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[This article features in Develop magazine issue 116, which begins arriving at game studios and to subscribers from today.]

He is mistaken for a man who went back on his word. Gabe Newell, once upon a time, had become the self-appointed pariah of the PlayStation 3 development community. Times have changed. His mood may have not.

Hardly were his criticisms anything like the vacant rhetoric of Microsoft and Nintendo salesmen. Newell’s objections to coding on PS3 were home truths from a developer’s heart – one who’s worked in technology for 28 years.

His analysis of Sony’s console had reverberated like a meteor crash. It was technical and trenchant, brutal and accurate, hated and loved.

That was before the 2010 E3 Sony Press Conference – the annual pantomime of games industry office politics. Here the world watched as Newell stood centre stage to reveal an extraordinary volte-face; Valve was now internally supporting PlayStation.

Newell said he’d been outspoken. The crowd laughed. He never said he was wrong.

The true story behind Valve’s PS3 turnaround is hard to believe. Yet it offers a rare snapshot of how the company’s most startling turnarounds aren’t always made at the behest of the management.

(Robin Walker, left; Erik Johnson, right)

AMONG EQUALS

“Put it this way,” says Erik Johnson, a longstanding employee at the company, “we didn’t have a PS3 version of our Source Engine because, quite simply, there weren’t calls from within the company from people who were interested in doing a PS3 game.”

Johnson’s career at Valve began with bug-testing the first Half-Life in the late nineties. In the years that followed he rose within the company to become a respected senior project manager, but he takes no pleasure when Develop describes him as ‘one of the management’.

Nobody is a manager at Valve, he says pointedly. When told he must nevertheless carry seniority, his expression hardens.

“Having someone tell someone else what to do would just be completely destructive to Valve. We’re completely allergic to that,” he says.

Johnson’s account is flattering, but thorny. In an industry where romantic visions of developer freedom are largely illusory, it is difficult to hear him insist that no command had been issued from above.

But he goes further; he says that Valve, one of the most successful technology companies in America, doesn’t even have a formal management structure.

Newell’s appearance at E3 suggested otherwise. It felt like a deal in the desert. Sony would get its blockbuster game, Valve in return would cross the threshold and bring its moneymaking digital portal, Steam, to the living room.

But Johnson is adamant. He is sticking to his story: “No one here decided to do anything about PS3 development, and the way we vote to do something about it is to simply start working on it.

“That’s why we’re working on the PS3 now, because we had about four engineers – some of which have worked here for a few years – who were annoyed that we hadn’t developed for that platform, and they were willing to cross over.”

Develop spent a full day at Valve to meet, dine with and interview over a dozen of its talented and inspiring staff. There was a lingering sense of disbelief throughout the occasion.

Each conversation brought light to an extraordinary development culture that is dangerously approaching socialism – one that has helped Steam attract 30 million registered users. One that, until now, has been kept in the dark.

IT’S TIME TO CHOOSE

Newell settles at one end of a stretched meeting room table without a single cup of coffee in sight. To his left, an emergency can of Coke. To his right, a dictaphone.

“When I left Microsoft, I could have retired,” he says, occasionally peering at the door as if waiting for someone.

“If I wanted, I could’ve have sailed around the world on an extended vacation. But I decided I wanted to work. I wanted to work with other really smart, motivated, socially-orientated people to create product that would affect millions of other people. To me, that was the most fun I could have.”

Newell describes himself as a “lottery winner” for joining Microsoft at a time when ‘a computer in every home’ was just a dream. He left the multi-billion dollar firm in 1996 to co-found Valve Software with fellow Microsoft manager Mike Harrington.

Harrington quit the company just four years later to pursue something which, demonstrably, still perplexes Newell. Harrington left to embark on a sailboat tour around the world. Such a decision, even today, seems alien to a caffeine-blooded workaholic like Newell.

“I would’ve sailed half way to Hawaii, cut my wrists and thrown myself to the sharks,” he says, punctuating his point with the click, snap and fizz of an opened Coke can.

Forbes recently branded Newell a likely billionaire. His career began – in what has almost become rite of passage for tech pioneers – with an excuse to quit college. In the 28 years since, he has shown only the rarest flashes of that famous American entrepreneurial instinct. The Harvard-educated man’s passions are, when one reflects on them, startlingly non-commercial.

