The Story of Valve Part Two

and they called it Valve Software LLC. At that time, they use their own money to fund this company, and they hired on talent to help them come up with a new type of game, which was a story driven first person shooter. It would take them two years and the result of that work would be the game Half Life.

A couple of years later, one of those two co founders, Might Harrington, would dissolve his partnership, with the other co founder, Gabe Newell, taking on charge of the company as the sole leader as it were, and leaving him a little bit lonely. So. Valve at this point had finished Half Life, which was enjoying critical acclaim as well as healthy sales. Gamers were eating it up. But as I covered in that previous episode, it didn't exactly go smoothly at the time.

The development took a long while. It did, however, help establish Valves methodology for developing games. That is that within the company, employees would form cabals. Now that all sounds rather sinister, doesn't it, But the cabal structure was necessity while working on Half Life, which I should remind you was a project that Valve hit the reset button on when the original work was nearing completion. They were getting close to their original ship date and made the determination

that the game just wasn't working. It wasn't fun. They developed lot of cool technology, but they had not yet figured out how to use it properly to make a really compelling game. So they wanted to actually take all that stuff they learned and turn it into a much better product. First, they thought, well, what we should do is get a game designer, someone who's brilliant in this field, like a leader, who can sweep in and rescue the project.

The way Ken Birdwell put it in a blog post was that the company was looking for a person who would swing in on a on a chord, you know, sword in hand, hair swept with a wind. He or she would pick up all the disparate pieces and development and magically assemble them into the most awesome game ever. But it became clear that this was a pipe dream. There was no hero coming to the rescue. They just they couldn't find the right person who could actually make

this happen. So instead, Valve employees within the company already began to form groups within that organization. They decided, well, we don't really have one person who can lead this project and turn it into something that is really compelling, but we've got a lot of talent here. Maybe we get a group of us, a multidisciplinary group, so people who are specialists in different fields to work together in a collaborative process. We can achieve what one magical superhero

would be able to do. And the members of that group had a really wide range of skills that complemented one another. They would have meetings that contained a lot of brainstorming, and in those meetings the group would do a ton of work. In fact, let me quote Mr Birdwell to give you a clue about how cabals would

actually get stuff done. Quote. The goal of this group was to create a complete document that detailed all the levels and described major monster interactions, special effects, plot devices, and design standards of Cabal was to work out when and how every monster, weapon and n PC was to be introduced, what skills we expected the player to have, and how we were going to teach them those skills

end quote. That's that's a huge burden. You know, you're talking about every element of game design, from the mechanics as in the mechanics within the game itself, not to mention just how do those translate to what the player needs to do in order to pull it off? Like what button do you have to push in order to strafe? What button do you push to interact with your environment? And then all the elements that happen inside the game, all the stuff you encounter, all the things that make

the game what it is. According to Birdwell, this process was intense and exhausting, and it would also include a second stage. Essentially, once the team had enough raw material material to work with, you know, they had brainstorm, they decide, okay, we're gonna have a level. We know that the level is going to culminate with an encounter enter with this particular type of enemy uh that has these weaknesses and nise strengths. But leading up to that, we want them

to have these four or five other experiences. Plus we have to make sure that the player has the opportunity to learn the strategy that will ultimately benefit them in the battle with this big boss at the end of the level. They come up with these various ideas, they would start hashing them out and they would get really detailed.

It wouldn't just be these general rules. It might be much more specific, and they would start to take all of these different disparate pieces and shape it into a narrative. They decided that the stuff that happened within the game should be location based rather than time based. So in other words, you wouldn't need to worry about missing out on a really cool story development because you were lollygagging

two rooms back for too long. So you were, you know, checking out this one corner because you were convinced that that corner was going to lead you to a super secret special area. And it turns out no, it's just a corner. So you go on with your merry little life. But you missed all the great stuff because you were too busy with the corner, and the great stuff was on a timer. They did not want that to happen, so instead they decided that once you reach the appropriate

location within any given level. Your arrival is what would trigger whatever the event was supposed to be, and those events could be plot developments. It could be an encounter with a monster. It could be the discovery of a new weapon. It could be uh the interaction with another character. It could be a specific special effect, whatever that might be. Now, occasionally the group would come up with ideas for really cool stuff that didn't necessarily fit in with anything else.

It was kind of just a neat idea all on its own, and sometimes they would use those as transitions between areas. They'd say, well, it doesn't really fit in this level design, and it doesn't really fit in this next level design, but we could have it as something in between those two. Or some times they would just have to toss it out if they couldn't find a way for it to work within the confines of their story.

They also found it helpful to occasionally just put a whole bunch of unrelated ideas into the same area and then try to figure out how they would make them all fit logically. So you might have a couple of monster designs and a new weapon, and maybe a character interaction, and all of these ideas you've had separately, and you thought, well, why don't we just throw them into this one level, see if we can make it make sense from a story aspect, and then that can help lead to some

more creativity. Uh. Sometimes that didn't work. Sometimes they would end up incorporating a lot of ideas, but ultimately they would discover when they were done that whatever it was that launched them down that path was no longer part of the level. So let's say that you have this one monster design you really like, and you have decided that you're going to try and create a level around it. It might turn out that months later you've got a great level, but that monsters nowhere to be found. You

don't even use it, they said. Ultimately they realized, you know, it didn't matter what the the genesis of the idea was so much that the finished idea worked for the game. And once they took that philosophy, they realized that the development process, while very exhausting, worked much much better now. At that time, Birdwell says, cabal sessions would include five or six employees, and not everyone would always have something

to contribute every single day. So if you didn't have five or six, you could end up with a meeting where no one's really talking, nothing's really getting done. So they needed five or six just to kind of cover all the bases. Make sure that even if you're strapped for ideas that week, other people in the group have stuff to contribute, and it may be that three weeks later you're the person who's taking the lead because something someone else has done has sparked an idea in your

