Additive Adventures in Design & Fabrication

                                     from the desk of Adam B. Levine

February 13, 2013

Gabe Newell is the president and founder of the 4th biggest bandwidth sink on the internet. VALVE isn't your average company, it's built on a Flat business model, features mobile desks and a 50% average annual growth rate over its  17 years in business.

 

As a platform, STEAM has grown from a proprietary digital game distribution application to the worlds largest software store sporting more than 2500 titles and recently opening up to all kinds of applications.  VALVE keeps STEAM relevent by figuring out what's next, all the time.  Gabe Newell recently spoke to the LBJ School for just over an hour on his thoughts on digital distribution, economics, prediction markets, taking the VALVE out of STEAM, and partnering with users and competitors to create and sell innovative content in a way where all participants benefit.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

It sounds utopian, right? Apparently market mechanisms actually do work sometimes.

 

At least on the internet.

 

If you've got a passing interest in intellectual property, 3d printing (he's got a million dollar CNC machine), suprising economics, or future of how business is going to happen on the STEAM part of the internet this talk is worth a watch.

 

I've excerpted out some of my favorite bits but it's better in context.

 

 

 

 

Taking the VALVE out of STEAM 

PUBLISHING AS A NETWORK PROTOCOL

3D PRINTING AS MICROTRANSACTIONS 

 

"This notion of machining is the most real-world concept I could think of, so with 3-d printing now we've gone all the way to microtransactions.  it's even more like videogames now.  On demand you're building custom items on a worldwide basis.  There already are companies that don't bother to sell you the hardware, they sell you the 3-d models that go to your own printer and what you get is their software running on top of that. I think you'll see alot more businesses that look like that.  I think the pre-internet way of is to think we're all going to get the same product.  I think our children are going to say "that is the wierdest i've ever heard of, every one of my products are unique and different" and that transition means the sets of things we're learning in videogames today are probably going to be true of much wider industries tomorrow."

 

 

"Whether we want to or not, we're [valve] sort of becoming a bottleneck.  Now there are reasons why you might want to create an artificial bottleneck, virtual shelf space scarcity, but that's not really what we're trying to do.  Rather than having this curated store, we're going to say "Ok if we're thinking about this correctly, it should be a network APIThere should just be this publishing model, and yes you have to worry about viruses and all that, but anybody should be able to publish anything through steam.  Steam is just a whole bunch of servers and network bandwidth, and if people are interested in consuming the stuff you're putting up than a collective good is going to be there.  So rather than us sitting there between users and creators, we're going to get as far away from that as possible."

"In team fortress two, people make goofy content for all the characters, theres no notion of privleged content.  Right now in steam, the store is privledged content.  A store is a bunch of editorialized perspectives on stuff, and what it should be is user generated content.  That means other companies might create their own stores that are connected to the steam backend but anybody would be able to create a store.  Theres some market based mechanism for determing the price a store gets to impose, so anybody who tries to charge too  much for the goods flowing through that store will be priced out of the market.  But if you have a collection of games that you like to play, and one of your friends decides to buy a game through your trivially created store, than you should get a % of that revenue.  Now most people won't have interesting collections of games, or interesting friends but some people will go to great legnths to create.... Treating a store as another type of experiance.  Some people, like Old Man Murray... Yahtzee would be another person, either who through affiliation or because of their content I would purchase titles through their portal rather than some other way.   So you take two things that you tend to think of as super valuable assets that need to be guarded carefully.  Deciding who gets to get on steam, and how stores are presented consumers.   This is how we rethink them; it's a generalized network service and a store where lots of people add value to that process and through the market mechanism, the audience will reward or not reward people for building entertaining stores. "

"We have lots and lots of data, but analysis of data is hard.  Not in terms of... We want to take all the data and make it as widely available as possible.  If building a hat is valuable, analysing data from steam is going to be alot more valuable.  Anything we do, we try to systemitize and build a framework for our audience to participate.  Anything I do, I do my  job but if I can figure out how to get reddit to do my job, I'll do it alot better."

"I have a million dollar CNC, It's a hobby that got out of control - I thought "Oh good, it's a hobby it'll have nothing to do my my day job" Turns out all the problems with a CNC are software rendering problems... The problems of carving away alluminum and drawing something in freespace are remarkably similar.  The way you keep this thing busy is standardize a bunch of stuff and create a network interface so jobs can flow through this thing, so the hobby winds up looking alot like counterstrike in the ways you'd improve it..."

"Cheap information reduces moral hazard - agency costs and information asymetry - The point I make to people of your generation is "You can't lie to reddit" although it's remarkable how many people try. Reddits ability to detect bullshit is insanely high.  but from an economists perspective, that translates to something really important abotu information asymetry and moral hazard.  People get confused when I start to rag on consoles saying "you have a competitive platform" - The thing I dislike about closed platforms is they  increase the chunk size of competition. which I think is a bad thing  They increase the cost of market entry, so people who have good ideas have higher costs it's alot more expensive for their productivity to be monetized essentially in closed platform spaces.  They also delay standardization. Standardization is a great way of eliminating the ability to rent-seek, which is a presentation on its own.  To us in this room it seems fairly obvious that the Internet does a better job of organizing a bunch of individuals than general motors or sears does, alot of these companies  - things  percieved as being capital assets end up disturbing their decision making so they actually wind up dooming the companies... Corporations look to me like pre-internet ways of organizing production and allocating capital.  when you see the makers, and the emergence of.."

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