“Working with everyone here at Valve is what I would do if given the choice to do anything,” he says.

To believe in his vision is to accept that Valve behaves more like a professional mod community than it does a business.

The company’s multi-billion-dollar valuations detract from its central purpose of fostering a four-walled society of dazzlingly gifted and creative individuals.

The kind of aspiring people who everyone wants to work with, who solve problems and share ideas.

For this to work to its fullest potential, Newell says, any strict chain of command must be abolished, and people cannot be forced into the confines of a single duty.

“If you’re trying to invent things, or do novel things, a really strong hierarchical organisation structure can get in the way of that,” he says.

“Right now it feels to us that the games industry is changing faster than it ever has since we started Valve in 1996. As much as we’ve tried to be flexible and adaptable in the past, today it’s more important than ever.

“If you look at how quickly the video game environment is changing, what works really well in one generation becomes pretty irrelevant the next. You go from sprites to polygons. From 256-colour 64-by-64 bitmaps to shaded polygonal models.

“Game studios have to constantly keep reinventing themselves; processes have to change over and over. In this industry, things we were successful at in the past don’t matter a whole lot in predicting how well we are going to do in the future.”

There are holes to be pricked in his theory. For years, other studios with even the most

regimented structures have, by hook or by crook, adapted to industry shifts.

Ubisoft Montreal, with a workforce above one thousand, can today finish a modern triple-A project in around fifteen months.

“The only problem with that is that they’ll be able to knock out the same thing over and over again, and not something that adapts to the changes in the industry,” Newell says.

“What you end up finding is those thousand people are the enemy of your next project. They may be able to bang out your current one, but they will get in the way of the next.”

Leaning back in his chair, he reflects for a brief moment.

“I haven’t seen any evidence that the rate of change in the industry is decreasing. I think it’s increasing.”

If you find yourself in a position where you disagree with Newell, or perhaps wish to cross-examine him, the best advice is to thrash out a sentence like a sledgehammer to a door. He has a towering, composed eloquence of which there is little point trying to match.

So, wot then, Develop asks, happens when Valve has a deadline to hit? How does a studio with no hierarchy meet a product launch date if no one’s there to whip developers into shape?

He responds instantly: “People pick up their shovels and start digging. Since everybody gets used to this idea and no one tells them what to do, everybody gets used to this idea of picking what’s best for them to work on. And it’s amazing how much more productive people can be when they’re setting their own agenda.”

Each time the Valve studio model is challenged, Newell springs back with an answer. It speaks volumes about the gulf of understanding between those on the inside and those looking from afar.

What seems implausible, extraordinary and remarkable is, for Newell and his 260-odd colleagues, as instinctive as muscle memory.

Newell appears to have an answer for everything. Yet there is one question, issued in the guise of a compliment, which catches him in a sudden moment of silence.

LET THEM EAT CAKE

Portal 2 will crown charts, make millions, be talked to death on forums and become eulogised by the game critic noblesse.

By the time you read this, its Metacritic number will have settled (Develop predicts a 91), and another sequel will be prayed for and speculated on.

Even for a Valve product, both commercial and critical success has never been so estimable. Expectations for its predecessor scarcely existed – the first Portal had been billed in the shadow of The Orange Box package it was bundled in.

“A lot of people here at Valve didn’t really take a proper look at the first Portal until it shipped,” says Erik Wolpaw, a man with the kind of sharp meme-cultivating wit that’s become central to the Portal series.

“As we were finishing The Orange Box, a lot of people at the company were heads-down on all the projects that entailed. So for many at Valve, their first-time relationship with Portal was the same as the fans’.

“I think that’s why eventually we got a lot of interest internally about working together on the sequel.”

Wolpaw, 44, broke onto the scene in the late nineties with a games blog described as “unbelievably offensive” and “disproportionately influential” with a “wilful, ironic troglodytism aped by internet idiots for years”. Valve hired him as a writer in 2005.

“People who worked on the original Portal, like me, were just really energised by the response to the game,” he says.

“I imagine you get this now that, at Valve, projects don’t just happen because of some top-down decree, but because there are enough people interested in doing a project and those people, quite simply, start talking to each other.”

Wolpaw had a central role in the development of Portal 2, but he hadn’t been there at its genesis.