head and you're able to run with it. And that's exactly what they wanted. So the cabal group for Half Life consisted of a single writer, a level designer, and animator, and then three engineers. Everyone who was in that cabal had previously worked on a product somewhere that actually shipped, which was a pre requirement of that first cabal. They wanted the group to only include people who had worked

on products that actually saw the light of day. Now, that didn't mean that they had done that in game development necessarily. They might have developed software they got published somewhere else that wasn't even a game, but at least they had worked on something that published. The group would meet four days a week, and the meetings would last six hours a day, and this went on for five

months when they first started the cabal system. After that, they would occasionally meet as the game continued to develop until it was finally shipped, but they weren't meeting every single day or even four days a week. Once they got through that initial brainstorming process, and according to Birdwell, the experience was so draining that you couldn't expect the people who were in the cabal to do any other

work because it was just so consuming. The most you might manage is some light housekeeping stuff like answering emails. That's about as strenuous as you could get once you went through this system. Now, at the end of this process, the cabal produced a two hundred page document about Half Life. This became the guiding design behind the game. More importantly, this style of collaboration became synonymous with valves operating procedure.

Cabals became the model for game development and really all projects with involved, not just game development, software development tools, patches, all sorts of stuff. All of it is centered around this concept of cabals. And it all started with Half Life. Once there was enough of Half Life to actually test Sierra because remember Sierra was the publisher for Half Life pulled in play testers to try stuff out. During those sessions that people responsible for that level would observe the

players and they would take notes. So that had to be a harrowing experience to have designed something and now you're watching a stranger play through it for the first time, and you're thinking, oh, they're gonna love that thing that's around the corner, and then it turns out they never even went around the corner. That's gotta be a sobering experience.

It's also how they found out if a puzzle they designed was too easy and people just breathe through it, or maybe they found out it was impossible that without the fore knowledge that there was a puzzle and how the puzzle worked, there's no real way to work it out. And it also just showed them if there were any elements that just weren't fun to play, and that would allow them to go back and refine their design for

the next build of the game. Now, after Half Life was done, the cabal process continued, but it did change a bit. Birdwell says that for Team Fortress too, For example, cabals tended to include between eight and twelve people, and the meetings weren't nearly as long they were a couple

of hours, not six hours a day. But the collaborative process became an important element for Valve, so much so that, according to the two thousand twelve employee Handbook, which by the way, you can actually find online and it is a pretty entertaining read, at that point, all desks at Valve were mounted on wheels that allowed him to move

around the office. Even when the office got large enough to encompass multiple floors, there were freight elevators where you could wheel your desk and take it to a different floor. This would make it easier to form teams within Valve and work close by, you know, shoulder to shoulder with your teammates for as long as whatever the team project was took, and then once it was over, you could actually wheel your desk somewhere else and join a different

team or form a team yourself. In fact, rather than just jumped down the chronology, it might be a good time to talk about the actual corporate culture of Valve, at least circa two thousand twelve, because that was the latest employee handbook I have at my disposal. It may be that things have changed since then, but the two thousand twelve valve. I imagine it was not too different from what today's valve is, But this gives you a way of imagining how things work inside the company itself.

The two thousand twelve handbook refers to valves organizational structure as flat land, so they don't have a strict hierarchy of positions in which directors report to a president and then manager's report to the directors and employees report to managers or they're overseen by managers. Instead, it's at least, in theory, a flat line across the company, with all

employees being equal. The handbook does say that Gabe Newell is the founder slash president, but he it also says that he is not quote your manager in the quote, so every employee in theory at least has the power to green light and ship products. Uh. Of course, the manual also says that out of all the people who are not your manager, Gabe Newell is the most not your manager, and it almost sounds like a double speak sort of thing, like he's not your manager, but he

runs the company. M of course, that could just be my interpretation of the manual. So how does this corporate culture work in practice. Well. I have not been to Valve personally, and they are traditionally a pretty secretive company. They've had a couple of different UH folks visit and document their visits to the office, but it tends to be really controlled and usually there are multiple floors that people have no access to because there are top secret

projects going on in those floors. But it sounds to me like the corporate culture Valve would be a rewarding but extremely challenging environment for a lot of people because instead of taking direction, instead of having a boss who says, this is what your job is, these are your responsibilities. Here is how we expect you to perform your duties,

and we will evaluate you based on that criteria. Employees at Valve are expected to seek out projects that appeal to them and then essentially glam onto them and contribute. So you would look around at your fellow employees and say, hey, what are you working on? Oh that sounds cool, I would like to work on that too. I'm part of your team now, Or you could say what are you working on? What are you working on? You know what?

It sounds to me like no one is working on this amazing idea I have so I am going to launch this as a project, and I'm going to start recruiting people to work on my own team so that we can get this done. Uh, these projects can be just about anything. There seems to be a huge number of options to choose from, and for some people that could be a little bit intimidating. I know for me

it would be extremely intimidating. I mean, if you just take me to the cheesecake factory and watches I panic while flipping through that fifty page menu, you'd understand, like sometimes having unlimited options is more restrictive than it is freeing. There's actually a whole paradox about that. But if you have the aptitude, if you're the person who can thrive in that environment, you can, in theory anyway, work on

any project inside Valve. The philosophy of the company is that if you're good enough to be hired, you're already on the right path. And in fact, they are very careful in the hiring process. They don't want to hire someone who is either just a generalist who is pretty good at lots of stuff but doesn't have a deep expertise in anything, Nor do they want to get someone who has an exclusive expertise in one subject and no

interest or affinity for any other subject. They want to find people who have a broad range of skills and a narrow range of deep expertise. That's the sweet spot for Valve employees. And honestly, they say that they want people who can make senior level decisions because in a flat hierarchy, where you don't have a boss to report to, you are the one making these senior decisions. You might end up contributing to one project, but you could end

