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11 Rules For Creating Value In the Social Era

January 23, 2013

As an impatient gamer or business executive, one must have faith of almost fanatical proportions to believe that Valve is actually producing desirable products in their posh digs, with mobile desks, and six month job orientations that start with “think about the most valuable thing you could be doing”.  A couple of months ago, I called them on “their shit” and having since grown in knowledge and experience, I find myself excited to announce that I was probably wrong.  In fact, before I even wrote that article, a Valve employee had already explained how Valve works, or rather, what Valve believes.  It is that employee blog entry which I hadn’t read until last week, and the discovery of a new book, that finally has persuaded me that Valve is on to something.  While they may or may not continue to “pump” out sequels to favorite games, they have as good a chance as any company in the world to discover “the next big thing(s)”.

Valve is different

Gabe tells it this way. When he was at Microsoft in the early 90’s, he commissioned a survey of what was actually installed on users’ PCs. The second most widely installed software was Windows.

Number one was Id’s Doom.

The idea that a 10-person company of 20-somethings in Mesquite, Texas, could get its software on more computers than the largest software company in the world told him that something fundamental had changed about the nature of productivity. When he looked into the history of the organization, he found that hierarchical management had been invented for military purposes, where it was perfectly suited to getting 1,000 men to march over a hill to get shot at. When the Industrial Revolution came along, hierarchical management was again a good fit, since the objective was to treat each person as a component, doing exactly the same thing over and over.

The success of Doom made it obvious that this was no longer the case. There was now little value in doing the same thing even twice; almost all the value was in performing a valuable creative act for the first time. Once Doom had been released, any of thousands of programmers and artists could create something similar (and many did), but none of those had anywhere near the same impact. Similarly, if you’re a programmer, you’re probably perfectly capable of writing Facebook or the Google search engine or Twitter or a browser, and you certainly could churn out Tetris or Angry Birds or Words with Friends or Farmville or any of hundreds of enormously successful programs. There’s little value in doing so, though, and that’s the point – in the Internet age, software has close to zero cost of replication and massive network effects, so there’s a positive feedback spiral that means that the first mover dominates.

If most of the value is now in the initial creative act, there’s little benefit to traditional hierarchical organization that’s designed to deliver the same thing over and over, making only incremental changes over time. What matters is being first and bootstrapping your product into a positive feedback spiral with a constant stream of creative innovation. Hierarchical management doesn’t help with that, because it bottlenecks innovation through the people at the top of the hierarchy, and there’s no reason to expect that those people would be particularly creative about coming up with new products that are dramatically different from existing ones – quite the opposite, in fact. So Valve was designed as a company that would attract the sort of people capable of taking the initial creative step, leave them free to do creative work, and make them want to stay. Consequently, Valve has no formal management or hierarchy at all.     Michael Abrash

Now, Nilofer Merchant, in her new e-book 11 Rules For Creating Value In the Social Era, describes the characteristics of what companies need to be to excel in the current “social era”.  One wonders if she has ever visited Valve, or even knows of its existence, because by definition, it is exemplar of her successful social era company (if she hasn’t, I just left a message in her blog to check ’em out):

1. Connections create value
2. Power in community
3. Collaboration>control
4. Celebrate onlyness
5. Allow all talent
6. Consumers become co-creators
7. Mistakes can build trust
8. Learn. Unlearn. (Repeat.)
9. Bank on openness
10. Social purpose unleashes ownership
11. (There are no answers.)

I think I have become a believer.  It is a great little book, by the way.

  1. Average permalink*
    January 23, 2013 6:05 am

    This was brilliant, thank you for sharing Mike.

  2. January 23, 2013 1:40 pm

    Nilofer or Nolifer?? Might want to update the tag.

  3. January 23, 2013 1:46 pm

    Also, still doesn’t explain why the “weekly blog” hasn’t been updated since August. There’s a Greek economy joke in there somewhere, but I’m not going to go there.

  4. January 23, 2013 2:12 pm

    You’re welcome, Doh!, and lol. Cheers!

  5. January 23, 2013 4:18 pm

    Great post. There is a lot that can be said about Valve, but I believe their passions are similar to Apple. They approach design (and their projects) with the intention of creating good products (fun games, gaming marketplaces, cool merchandise). Where as a lot of companies view their endeavors with the intention of making profit as the primary goal. (the profit comes naturally with good products)

  6. January 24, 2013 9:24 pm


    Finished reading Steve Job’s biography, it was amazing. Very honest, and a transparent look behind the relationships he had with businesses and people. Highly suggest it.

    Halfway through Neil Young’s autobiography now, also good stuff. He definitely doesn’t keep the same level of structure. It is essentially parts of his life, opinions and stories mixed together following a semi consistent progression from the early days to present. His voice bleeds off the pages.


  7. January 27, 2013 10:29 pm

    Highly OT. It is amazing the shit people try to pull and get away with.

    Also OT, a very insightful article on game Achievements.

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