Gabe Newell Teaches Corporate Structure to Texans

Gabe Newell Teaches Corporate Structure to Texans

Valve's founder hosted an hour-long talk at the University of Texas; what secrets did he reveal?

Gabe Newell, the benevolent genie who pretty much gives Valve the gift of life, gave a talk to University of Texas students, discussing pretty much everything under the sun. Including, among many other things, how the internet will flatten corporate structures across the board.

"It seems fairly obvious that the Internet does a better job of organizing a bunch of individuals than General Motors or Sears does," said Newell. "Corporations [with hierarchies] tend to be pre-internet ways of organizing production." Meanwhile Valve, which famously has as little structure as it can get away with, does just fine without bosses, titles and chains of command. Newell hopes other companies will eventually embrace a model not unlike Valve's own.

Is that all he said? Lord no; the talk was an hour long, after all, and if you have the time, it's well worth watching, particularly if you have any interest in the early development of Valve. Why shouldn't companies outsource? How do you attract and retain the most highly productive staff? Why won't Valve sell stock in itself? How important are quantitative future predictions? Can free-to-play work? How aggressive should your hire/fire strategy be? Just what is "beaten wife syndrome"? Newell knows, and will tell you.

"I think the pre-internet way of communicating to users," Newell concludes, "the one-size-fits-all [philosophy] ... our children are going to say 'that is the weirdest thing I've ever heard of' ... the sets of lessons we're learning today in the videogame space are going to be true of a much wider range of industries tomorrow."

Source: PCGamesN

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'Now kids, here's what you do if you want to make a lot of money...'

'Hats!'

'All the hats!'

'Also, never release Half Life 3, because hats ain't gonna sell themselves.'

Daystar Clarion:
'Now kids, here's what you do if you want to make a lot of money...'

'Hats!'

'All the hats!'

'Also, never release Half Life 3, because hats ain't gonna sell themselves.'

I just thought of something. What if he made a Half-Life 3 hat?

"I just let people do what they do best" The only reason it took an hour to say is because he hid the message in a Valve puzzle.

Daystar Clarion:
'Also, never release Half Life 3, because hats ain't gonna sell themselves.'

Because some men aren't looking for anything logical, like money. They can't be bought, bullied, reasoned, or negotiated with. Some men just want to watch the Windows 8 burn.

Irridium:
I just thought of something. What if he made a Half-Life 3 hat?

What if he made the Steam Box a hat? O.O

ok, dint watch hte video since im not eager to watch/listen to an hour long lecture about business structure but im sure €A can learn something from it as well. unless they still insist that valve is bad for the industry for selling games for 75% off.

You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve. Its easy to manage 400 people under the direct eye of the boss. Its not humanly possible for 1 person to have the same level of involvement with 1000000 people. Unless Sauron takes up the job of being CEO (I have suspicions about Walmart) things are not going to change radically.

albino boo:
You can't manage the 300000 employes of Sears and the 200000 employes the same way you manage the 400 of valve.

Maybe not, but it doesn't require a strict hierarchy either. For instance you can leave the local management of a let's say 'Valve sized unit' within the group to do their own thing. Newell is correct that strict hierarchy slows down organisations and makes them less efficient.

Then again, he hardly invented that. Non-hierarchical management has been gaining popularity for years.

Oh, man, that beard. I love that beard.

Blablahb:

albino boo:
You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve.

Maybe not, but it doesn't require a strict hierarchy either. For instance you can leave the local management of a let's say 'Valve sized unit' within the group to do their own thing. Newell is correct that strict hierarchy slows down organisations and makes them less efficient.

Then again, he hardly invented that. Non-hierarchical management has been gaining popularity for years.