up effectively leading another one. Now, within work groups, some hierarchies can and do emerge, but they are informal. They're not codified in the organizational chart of Valve. Typically, someone on a project will end up being a team lead, though that person is more often a repository of all the information about the project instead of being like a

traditional manager. And while a group is working toward a goal, certain roles and relationships might form because just on necessity to make sure you get stuff done uh, and that might look more like a traditional company's structure, at least temporarily within the confines of that project. But all of that will fade away once the goal is complete or

the project is concluded now. According to the handbook, the company also wanted to avoid the problems of crunch time because they had gone through that a couple of times by the by the year two thousand twelve when this handbook was written. Crunch is when you're coming up against a deadline and you need to make the mountain of work between you and the deadline go away. So typically this means working very long hours with an increased amount

of stress. And if you've ever done a crash study course before a test, you know you're just cramming before a test. You get an idea of what this is like, only crunch is way way worse. Valves Handbook says that employee work life balance is really important and that for that reason you should only work normal office hours, and employees also have no holiday or sick leave policies, meaning that you can take as much time as you need at least in theory, as long as you're getting your

work done. Whether this actually happens at the company or not, I can't say, but I can imagine why it was added in, because, after all, one of the co founders a Valve left after half life shipped and part of the reason for his leaving was because he had poured so much of his time and energy and effort into getting the game out the door that it had had a real impact on his life at that point, and

no one wants to drive their talent away. So they made a formal policy saying, you know, you should just be working your office hours, and anything that's causing you to work longer hours than normal, maybe we need to take a look at it and make sure that you know the priorities are in the right spot so that you can actually have your personal time. Again, I don't know if that's how it actually shakes out in the company. It's one thing to say it in the employee handbook.

It's another thing to see it play out in the actual day to day office life. But since I don't know anyone at Valve, I can't really get insider information

on that. If you do work for Valve or have worked for Valve, and you have some insight into this and whether or not that in fact is the way it works within the company, or maybe it's the ideal, but that's not how things turn out, let me know, because I can tell you as a creative person on my end, most of the people I know at this company are working very long weeks, and just because you're office hours are over doesn't mean you are done working. You might be working quite a bit more, even at

home or on vacation. As it turns out anyway, peer review would become the basis of employee reviews at Valve, And because there's no real hierarchy, there's no manager director that you're reporting to, you would have to rely upon your fellow employees to describe your work, and they would describe it to some people who would essentially be kind of chosen each year to be responsible for interviewing employees to find out how everyone is doing job performance wise,

and compensation decisions would rest on peer descriptions of an employee's technical ability, their ability to work within a group and contribute valuable input, how much the employee actually contributed to products and development, and the employee's general output level.

So you would end up having, like if you work for Valve, then your coworkers that you are in close contact with because you're all working together on a specific project, they would get interviewed by some of these employees and they would give answers like, hey, Jonathan over there, he's on your team. Uh, what's he like to work with? Did he do anything really uh? Notable in context of this particular product, you know, were his contributions meaningful? Did

they help make the product better? Did they help it ship on time? All those sort of questions. The answers to that are what informs the decision to increase your compensation or not. As it turns out, and Valve really wants to reward people based upon their value to the company, but not over reward people, so it's a delicate balance. They also pride themselves on being more generous with their

compensation than some other companies like Microsoft and Google. But this is important because there's no there's no career ladder, right, there's no hierarchy, so you can't be promoted. In fact, most Valve employees don't really have a position uh not not really not not a real position or even job

description apart from help Valve do stuff. Some Valve employees have an effective job title because if you're ever interacting with anyone outside of Valve, typically you need to have some sort of job title to make sense of it, because anyone who's chatting with you needs to have a

point of reference. So people who work at Valve who have outside facing duties, like let's say it's someone who represents Valve at a trade show like E three, they probably have a working job title, though within Valve they would just be considered another Valve employee. So you can't really get promoted, but you can increase your compensation based upon your personal performance at work and your technical expertise and that sort of thing. Uh. The handbook also outlines

some amenities that the office had at that time. Now, this is a different office than where Valve is currently, but I suspect that the amenities haven't changed, or rather, if they have changed, they've only expanded. But the ones that were listed in the two thousand and twelve handbook included laundry rooms. There was a room where you could get a massage if you need in one. There's a gym.

There were recreational games like dartboards, that kind of stuff. Uh. The lobbies sported an enormous valve which, as I understand it is also in the new office space. This was a gift from Gabe Newell's brother when Half Life one ship. They also have a gold crowbar, which was a gift from Sierra when half Life went gold. Uh, And not to jump too much ahead, but Valve has moved a

couple of times in its history. During the half Life days, there were only about twenty people working for the company, but by that number had increased to more than two hundred employees, and in the company moved into the Lincoln Square Expansion, which is a skyscraper next to the Bellevue Arts Museum in Washington, Washington State. That is, so, I guess it would be good to go back and explore how the company ended up getting so big, which means

dialing the time machine back to two thousands. So I'm gonna hop in the time machine and head back there. The old way back machine has been sitting getting a little dusty in the corner. Before I do that, let's take a quick break to thank our sponsor, and we're back, And by back, I mean back to the year two thousand. The dot com bubble is poised to burst the final original Peanuts comic strip publishes after Charles Schultz's passing, and

Sony debuts the PlayStation two in Japan. Meanwhile, over at Valve, what's going on there? Well, I mentioned in the previous episode that Half Life Opposing Force came out. N I failed to mention in that episode that Valve didn't actually develop that game or expansion pack if you prefer, because it really was an expansion on the original Half Life game and not a fully fledged game on its own right. Instead,

this game was developed by someone else. It was actually developed by Gearbox Software, which would go on to make a two thousand one expansion for Half Life called Blueshift. Gearbox became known later on as the creators of a series called Borderlands. So the folks at Valve we're looking at other projects, namely half Life two and Team Fortress too,

and a couple of other projects as well. The company was also supporting the work of the mod community, which helped entrenched Valve in the hearts of hardcore gamers everywhere. As I mentioned in the last episode, when the company really liked a mod, they were likely to acquire it, and that was the case with a little mod of the Half Life competitive multiplayer mode called counter Strike. Now.

