By: Samuel Wagreich
The Valve Corporation’s former economist-in-residence explained how a trendsetter in the video game industry can function without management
Imagine being a part of a company with no bosses, upper-level management, or HR where bonuses, hirings, and firings were all determined by peer consensus. Imagine a company like this going on to become one of the most successful in its space. This isn’t a joke: It’s the real story of video game developer and publisher, Valve Corporation.
In an interview late last month with the Library of Economics and Liberty, Valve’s former economist-in-residence Yanis Varoufakis (that’s right, a video game company with a staff economist) described the flat management model behind the Seattle-based, 400-employee company that could be worth up to $4 billion.
“The most astonishing aspect of life at Valve is that there are no bosses,” said Varoufakis, an economist from the University of Athens with notable publications on the Euro Crisis. “It contains no explicit hierarchy. It’s based on what several members of the company have described to me as the principles of anarcho-syndicalism. Effectively, free association of employees with one another.”
Anarcho-syndicalism is an economic theory with roots in the early 19th century that articulates a form of government in which self-organized cliques of labor work together to directly achieve goals. In essence: socialism minus centralized government plus trade unions.
The way this manifests at Valve is that, after an endogenous process in which a self-organized committee hires a new employee, he or she is free to join and freely move around any of the company’s myriad of projects. Where Google boasts 20 percent free time for its employees, Valve boasts 100 free time.
Crazy or Brilliant?
“The mobility within the corporation is a great asset, and everybody recognizes that,” Varoufakis told the outlet. “Everybody’s desk is on wheels, and there are only two plugs that need to be unplugged in order for an employee to shift from one team to another.”
He added, hirings and firings can both be initiated by something as simple as a conversation between two employees in a hallway. And bonuses, which can sometimes be as large as 10 times an employee’s base pay, are all subject to leaderless peer review.
One could see how this institutional anarchy could lead to abuses, but Varoufakis told the outlet that this hasn’t really manifested as a problem for the company.
“It’s important to understand that such based spontaneous enterprises rely to a large extent on individuals who actually believe in the social norms that govern their existence,” he said. “By the very nature of the beast, you don’t have people in there who try to create a smoke screen around the fact that they are not very good at what they do. All of the people there have been handpicked to be very excellent at what they do.”
Valve was founded in 1996 by former Microsoft software developers Gabe Newell and Mike Harrington. Valve’s biggest moneymaker is actually its Steam platform which functions as the worldwide iTunes of video games. According to Varoufakis, 70 percent of all games are sold through the Steam platform, which has around 55 million users globally. It generates an estimated $1 billion a year.