Gabe Newell, co-founder of Valve Software, left Microsoft to create a company focused on

building products with smart people.

Valve was established as a non-hierarchical company with no job titles or org charts, where
employee time was self-allocated.

Gabe believed that video games had the potential for high returns and wanted to attract talent by
offering autonomy and high pay.

Valve's growth opportunities were limited without accessible hardware, so they considered
creating hardware alongside software.

Valve's organizational structure was based on spontaneous order, allowing employees to choose
projects and form temporary project teams called "cabals."

Leadership roles within cabals were self-imposed and temporary, without formal authority or
status.

Valve encouraged employees to take risks and learn from failures, providing the freedom to
experiment and collect more data.

Hiring the right people was crucial at Valve, and candidates were evaluated for their expertise,
collaboration skills, and ability to run the company.

Valve sought "T-Shaped" employees who were generalists with broad skills and experts in a
specific discipline.

Valve offered attractive perks and tried to engage employees' families to enhance retention.

Valve stack-ranked employees for compensation purposes, but the ranking process was different
from traditional hierarchical structures.

Summary:

Valve released the Steam platform in 2002, initially for delivering patches for their games. It
later expanded to retailing games from other developers and became the dominant digital
distribution platform for PC games.

Valve developed the Source Engine, which allowed for superior graphics and increased
modularity of game development. Games like Half-Life 2, Portal, Left 4 Dead, and Team
Fortress 2 were created using this engine.
Valve responded to the emergence of closed-shop platforms by releasing a PlayStation 3-
compatible version of Steam and adding new functionality like Steam Greenlight and the Steam
Workshop.

Valve started exploring hardware development to address the limitations of the PC ecosystem.
They developed Big Picture, a software adaptation of Steam for TVs, as a first step toward
integrating PCs into the living room and competing with consoles.

Valve formed a hardware cabal to experiment with biometrics, eye tracking, and virtual reality.
They enlisted the help of outside firms for higher-fidelity prototypes and gameplay testing.

Valve faced challenges in entering the hardware field due to its unique structure and preference
for iterative development. They had to consider the feasibility of hardware production, whether
to mass manufacture their own devices or work with partners, and how to approach
manufacturing various components.

Valve grappled with maintaining their organizational structure while participating in hardware
development and sought to find a productive role within the existing hardware ecosystem.

Points:

Valve released Steam in 2002 for delivering patches for their games and later expanded it to
retail other developers' games, becoming the dominant digital distribution platform for PC
games.

The Source Engine developed by Valve allowed for better graphics and increased modularity in
game development.

Valve responded to closed-shop platforms by releasing a PlayStation 3-compatible version of

Steam and adding features like Steam Greenlight and the Steam Workshop.

To address the limitations of the PC ecosystem, Valve started exploring hardware development,
beginning with the development of Big Picture, a software adaptation for TVs.

Valve formed a hardware cabal to experiment with biometrics, eye tracking, and virtual reality,
working with outside firms for prototypes and gameplay testing.

Valve faced challenges in hardware development due to their preference for iterative
development and the need for long lead times and upfront investment in hardware production.

Valve considered whether to mass manufacture their own devices or work with partners, and
whether to adopt the same or different approaches for manufacturing various components.
Valve aimed to find a productive role within the existing hardware ecosystem while maintaining
their unique organizational structure.

Summary of Leading-Edge, Emerging Trends in PC Gaming:

Independent ("Indie") Games: These games are developed outside major companies and have
gained significant success. Minecraft, created by Markus "Notch" Persson, started as a personal
project and became one of the best-selling PC games ever.

Digital (Internet) Distribution: Conventional retail distribution has been replaced by online
purchase and downloading. Platforms like Steam by Valve and GOG ("Good Old Games")
dominate PC gaming, with specialized services catering to specific market niches.

Free-to-Play: Digital distribution allows games to be offered for free, with revenue generated
through paid in-game content. Some pay-to-play games have transitioned to free-to-play models,
with revenue compensating through in-game stores.

Frequent Updates: Digital distribution enables game manufacturers to release early versions of
games and provide updates to the community. This approach fosters closer engagement with
players. For example, Valve has updated Team Fortress approximately 800 times.

Mobile Gaming: The rise of mobile computing, driven by ecosystems like iOS and Android, has
impacted the gaming industry. Mobile platforms have attracted new players and affected PC
sales, potentially influencing Microsoft's position as a platform leader.

New Input Hardware: Oculus VR's announcement of the Oculus Rift in 2012 brought virtual
reality immersion to video games. The development of new input hardware technologies,
alongside the shift to mobile computing, has the potential to reshape the gaming environment,
similar to the impact of the first consoles 40 years ago.