That mod put players into one of two teams. You either played as a terrorist or a counter terrorist, and each team had a certain goal depended upon whatever the game type was is for that particular playing session, Completing the goal would gain your team a point for that round. After a certain number of rounds determined before you actually start playing the game, the team which had the most

points would win. Now, that does not necessarily mean you'd win if you've got more kills than your opponents, because sometimes the objective wasn't too just kill as many people as you possibly could. However, killing opposing team team members tends to help no matter what the game type is.

The game rewards tight team play and ultimately became a popular title in the e sports realm because while you could excel at counter Strike if you were just an amazing, lead skilled player, what you really needed was a team of people who could work well together in order to to excel at the game itself. If you are an amazing player and all your teammates are nubes, then you're probably not going to do so well in the grand scheme of things, especially if you're up against a team

that has, you know, decent communication skills. You need to have a good, solid group together, and that's what made it a prime candidate for E sports now. Counter Strike was the work of two members of the Half Life modding community, and those were Meanly a k A. Gooseman and just Cliff Lee did nearly all the development on the mod, while Cliff helped publicize it. He had a Half Life fan site that would publish and promote mods

and maps in the half Life community. Their work so impressed Valve that the company extended to them the invitation to become employees, and they both accepted that invitation. In two thousand, Valve released counter Strike one point oh. It became one of the most popular multiplayer games of all time,

right out there with games like Call of Duty. In fact, even today, after nearly a decade and other versions of counter Strike coming out, the original counter Strike is still going and has more than fifteen thousand people playing it as I do the research for this podcast. In fact, the day that I did the research for this there was a peak number of players hitting seventeen thousand, seven sixty six, which is pretty incredible for a game that's

that old. By the way, Cliff provided the voice of the radio commands in the game, so you would get little commands over your radio that came from the from Jeff Cliff himself. Well, Meanly would stay on with Valve for a little while and would shift work to counter Strike to the full sequel to counter Strike. Eventually, Valve decided that they were not going to develop counter Strike too. They made some other counter Strike spinoffs, but the sequel

itself got scrapped and Lee would leave Valve. As a result, Cliff would actually stay on with Valve. Lee would go on to work for other games for other developers. The count Strike series did continue with spinoffs. Uh, there just wasn't a counter Strike two. So in two thousand four, counter Strike Condition zero published. This was a game that

was developed by Turtle Rock. They developed that particular version of counter Strike and it was still using the gold Source game engine, which was the same one that powered Half Life and the original counter Strike Mod two. Other games would follow. There was counter Strike Source, which used a different game engine that we'll talk about a little bit later in this episode. That one also published in two thousand four, and then there was Counterstrike Global Offensive,

which would not publish until two thousand twelve. That one was developed in partnership with Hidden Path Entertainment five years later. That particular version of counter Strike, that is Counterstrike Global Offensive remains one of the most popular games on the Steam platform. In fact, when I checked it today as I do this podcast, there were more than four hundred seventy five thousand concurrent players. Nearly half a million concurrent

players playing a game that's five years old. That is phenomenal. Back to two thousand, Valve released a game called Ricochet in two thousand and It was developed by a guy

named Robin Walker who was an Australian game designer. He was part of the team who had developed the Team Fortress mod for Quake World, and when Valve decided that they were going to acquire the Team Fortress assets and end up acquiring the company essentially or the group that developed them, uh, Robin Walker was one of those guys and came over to Valve. So he had joined Valve

about two years earlier. Now the employee handbook describes Ricochet as an example that quote demonstrates to the mod community how a game can be created quickly and easily with Valves s d K end quote. S d K stands for Software Developer Kit, So in other words, Ricochet was meant to say to the mod community, Hey, we want you to make awesome games, and here are the tools you can used to do that, So go out there

and make the next cool, super awesome game. And obviously Valve has a vested interest in this because if people go out and create an awesome game, and Valve sees a way of marketing that they can acquire that game, the game developers get rewarded for the work they've done, and then Valve can sell that game to a wider audience. Ricochet was developed internally. This was not a moded game that they picked up, but Walker created Ricochet and modified

Half Life into a new type of game. It was a competitive multiplayer game, so you know something counter Strikes a competitive multiplayer game as well, but Ricchet is very

different from Counterstrike and Ricochet. Players would control the character first person shooter style, but you would have all these different disc shaped platforms in a giant arena that are suspended over an infinite pit it appears to be so you can jump from platform to platform as part of this game, those part of the strategy is jumping from one platform to the next while trying to take out your opponents. So you had to worry about all these

sorts of different angles. You had to worry about making jumps. If you missed a jump, then you would fall to your death. You had to worry about where your opponents were, and there are also little elements along the edges of the playing field that would allow you to bounce off of them, so if you jump toward them, it would

redirect your jump or allow you to ricochet. Thus the name and actually reminds me a lot of the disc game in Tron in a lot of ways, although that may just be the graphics that are really reminiscent of that. The gameplay itself is quite different now. Originally, Valve wanted to release this game and then have updates come out over time, allowing it to continually evolve. That would eventually become the model for Team Fortress to further down the line,

but Ricochet never quite got that benefit. It just sort of languished, and a lot of folks look at it as a totally failed title. It became something of a joke within the gaming community and definitely something that Robin Walker would find painful to discuss, because clearly there was the gem of a really cool idea here, but it just never got the support outside of its initial development that it really needed in order for it to become

a really compelling game. However, I would argue that if you look at something like Ricochet, you could easily see where the other future developers would come up with ideas that were really compelling that put their own twist on the first person shooter genre. I'm specifically talking about Portal, but that's a game we'll have to cover in Part three of this series. Also spoiler alert, there will be

a Part three of this series. And I don't mean to suggest that Valve is so important a company that requires three episodes, but rather that there are a lot of lessons to be learned in the story of Valve, that there are a ton of things that happened through the course of valves history that are really valuable to

understand for other companies. It's not just Valve. So while I understand that i've I've covered other companies with fewer parts that had longer histories than Valve, I feel like there's a lot of deep lessons to be learned in these histories. So that's the only reason I'm really spending that much time on this one now. In two thousand one,