GM and Sears rely on the economies of scale. The whole point of them is the centralized barging power of buying 10000s of units and the use of just in time supply chain management, forcing the supplier to carry the cost of stock. Non-hierarchical management only really works businesses with small numbers of employees or in the service sector where scale ins't an advantage in the same way.

in addition, the whole thing about not having hard deadlines only really works when you have stuff like hats and steam to give you large piles of cash to screw around with when your ass isn't constantly on the line

weirdguy:
in addition, the whole thing about not having hard deadlines only really works when you have stuff like hats and steam to give you large piles of cash to screw around with when your ass isn't constantly on the line

Well, that's something I hoped large companies would have figured out by now. Spreading assets through smaller projects should be a reasonable option to make riskier titles more viable.
The current trend of sitting all your capital on massive blobs of money such as Call of Duty or Assassin's Creed invariably makes you a hostage of those projects and, even though those IP are almost guaranteed to turn profit, all it takes for your money to be washed away is one little screw up in one of their iterations.

mateushac:

weirdguy:
in addition, the whole thing about not having hard deadlines only really works when you have stuff like hats and steam to give you large piles of cash to screw around with when your ass isn't constantly on the line

Well, that's something I hoped large companies would have figured out by now. Spreading assets through smaller projects should be a reasonable option to make riskier titles more viable.
The current trend of sitting all your capital on massive blobs of money such as Call of Duty or Assassin's Creed invariably makes you a hostage of those projects and, even though those IP are almost guaranteed to turn profit, all it takes for your money to be washed away is one little screw up in one of their iterations.

at the same time, letting those projects sit for a long time might rob them of the kind of urgency that creates fresh things, so realistically, this would only be good if the project in question was something on an epic scale where the people who are handling it need time to finetune things to the point where it becomes obsessive, but in an appreciable way

weirdguy:

mateushac:

weirdguy:
snip

snip

at the same time, letting those projects sit for a long time might rob them of the kind of urgency that creates fresh things, so realistically, this would only be good if the project in question was something on an epic scale where the people who are handling it need time to finetune things to the point where it becomes obsessive, but in an appreciable way

I completely agree with you. What I meant was that if they have smaller chunks of money flowing all the time, eventually waiting a little bit more for one of the projects to come to a more polished state, with more agregate value, becomes much more affordable.

albino boo:
You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve. Its easy to manage 400 people under the direct eye of the boss. Its not humanly possible for 1 person to have the same level of involvement with 1000000 people. Unless Sauron takes up the job of being CEO (I have suspicions about Walmart) things are not going to change radically.

Couldn't have said it better myself.

There's also the fact that valve take a while to develop games on their own, and have a digital distribution platform to ship so they can mitigate any losses as advertising expenses for said platform. Half-Life 2 almost never made it out the door with this 'philosophy', and the majority of games they've made lately are mod releases as they're taking so long with Half-Life 3 (which they can do because hey Steam funds the company with billions in revenue with an almost negligible gross profit margin).

albino boo:
You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve. Its easy to manage 400 people under the direct eye of the boss. Its not humanly possible for 1 person to have the same level of involvement with 1000000 people. Unless Sauron takes up the job of being CEO (I have suspicions about Walmart) things are not going to change radically.

And that is why you have group management model. you have groups managing groups and eachother. and it actually works in real life too.

this is one of thos videos that "Watch later" feature was mde for (at work atm). definatelly going to see this.

There's also the fact that valve take a while to develop games on their own, and have a digital distribution platform to ship so they can mitigate any losses as advertising expenses for said platform. Half-Life 2 almost never made it out the door with this 'philosophy', and the majority of games they've made lately are mod releases as they're taking so long with Half-Life 3 (which they can do because hey Steam funds the company with billions in revenue with an almost negligible gross profit margin).

taking long time to develop in order to make an actually good game - fine by me.
all valves games developed inhouse were financial sucess. infact, they still sell well, after many many years.
Team Fortress is such a money cow Valve can get away with anything.
Steam profits help too you know.

id rather they take 5 years and make a GOOD game, then they rush the yearly-sequel and end up like COD.