Project director Josh Weier gives rare insight into how games are born at Valve.

“It really is an organic process. I mean, coming out of The Orange Box, a few of us still had some ideas about where the game could go,” he says.

“And having finished that massive project with Half-Life 2 Episode 2, Team Fortress 2 and Portal bundled together, it was an ideal time to recharge our batteries and riff a little. I remember there was about four of us, and we were all playing with different gameplay mechanics. So we roped Erik into helping out with it too.”

Weier is a mild-mannered ex-Raven Software developer who refuses to share the secret of looking half his age. He confesses to a touch of inexperience, or perhaps nerves, when tasked with leading a project that had so quickly escalated in importance.

“I do remember meeting up with Gabe at one point for a bit of help and advice, because, you know, this was one of the first big projects that I had to help manage. And he said to me, ‘I could take hold of the handlebars and help you steer but I would probably knock you off your bike much more’.

“So his approach, and the company’s at large, is to help when help is needed but to allow the project drive itself.”

(Josh Weier, left; Erik Wolpaw, right)

Such is the nature of a decentralised studio culture, not everyone internally would have known that Weier and Wolpaw were working on Portal’s sequel. Valve is not a company where projects are announced through delegation.

“We put together a few concepts that were shown to a few people, just one or two internally, and we got feedback," Weier says.

"That’s been the process throughout; make something, get people to evaluate it, edit and carry on.

“With only a few of us working on this, we had built some levels, made some mechanics, created some art assets and had a rough narrative in place. What we do at that stage is called an ‘Overwatch’.”

An Overwatch, named after the half-human gas-masked military force in the Half-Life universe, marks a cornerstone moment in every Valve project.

Senior developers, lead designers and marketing staff are shown a project for the first time. This is where all game ideas at Valve are tested to the limits of their potential and put to the mercy of a committee of experts.

“We had about twelve people look at it,” Weier says, “but it’s still the same process. We get feedback on what they loved and hated, but we also are given ideas as well. It’s a key philosophy at Valve that decisions on a project ultimately have to be made from people working on the game.

“An Overwatch team doesn’t come back and list all the things we need to change, they simply say ‘this is what we think’ and we do what we want with that feedback. Of course usually the feedback you’re getting makes a lot of sense and is coming from people you respect. However, and honestly, we can say we don’t agree with certain points and the company will understand that.”

Wolpaw steps in: “In the case of Portal 2’s first Overwatch, some designers who loved what we were doing jumped on the project.”

When compared to the traditional factory-line model of triple-A games studios, the grass-roots style at Valve is tricky to fathom, even when explained in illuminating detail. It is either a unique utopian model where developers are free to mix and experiment, or the most elaborate lie Develop has ever printed. For those who believe, Portal 2’s imagination and craft will testify to this distinctive game development structure.

CRUNCH TIME

So what question stopped Newell in his tracks? During his first half hour with Develop he made astute arguments whilst joking about recurrent game delays, and everyone dying in the middle of our interview, and the lack of reason to believe a new Half-Life project even exists.

But when Develop tells him he seems happier than ever, Newell falls silent for a few enduring seconds.

“It’s hard for me to look back at how disgruntled I was before Half-Life 2 shipped,” he says.

Someone finally arrives at the door to hand over a tall Starbucks. Newell tests its plastic lid with his hand, nursing the drink while it cools a little.

The man who brought it in, Jay Stelly, was hailed as Valve’s most senior engineer as he backed out the room.

“There are probably at least five publishers Jay could call and get a $30 million project in an hour if he wanted to,” Newell says.

“The reason he’s here isn’t because he has no other option, he’s here because he can work with the best people we have.”

Newell clearly takes pride in the people who helped build his studio empire. You can tell even more so when he, for a fleeting moment, looks back on the bitterly protracted Half-Life 2 project.

That five-year odyssey had awakened Newell of his own responsibility for the wellbeing of his staff. He says he’s now “obsessed” with maintaining the work/life balance of his team.

“In fact that’s why we’re all going to Hawaii in a week.”

After Half-Life 2, a significant change was made to the timelines which Valve put on projects. The company had introduced an episodic model – one which was promised would shorten development cycles and give staff more room to breathe.

Two episodes later, that model has been completely replaced, Newell says. Everything Valve designs and makes today is built under the credo of the connected age – as ‘entertainment as a service’.