Valve released a couple of half life expansions. While counter Strike would become the most popular online action game that year, and behind the scenes work would continue on Team Fortress Too, as well as the sequel to Half Life, but it became clear that, at least for Team Fortress Too, things were going to take a lot longer than game Newell

initially expected. In fact, in many ways, it was going to become another Half Life, in that numerous delays and internal issues would cause the game to come out much much later than what they had hoped. These days, gamers call this sort of thing Valve time, So it's kind of a dismissive term, almost a pejorative about the delay between when you expect a game and whether or not it ever comes out. That that time in between is called Valve time. Like, yeah, but how long is that?

In Valve time, you might say, all right, what was coming out next year, But in Valve time, that really means two, three, six years from now. So uh. These long stretches have made Valve employees a bit more hesitant to talk about big projects because of the issues that

stirs up within the gaming community. I mean, you don't want to announce that a game is coming out, have that day come and go with nothing shipped, and then have to answer to the gaming community over and over again, because they are persistent and largely unforgiving, and it can be very frustrating from a creative perspective to deal with that level of animosity, or even not even if it's animosity,

let's say that there's no ill will or anything. Just having to answer the same question over and over again can become demoralizing. So these days Valve is less likely to talk about the stuff that's in development. So we'll check back with Team Fortress two in the next episode and maybe touch on it a couple of times throughout this one and talk about some of the stuff that went down during its development. But the following year, two thousand two, was when Valve relocated to a new office space.

So they had started off in Kirkland, Washington, they had signed a five year office rental agreement, and they decided that they would relocate to Bellevue, Washington. It was also in two thousand two that Valve made an announcement that would end up transforming the company on a level that I suspect no one anticipated at that time. And this was an announcement that happened at the Game Developer Conference

in two thousand two. That's when Valve announced Steam. Now, the actual platform of Steam wouldn't launch until two thousand three, but they announced it in two thousand two. So what is Steam and why is it such a big deal? Well, when it launched, it wasn't nearly as big a deal as it is today, and I don't think anyone could have anticipated it. But first, at the time, Steam was

pretty much necessary for Valve. So Valve was working on developing or supporting tons of multiplayer games, either the games that they had developed in house or the mods that

were based upon the game they had developed. That game essentially being Half Life right, So Half Life and all the different modifications that came out, all of them required this kind of ongoing support because Valve would constantly tweak things so that they would run a little better, more smoothly, that they would remove exploits, that they would remove vulnerabilities. But that meant that people had to use the latest version of the game or to play with each other.

In other words, if you have the latest version of counter Strike, but I've got a version that's two versions behind. Let's say that you've got one point four and I have one point too, we can't play together because our games are no longer compatible. I I cannot match everything you have. There might be new maps that you have that I don't have, and this sort of mismatch meant that we could not have a compatible gaming session with one another. I would need to update my game to

be the same version as yours. Uh. And actually it ends up being more complicated than that, because I would need to have the right version to even log into a server and be able to play on that server. So what Valve wanted to do was develop a platform that would make it easier to patch games like counter Strike and Steam was that solution. It's an online platform, which means you have to log into an online account. You have to have an Internet connection for it to work.

Once you're logged in, the platform can scan the versions the various Valve games. Later on it would be other games as well, but in the early days it was just Valve and really it was just Half Life and the various mods, and then it would make sure that the version you were using was up to date. And if the version you're using isn't up to date, it could automatically update those games to make sure that you're ready to go and you could log in and have

your online gaming session. Eventually, Valve would extend this to apply not just to online multiplayer games, but also single player games that you can play offline. Let's say you buy Half Life and you only want to play the single player campaign, you have no interest in playing the

multiplayer campaign. Well, once this really got going, you had to have a Steam connection even to play your single player game on your computer, because even though the whole thing is self contained, even though you are playing data that lives on your computer, you would require that persistent connection to the Internet in order to actually play it. And a lot of gamers do not like this, particularly since at the time in the early two thousand's, not

everyone had a persistent Internet connection. It wasn't really common in the gaming world or in the households in general, and some gamers really resented having to log onto an online service just to play a game that, in their minds, should exist completely on their own machines with no need for outside access. And I can't say that I fully

blamed them. I mean, I find it very frustrating to try and play certain games that should not have any real Internet component and find out I can't do it because my Internet connection is uh is down or is unreliable. I have an Internet connection that sometimes just poops out on me, and if I have a game installed on a computer or a console, is really frustrating to have that experience of launching the game and being told, oh, by the way, you can't actually play this because I

can't connect to the servers to authenticate. In fact, that's another point that Steam was made for. It was for authentication. This is a way to combat piracy. So the idea is that if you want to play a game, you log into Steam, which would check to make sure the game you were playing was in fact a valid copy. It would make sure that you had the license to play that game and you weren't just pirating a copy

of it. Now, if you're an honest customer, that doesn't necessarily sound bad, right like, well, you know I bought the game. It's checking to make sure I bought the game. I get it fine, you know whatever, you might think. The only people who really get upset at this tactic are software pirates, the people who steal games and that they find out that the stuff they stole they can't

actually play. But it turns out that you can be a completely honest customer and still have really negative experiences due to this sort of authentication or digital rights management strategy. The implementation caused problems to people even when they had legitimately purchased their copy of a game. So here's one way Valve games are popular. They are really popular games. They a lot of people end up buying them on day one, and then they launched their games, they want

