Bulldozer00's Blog

I recently listened to a fascinating podcast interview of Valve Inc‘s “economist-in-residence“, Yanis Varoufakis. According to Yanis, the company is still organizationally flat after 17 years of existence.

The thought early on at Valve was that the maximum limit to flatness would be around 50-60 people. Above that, in order to keep the wheels from falling off, some form of hierarchy would be required for concerted coordination. However, currently at 300+ employees, Valve has managed to blow through that artificial barrier and remain flat. Mind you, this is not a company solely made up of like-thinking engineers. There are also artists, animators, writers, and accountants running around like a herd of cats inefficiently doing the shit that brings in $1B in revenue each year.

According to Yanis, in order to maintain their egalitarian culture, Valve can’t afford to grow too quickly. That’s because they have to deprogram people who are hired in from hierarchical borgs as former bosses who expect others to work for them, and former workers who expect to be “directed” by a boss. If Valve didn’t do this, their culture would get eaten alive by the pervasive and mighty command-and-control mindset. The spontaneity, creativity, and togetherness that power their revenue machine would be lost forever.

Nevertheless, Valve is pragmatic with respect to hierarchy:

“Valve is not averse to all organizational structure—it crops up in many forms all the time, temporarily. But problems show up when hierarchy or codified divisions of labor either haven’t been created by the group’s members or when those structures persist for long periods of time. We believe those structures inevitably begin to serve their own needs rather than those of Valve’s customers. The hierarchy will begin to reinforce its own structure by hiring people who fit its shape, adding people to fill subordinate support roles. Its members are also incented to engage in rent-seeking behaviors that take advantage of the power structure rather than focusing on simply delivering value to customers.” – The Valve employee handbook

Whether Valve knows it or not, their success is due to their respect of some of Gall’s system laws:

• Systems develop goals of their own as soon as they come into existence – and intra-system goals come first.
• Loose systems last longer and work better. Efficient systems are dangerous to themselves and others.