Strazdas:

albino boo:
You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve. Its easy to manage 400 people under the direct eye of the boss. Its not humanly possible for 1 person to have the same level of involvement with 1000000 people. Unless Sauron takes up the job of being CEO (I have suspicions about Walmart) things are not going to change radically.

And that is why you have group management model. you have groups managing groups and each other. and it actually works in real life too.

this is one of thos videos that "Watch later" feature was made for (at work atm). definitely going to see this.

Someone else has already made that point and I have dealt with that here

albino boo:

Blablahb:

albino boo:
You can't manage the 300000 employees of Sears and the 200000 employees of GM the same way you manage the 400 of valve.

Maybe not, but it doesn't require a strict hierarchy either. For instance you can leave the local management of a let's say 'Valve sized unit' within the group to do their own thing. Newell is correct that strict hierarchy slows down organisations and makes them less efficient.

Then again, he hardly invented that. Non-hierarchical management has been gaining popularity for years.

GM and Sears rely on the economies of scale. The whole point of them is the centralized barging power of buying 10000s of units and the use of just in time supply chain management, forcing the supplier to carry the cost of stock. Non-hierarchical management only really works businesses with small numbers of employees or in the service sector where scale isn't an advantage in the same way.

albino boo:

GM and Sears rely on the economies of scale. The whole point of them is the centralized barging power of buying 10000s of units and the use of just in time supply chain management, forcing the supplier to carry the cost of stock. Non-hierarchical management only really works businesses with small numbers of employees or in the service sector where scale isn't an advantage in the same way.

Scale isnt that big of advantage in real world either. The times of Scale economy philosophy is over. it was proven to be inefficient. Scope economy is what you should go after. Sure, each industry is different, but replying on scale economy solely is stupid and is the reason WE have to pay because THEY dont know how to run business.

Strazdas:

albino boo:

GM and Sears rely on the economies of scale. The whole point of them is the centralized barging power of buying 10000s of units and the use of just in time supply chain management, forcing the supplier to carry the cost of stock. Non-hierarchical management only really works businesses with small numbers of employees or in the service sector where scale isn't an advantage in the same way.

Scale isnt that big of advantage in real world either. The times of Scale economy philosophy is over. it was proven to be inefficient. Scope economy is what you should go after. Sure, each industry is different, but replying on scale economy solely is stupid and is the reason WE have to pay because THEY dont know how to run business.

I'm sorry but scale in not over. The only way the phones, pcs, tablets are affordable is because they are manufactured in the millions. I happen to know that developing the Ipod cost apple about $150 million, the only way you get a profit on that cost is the mass market. Apple may not employ 10000s people themselves but the people who actually make the Ipad, Iphone and Ipod do. Without the platforms to use digital media being affordable steam has no market.

albino boo:

Strazdas:

albino boo:

GM and Sears rely on the economies of scale. The whole point of them is the centralized barging power of buying 10000s of units and the use of just in time supply chain management, forcing the supplier to carry the cost of stock. Non-hierarchical management only really works businesses with small numbers of employees or in the service sector where scale isn't an advantage in the same way.

Scale isnt that big of advantage in real world either. The times of Scale economy philosophy is over. it was proven to be inefficient. Scope economy is what you should go after. Sure, each industry is different, but replying on scale economy solely is stupid and is the reason WE have to pay because THEY dont know how to run business.

I'm sorry but scale in not over. The only way the phones, pcs, tablets are affordable is because they are manufactured in the millions. I happen to know that developing the Ipod cost apple about $150 million, the only way you get a profit on that cost is the mass market. Apple may not employ 10000s people themselves but the people who actually make the Ipad, Iphone and Ipod do. Without the platforms to use digital media being affordable steam has no market.

Scale does not mean "we have to sell many to afford good developement". it means "We must manufacture many to become competetive in market" and thats not true. what you need to be competetive is superior, unique product. such product cost apple 150 millions to develop, and now they have a product which is unique, and therefore that gives them market advantage. the amount of ipads manufactured would not matter at all if they had no product to sell, so scope wins over scale.

 

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