to play them right away. Well, if you have an authentication strategy that requires your games to dial into a server, and on day one of your game, everybody is trying to play it, your servers could get overwhelmed with all these requests. Tons of people are logging in they just want to play their games, and these may be single player games that have no multiplayer component. Because the server

that authenticates the play sessions would be overloaded. This could cause delays, and then you have a growing number of gamers who are frustrated that the single player game that they own on their machine cannot launch because of a problem on some other computer out there on the internet. They have no control over that, and that gives credence to the argument that authentication strategies frequently punished legitimate users more than they prevent piracy, because pirates, they'll go to

an extra step. They'll often work to strip out those protections in games entirely so they aren't hampered by these same issues because they've gone into the code and removed those protections. So they turns out the only people who are getting affected by this anti piracy policy are the legitimate customers because the pirates have already taken it out. So this is a common problem in digital rights management solutions in general, not just this particular one, but different

DRM approaches. So it's a big challenge to create DRM that does its job while also not creating a negative impact for actual customers. But that's another topic. I could do a full episode, and in fact I have done full episodes about digital rights management and why it's both important and problematic. It's important because people steal stuff and it's really easy to distribute digital content without any checks or balances, and that has a real impact on finances

down the line. Um, it's a real problem because more often than not it ends up punishing your customers and does nothing to dissuade pirates. So yeah, big issue. The thing to remember right now is that when Steam launched. It was really done so as a means to distribute patches and also to sell digital copies of Valve games. Later on, Steam would become much more than that and has played a large role in the gradual shift away

from physical media to more digital distribution. Valve saw the writing on the wall way back in two thousand two and got ahead of the curve big time. But we'll talk more about that in part three. Now. Steam launched on September twelve, two thousand three, and in another year it would become a huge deal because that's when Half Life two would come out. Meanwhile, we're still back in two thousand two. Remember that's when Valve announced that Steam

was going to launch. It was that the game developer a conference in two thousand two. Valve also launched that year a second initiative called Valve Anti Cheat or v A c VAC. There have been a couple of different versions of that. This was software that was designed to detect modifications to games that allowed players to cheat in multiplayer matches, and there are a lot of different variations

of this. You know, things that would cause bullets to miss you, or things that would allow you to have like an auto aim feature essentially on players, especially for headshots, because those would be instantly fatal in games like Counterstrike. So there were a lot of different cheats out there that would take advantage of the fact that you know, Valve wanted the mod community to be really, really healthy,

which meant releasing the software developer kits. But that means you're giving people the tools to see how the game works, understand it, and potentially make these workarounds, these cheats that will allow you to UH to boost your abilities or remove your opponents abilities unfairly. And in order to counteract that,

Valve began to develop this software. There are other pieces of software that were in place at the time that Valve could have acquired, but instead they chose to develop their own in house software and they just stopped supporting the other types of anti cheating software. So the way this one would work is it would look for anomalies

within games. UH. It would first look for anything that it was identifiable, stuff that was already listed in its cheap code database, so it's looking for anything that it has already recognized previously. It would also look for other anomalies, unfamiliar anomalies. Maybe there's a new cheat code, because the way hackers work as they keep on making stuff, as as code changes, hackers will change up their approach to try and take advantage of the way that code works.

So the software itself had to have the ability to identify things that were outside the norm of regular gameplay, and then upon detection, the various game engineers could take a look at those anomalies and determine, all right, is this actually indication of a cheat? Is it a glitch? Is it just a weird thing that happened because this one particular seve circumstances that had never happened before in a game, did happen in this game? Because sometimes that happens.

Sometimes it's not so much someone's cheating as it's just something that the game cannot typically handle. Happens because infinite possibilities, you know, and the game reacts in a way that you could not predict. So these engineers would review things and then they could ban a player. Now, the original duration of the band this was back in the counter strike days, because counter Strike was really the the target

of a lot of cheating. I mean, there was tons of cheaters who were flocking to a counter strike That original band length was twenty four hours, so if you are caught cheating, you would be banned for twenty four hours from the servers and you could not play. As the system evolved, the bands would actually grow in length. They become one year or five years, and eventually in two thousand five they became lifetime bands. So don't cheat. I guess it's the lesson there. So I mentioned what

was happening on the back end. Um. Once people were able to take a look at something an anomaly and determined that yes, in fact, this is a cheat, they could then add that to a database, which meant that from that point forward, the system could automatically detect other

instances of that same cheat. So even if someone developed a new type of cheating software and they rolled it out, this particular anti cheat software could pick up on it relatively quickly, and after review, it could be built into the system to be detected automatically when it happens in the future, so that bands happened without too much human interaction required. Now, there's some types of hacks that the

software could not detect. For example, if you use the software Developer Kit to modify the game engine in a way where you can see through the various textures. It essentially gives you the equivalent of X ray visions. You can look right through walls and other obstacles and just see where other players are. No matter where they are at. You might just see an outline for things like walls

and doors and that kind of stuff. Uh, that kind of cheat would not get picked up by the VAC software, So there were people who were using that so they could keep an eye on an opposing team. Even if they were hidden behind cover or sneaking around, it didn't matter. You could see them. And that could also explain how if you are up against an opponent and they always seem to know where you are, no matter how careful you are, it could be they're using that cheat against you,

or they might just be really wicked good. Sometimes, if you play enough games, you'd learn all the tricks and you just go with the probabilities. If you know, people tend to rush out this one door at the top of matches, you know, to camp that door and take people out. But there are people who will cheat. I don't get it. I don't understand cheats. I mean I realized that when you play a game, you want to feel like you're the best, But using cheats doesn't mean

you're the best at all. In fact, very much means the opposite of that. You're really just taking the game out of it. There's no skill there, You're just cheating, and all you're really doing is punishing other players. I mean, any sort of success you're experiencing isn't due to your

own skill. So if you're only happy because you're making other people miserable, well I would suggest that you start asking yourself some pretty tough questions about why making other people unhappy makes you happy, because that doesn't seem cool to me because it's kind of messed up. Man. But never mind it. That's off topic. We've got a lot more to chat about with the story of Valve Part two, but first let's take another quick break to thank our sponsor.