Games will no longer be cut into slices, he says, but instead will become their own platforms that Valve can continually evolve and update through Steam.

“We went through the episodes phase, and now we’re going towards shorter and even shorter cycles.

“With episodes, I think we accelerated the model and shortened development cycles with it. If you look at Team Fortress 2, that’s what we now think is the best model for what we’ve been doing. Our updates and release model keeps on getting shorter and shorter.”

By the time you read this, Team Fortress 2 will have passed its two hundredth update on PC. The game was released late in 2007.

“If you talk to some of the Korean developers, they actually make fun of us for taking so long to do updates,” Newell adds.

“They say that, until we release updates every single day, we’re missing a huge amount of value. I think there’s a lot of validity to that perspective.

“Left 4 Dead 2 is starting to approach the TF2 cycle. Portal 2? We’ll have to see how much our customers want us to push in that direction. In general, our approach to our customers is, every day, to ask what we can do for them.”

Robin Walker was one of three pioneers of the original Team Fortress mod for Quake. In March 1998, Valve asked him to build a similar mod for Half-Life. He’s been working at the company ever since.

“The whole idea about constantly updating our games originally came from a mod community ethos,” he says with an Australian accent masked behind years of American dialect.

“The best mods in the early days, like Counter-Strike, Team Fortress, Day of Defeat and Garry’s Mod – these were all things that were constantly updated.

“And when you realise these were the most popular mods and see that they update all the time, you think, yeah, maybe there’s something remarkably valuable in building your product iteratively in front of your own customers.”

With Steam, a digital platform that is arguably Valve’s most significant contribution to the games industry, Walker and his team can engage with customers on a daily basis.

“In fact,” he adds, “we have been able to modify a game before its release based on how people respond to marketing.

“When customers watch our trailers and say ‘that feature looks awesome, I can’t wait to use it to do X, Y and Z’, sometimes we haven’t thought about those ideas at all, so we’ll update a game pre-release to add stuff in that people are excited about. That’s the power of Steam.”

THE VALVE MANIFESTO

As Karl Marx might’ve said, developer freedom is the opium of the masses. Studio labour is often, when the mask is removed, little more than factory work. Talented individuals are systematically pushed behind desks and feed to-do lists.

There is little magic in the air during a six-month crunch period. And the malaise of these conditions is, save for the occasional spouse’s outburst, kept hidden from the public.

There isn’t a conclusion to be drawn from Valve’s distinctive approach to game development – only a dilemma.

To accept it works, to admire its glorious communal and socialist system, is in part an admission that the rigid studio structure should be reassessed.

“I think, especially for other developers, there’s a lot of speculation about Valve actually works,” Walker adds.

“We all know how confusing it must sound to them”.

Newell reveals that it usually takes his newest recruits around half a year to fully adapt to life without the familiar structure of a line manager.

Johnson says it can be a genuinely stressful time at Valve during the first six months – to not be checked on work, to not be given any immediate direction.

For others, like Wolpaw, escaping the old system and joining Valve was a relief from the very start.

“After my first experience working in the industry, I honestly was done with it,” he says.

“I quit the company I was working at. I was pretty much ready to quit the industry, in fact. It wasn’t fun. It was interesting, but I had no real desire to do that again.

“I must admit, I thought working at Valve could be just as bad. But it was like night and day. Working here is nothing like what happened before.”

Valve is, like the industry it stands atop, in a continuous state of flux. The only constant is its people. Their stories, entangled together, define the studio better than any product line ever will.

Valve is not Half-Life, nor Portal, nor Steam.

Valve is Ted Backman. Valve is an experimental psychologist, and Ken Birdwell, Marc Laidlaw, and a community manager, Michael Abrash and Chet Faliszek. Valve is a DigiPen student who shot to fame and quit. A System Shock creator who finally joined.

Valve is Dhabih Eng. It is Jay Stelly, Jeff Ballinger, the team who invented the gravity gun, Aaron Barber, Michael Booth and Doug Lombardi.

It is Jeep Barnett, John Guthrie, the original Team Fortress modders, Gabe Newell, Ariel Diaz, Doug Wood and four PS3 engineers who changed the studio’s path.

Their collective past is a story of studio that shot to the digital heavens like a flowering Roman candle.

The future is their call.