — ‘Where can we find the lowest-cost English language speaker in the world?’ …  To us, that seemed like exactly the opposite of what you should be doing, and what we decided was that we were going to buy the most expensive talent that was out there in the world.”

Advantages of Being a Private Company — Newell said the major downside to running a public company is the pressure to let third parties call the shots in the name of keeping shareholders happy. By staying private, Valve has been able to make decisions internally and deal with problems directly rather than waiting for a board of directors to slow the company’s momentum, Newell said.

“Being a publicly traded company comes with a lot of headaches, and it didn’t really solve any problems for us. … The whole point of being a privately held company is to eliminate another source of noise between consumers and producers of a good.”

Flattening the Hierarchy — Valve has a reputation for following a flat organizational structure, meaning it does not adhere to the traditional corporate hierarchy — no bosses, no titles, no regimented schedule. Newell compared his company’s organizational style to the more collaborative model of exchanging ideas in the online world.

“It seems fairly obvious that the Internet does a better job of organizing a bunch of individuals than General Motors or Sears does. … Corporations [with traditional hierarchies] tend to have pre-Internet ways of organizing production.”

Managing Productivity — Because Valve has no strict hierarchy, it doesn’t have managers in the traditional sense. Rather, projects are managed by different people on a rotating basis, which Newell believes is a way to keep teams focused on the task at hand rather than looking for ways to climb the ladder.

“Management is a skill; it’s not a career path. … It’s about working really hard to make other people more productive.”

 

About The Author

Rob Heidrick

Writer, McCombs School of Business

Born and raised in Austin, writer Rob Heidrick has spent several years as a contributor and editor at local magazines and community newspapers. He...

Comments

#1 You should really check out

You should really check out the Valve Employee Handbook for some extremely interesting insights into management and organizational values of a proven market leader. This expands on a lot of the ideas teased above: http://newcdn.flamehaus.com/Valve_Handbook_LowRes.pdf

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