All Right, we're back now. It's two thousand three and a major event happens to Valve. That becomes an example of how game companies have some huge issues to contend with that are outside of actually making a game work. That's that's enough right there, right, just trying to create a game that does what's supposed to do. That's fun to play that can be a successful product in a very crowded marketplace. That's already a huge challenge, but Valve

encountered something else that was even more complicated. Someone managed to infiltrate valves computer system. They stole the source code for Half Life two, which was in development at the time. It was not finished, and then that source code found its way onto the Internet and got wide distribution across the Internet. People were pirating the source code for the game left and right. This was a disaster, so gamers were really eager to continue those adventures of Gordon Freeman

from Half Life. They began to scoop up this source code, and it wasn't really finished. It wasn't a full game. It was only the way you know as the game engine. Really it was the way the game worked, and it had some stuff in it, but it wasn't a fleshed out product. And part of that ended up being a huge black eye for Valve, not just because the source code leaked that someone managed to infiltrate their systems, but also because the game was supposed to come out in

two thousand three. Half Life two was supposed to debut in two thousand three, but it wasn't ready, and the company had not yet publicly addressed this issue. They had not admitted that the game was going to be a year a moother another year in development. Uh, it was late, but they had not actually said that it was going to take another year. So this was a big issue because Valve not get a chance to get ahead of the story and say, you know, we promised this game

in two thousand three. It is not ready. We don't want to release a game before it's ready, because it will be a terrible experience for you. It will be a terrible experience for us. So trust us, We're going to continue working on the game. It will come out next year. They didn't even have that chance. It was

spoiled for them. So game Newell ultimately discovered that his own corporate email account had been compromised and that key logging software had been installed on machines in the Valve offices. Key logging, by the way, does exactly what it sounds like. It logs key strokes. Hackers use these programs to spy upon people in general, and in particularly use them to

get login ideas and passwords to systems. So you essentially get a a document of all the different key strokes used on that machine while the key logging software was active, and if someone was using it to log into accounts, then you get those passwords. It's a clever way to get around all that encryption nonsense, right, It's also really nasty. Well. The culprit turned out to be a young German guy. I think he was a teenager, might have been eighteen

at the time. I think his name was Axel Gimbe. Uh, it might just be gimb My German is really rusty, so on my apologies, but gimb g E m b E had gotten into hacking after he himself had been hacked. Uh. He had installed malware on his system accidentally. He was trying to get a pirate copy of the game Warcraft three at the time, and instead of getting really upset and he decided to reverse engineer the malware. He learned how it worked, and I learned more about creating malware

of his own in order to infiltrate systems. His goal was to be able to play games. He wanted to play as many games as he possibly could, and he felt like he couldn't buy them. He didn't have the money for them, and he had what was described in multiple sources as a rough upbringing. So I suspect that he didn't have a whole of support at home to get into the hobby that he enjoyed. So he really wanted to play the games, and he decided that stealing them would be fine. That it was. You know, it

wasn't that he was trying to sabotage a game. He just really wanted to play things and he didn't otherwise have an opportunity. By the way, this is no way justifies stealing a game. In case you were wondering, just because something exists doesn't mean that you have a right

to it. That might come as news to some of you, and I know that there have been people in the past who have yelled at me for getting on my soapbox about this, but it it remains true that just because something exists doesn't mean you have a right to it. Now that being said, any company that makes something and does not make it available to everyone, uh, they don't

deserve to be the targets of theft. But they certainly are making themselves big targets because if they make something people want and then they don't make it available, that's just encouraging lots of bad behavior, so blame goes all around, although ultimately it falls on the thief, I would argue while Axel found the source code for Half Life too,

while he was snooping around Valves network. He was able to get access to the network because he found access to another company that was doing business with Valve and there was sort of a tunnel between that company's server and Valved servers. So by infiltrating this partnered company that had pretty poor security, he was able to then get access to Valves system, which had pretty good security on the whole, but did not have good security with this

partnered relationship. Uh. He then started looking around. At first, he was pulling out documentation about the game and just reading about it and getting really excited, and then one day he discovered the source code and he made the decision to download it. He did that on September nineteen,

two thousand three. Now, Axel has said that he never uploaded that source code to the Internet, but he does admit that he shared that code with someone else, and that person, who as far as I know, was never named, did take the step to upload it to the internet. Axel had said that he was initially promised that this person he showed the source code to wasn't going to do anything with it. Axel was very proud of his accomplishment and he wanted to kind of brag a little bit.

But apparently he took this person at his or her word that they were not going to share the code, and then of course the code got shared, so the code made the rounds on the internet. People downloaded it like crazy. The potential impact of val of his bottom line was catastrophic, or it could have been catastrophic. It's actually impossible to say you never know how many sales you miss out on on these things. You can't say that for sure, because you until you actually make the sales.

