Gabe Newell explains Valve's budgeting process: there is none

"At Valve, we don't have a budgeting process," says company chief Gabe Newell. ""The scarce commodity here is not money -- it's how many hours there are in a day."

Half-Life developer Valve has expanded quite a bit in the 20+ years since it was founded, branching out beyond game development to become a major game marketplace operator, hardware developer, and event producer. 

So what kind of team does it have in place to oversee budgeting across all those different projects? Game devs curious to learn more about how Valve works may appreciate hearing the answer from company chief Gabe Newell, who got into it with Gamasutra and other outlets during a press briefing at Valve HQ last week.

"At Valve, we don't have a budgeting process. There's not like some group of people who go off and say this is how much money we think we're going to make on this title, so that's how many people we're going to assign to work on that project," said Newell. "That's an economy based on that budgetary process. Our economy is based on people's time. That's the scarce commodity."

Newell has mentioned the lack of financial oversight or forecasting at Valve before, but last week he dug into exactly how it works and, based on the way he spoke, it sounds as though it works in part because the amount of funding available to Valve outsizes staff size to the point that work time, not budget, is the major constraint.

"The scarce commodity here is not money -- it's how many hours there are in a day"

"The scarce commodity here is not money -- it's how many hours there are in a day," Newell continued. "So everybody is expected to essentially vote on what is most important to our customers by the projects that they work on. So none of the people you saw today [folks who worked on Steam Support, VR, CS:GO, Team Fortress 2 and Dota 2] are working on those projects because somebody else told them to work on them. Everybody's working on those projects because they thought they could make the largest contributions to our customers by working on them. People move around all the time."

He and fellow Valve staffer Erik Johnson went on to explain that this is basically how Valve got started making its highly popular free-to-play MOBA Dota 2 -- at first most people in the company thought it was a weird project ("giving a game away for free. And there's this economy aspect to it, and user-generated content...seemed kind of wacky", recalled Newell) and interest in working on it was tepid.

"But you know, Adrian Finol, a week after he started, he had the top-down camera working. And suddenly other engineers go oh, okay, I think there are other interesting problems in this space that I can work on," continued Newell. "And then more and more people pile onto the project because they think it's interesting. And I think it's that fact that you're always voting with your time, you're always making a decision about how to spend your work product, that actually makes it easy for people to be fired up. Because they're always working on stuff that to them seems significant. Nobody's working on yet another sequel. 'Oh, it's the fall, we have to come out with, you know, version 17.'"

This way of running a game company seems intriguing, and worth studying if you're a game maker -- but it also seems like something that could only work in very rare instances. Newell admits this, and says he often has a hard time convincing folks at other companies that he's not just making it all up.

"I talk with other people at other companies and they just..." Newell said, raising his hands in the air wordlessly before continuing. "I'll talk to another CEO and they'll say, 'you don't have a budgeting process?' And they'll say, 'you are lying. There's no way a modern company could work like that. Either that or you're incredibly unprofessional, and you guys will eventually implode.' And we're like, no, actually this system works."

It works in part, says Newell, because of Valve's now-infamous decentralized structure. There are no titles, and therefore everyone is accountable to nobody and everybody at the same time. This means there's no established accounting process for either funding or actual work done.

"One of the things that you don't really care about is, you don't care about information flowing to me. Right? If there's information I need, I should go and hunt it down," says Newell. "And that's true for anybody. If Erik [Johnson] needs to know something to get his job done, he goes and gets it. But there's no monthly reports. Nobody says 'I have to update Gabe on the progress of X.' The reality is, they have to update their customers on the progress of X. That's way more important than updating me."

"And I'm a really good information hunter-downer," he added. "If there's something I need to know, I can find out about it. And information is pretty freely available inside of the company. It's just not hard to, if there's something you need to know, to find out about it. But there's no -- you pull your information. There's no push towards you."

It's an intriguing way to work, one you can read more about in our recent conversation with Newell about Valve's plans and expectations for VR in the years ahead.

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