You don't know how many people bought the thing, and you'll never know how many people would have bought it had they not pirated it. They impact on sales. Argument against piracy is a shaky one because we make those arguments without knowing how many sales were actually prevented. At

any rate. It was an embarrassing situation for Valve, and it's certainly caused them financial issues because they had to respond to it, and they also had to respond to the fact that gamers now knew that Half Life two was nowhere close to being finished game. Newell actually took to posting to a thread and half Life two. This was on October second, two thousand three, and there was a forum official forum on Valves website for half Life two, and Newell wrote and laid the cards on the table

and said, hey, half Life two is not ready. It's not gonna be ready for another year. The source code that is not the game, but is the work on the game in progress got released, uh prematurely. It was leaked and released, and we would like some help tracking down the person who did this. Within Valved, things were looking pretty grim. Development for half Life two was costing about a million dollars per month and the game was

clearly a year out from being finished. So even if you had not read Gabe Newell's post, if you looked at that source code, you realize, like, this isn't a game, this is a lot of code. In fact, initially if you just download the source code, it went and run on most machines, you would have to build a platform

upon which it could run. So a lot of people it was just useless information, and there was a legitimate fear within Valve that the leak would cause enough damage to destroy the company before it could even complete Half Life too, and a lot of employees felt demoralized. Their unfinished work was stolen and was being judged unfairly because it wasn't finished. Uh, it was not remotely a fun

or complete game. So they were going to be judged on something that was just the bones of a game, and they were dealing with a community that was mad at them because the title was so far behind schedule and they had not yet you know, admitted to that when this all happened. Axel would eventually send an email to Valve admitting his theft and said that he felt badly about how it turned out that he did not intend for the code to go public. He also perhaps

brazenly asked about getting a job at Valve now. Newell said he would be interested to talk to Axel and they would set up a phone interview. At the conclusion of that phone interview, at which Axel was, you know, talking with a different person at Valvue was and toy that Gabe Newell himself self. But Axel was told, Hey, you know, we're interested in flying you out to the United States and have a second interview here in person. What Axel suspected but did not know for sure, was

that this could be a trap. In fact, it was allegedly a trap. It was not a real job interview. It was an attempt to get Axel to come over to the United States where he could be apprehended by the FBI and then held and interrogated there for the whole purpose of prosecuting him on US soil. Axel agreed to the interview, but before he could actually be flown over to the United States, you know, they had to

get visas for him and his family and everything. Before he could do that, the German authorities acted and they raided his house and they arrested him, and happened on May seventh, two thousand four. That's when they burst into his house and they held him for questioning. And they were concerned not just with his involvement with the valve infiltration and the leaking of the half life source code. In fact, that really wasn't what they were really worried about.

They thought that he might have had some involvement with a different piece of malware called the sassor worm. I'll have to do a full episode about the Sassor worm. It was a big deal at the time. Axel actually was a bit insulted by this accusation because he felt the Sassor worm was shoddy coding. He actually said, well, the the malware of the Sassor worm. Sure, it's based off the same basic vulnerability that my stuff was based off of. But the sasser worm would cause your system

to crash where his mind would keep it stable. So I would never code something that crappy. It's kind of funny really, but authorities were really concerned about it. It was freaking havoc in Europe. So Axel admitted uh to infiltrating Valve. He explained the whole thing, how he was

able to do it, what he had stolen. He continued to to say that he was not the person to share the information on the internet, but he did, you know, he was ultimately responsible for the code getting out there because he was the one who gave that code to the person who did share it. And um, he said the whole thing was motivated by his desire to play the games, that he wasn't trying to do industrial sabotage

or anything like that. The German authorities told him that he was actually lucky to have been apprehended in Germany rather than finding himself overseas and in the custody of

the FBI. Axel eventually would stand trial for his crimes against Valve and was sentenced to two years probation, and since then he's expressed deep regret over his action, saying he wished he could go back in time and not do those things because he genuinely loved the games, and while he was motivated with a desire to play the games, he realizes that that was a kind of childish and selfish motivation and ultimately it caused a lot of problems for Valve, the very company that he loved, and he

loves the games from Valve. So he certainly feels a lot of regret for his role in that whole thing, and he says that, you know, he you know, he has apologized numerous times and interviews for those actions, and I think that's an important little thing to look at as well outside of Valve, just this whole motivation for

you know, why hackers do what they do. Not everyone is doing it in a way to actually make a profit or to hurt anyone and yet their actions can cause a great deal of harm, so you can't dismiss it. But you also can't just assume the darkest of motivators on behalf of those hackers. As I mentioned earlier in this episode, two thousand three was also when Steam launched, although it was much more modest than what it is today.

And Valve also acquired another popular Half Life mod in two thousand three, and that mod was called Day of Defeat and it featured the Western Front of World War Two as it's game setting. This was a multiplayer only game in which players chose characters of various classes to complete objectives either on the Allied side are the access side, and they would compete against other teams obviously on the other side of the game, which leads us up to

two thousand four. Now, that would end up being a huge year for Valve, and I think I'm gonna have to wrap up right here and include two thousand four in our next episode, and we'll build from there. But as a preview for what happens in two thousand four, the stuff I'm going to cover more thoroughly in our next episode. Two thousand four would see Valve release a

new game engine called Source. So they had been using a game engine called gold Source, which was based off the Quake game engine, and as I mentioned in the previous episode, they changed about seventy of the code in Quake Engine to become gold Source. Source would be a further branch off of that and become the next generation of game engines upon which most of Valves games would be based from that point forward. It's also the year

that Half Life two would come out. So in our next episod and we'll talk about the Source engine, we'll talk about Half Life two, we'll talk about the evolution of Steam and where Valve is today. So we'll compress

a lot of things our next episode. I know that in Part one and Part two I was getting really granular year by year with what was going on with Valve, but again, this was so that we could understand the corporate culture of Valve and its effects on how things came out, as well as get a deeper understanding of why gamers are so emotionally invested in this company. In large part is because the company had already shown a

great deal of respect and value toward its customers. So in our next episode will kind of compress the last decade a little bit more than that of Valves existence, and talk about where it's gone from there, including what the heck happened to Half Life three, a question that refuses to die well. Also talk about some other games like Left for Dead and the Portals series and how those got started and how they got wrapped up in Valve. But for now, it's time to close this episode down.

I hope you enjoyed this episode. Remember if you have any questions or suggestions for future episodes, whether it's a topic you want me to cover, maybe it's a company, maybe it's a specific technology, maybe it's a person who's influential in technology, you should send me a message. Or if you have any suggestions for people I should interview or guest hosts who should join me on an episode of tech Stuff. You can get in touch with me

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