[F5] Culture Handbooks
Lessons from Netflix, Valve, Facebook, Duolingo, and Peter Kaufman
Welcome to another Free Friday! Today’s post is the second of a new series I’m doing with Altos Ventures’ Director of Research Nick Chow. In this series, we’ll share five pieces of content, whether they be books, booklets, novels, movies, tv shows, reference guides, or anything else, grouped for a specific reason.
We’re still experimenting with the format of Friday 5s, but for this one we’ve split it up into two parts. If you have any suggestions or feedback, please feel free to share it with us on Twitter, Substack (respond to this email or comment below), or LinkedIn.
Theme: Why we grouped these books together.
Books: An overview and takeaways from each book.
Previous Editions
Theme
In 1987, legendary venture capitalist Arthur Rock wrote an article summarizing the core learning of his 25+ year career:
“Strategy is easy, but tactics—the day-to-day and month-to-month decisions required to manage a business—are hard.”
Essentially, Arthur is arguing that execution is more important than ideas. But how do you actually measure execution? You go upstream—to culture.
But what is culture?
Here’s Google employee #13 Steve Schimmel on the topic:
Corporate culture … is a social anomaly reflecting the microcosm specific to the unique individuals participating (especially the top management/founders- since it tends to flow top-down) and the time and place in which it has sprung up … It is organic- a living, evolving reality shared by only those who are part of it.
In other words, culture is both the reflection, and the driver, of the shared values and collective actions of a select group of individuals working towards a specific goal, the way owners and employees interact, collaborate, and approach their work, the environment they create, the decisions they make—how they execute.
And while culture spawned an industry of academics and consultants and became a buzzword that refers to ping pong tables and free snacks, it’s role in the birth and development of Silicon Valley is undeniable. Overbearing cultures led to The Traitorous Eight leaving Shockley to found Fairchild Semiconductor and later Bob Noyce and Gordon Moore leaving Fairchild to found Intel. Playful cultures led to ROLM becoming the largest acquisition in Silicon Valley history and Google becoming one of the first trillion dollar market cap companies.
Steve Schimmel later reflected, culture “is not developed or imparted via an employee handbook.” While we agree with Steve that culture cannot be developed via an employee handbook, we do believe that it can be codified in one.
Below, we’ve highlighted five company culture handbooks that we believe have done an excellent job of codifying excellent cultures.
Books
#1: Netflix: Reference Guide on our Freedom & Responsibility Culture
Too many growing organizations drown in bureaucracy, letting process stifle creativity and eventually miss critical market shifts. Netflix takes the opposite approach: scale doesn’t have to kill innovation. Back in 2009, CEO Reed Hastings and team published a now-legendary deck outlining seven pillars of what they call a “Freedom and Responsibility” culture. It’s since become a masterclass in building a high-performance environment — one that relentlessly pursues innovation, trusts exceptional people to act with context rather than control, and demands honesty about who’s truly adding value.
Essentially, Netflix has doubled down on the idea that “great workplace = stunning colleagues,” not ping-pong tables or flashy perks. Their Keeper Test is infamous: “Which of my people would I fight to keep if they told me they were leaving?” If the answer is “not sure,” Netflix parts ways kindly — “adequate performance gets a generous severance package.” They also reject the illusion of “we’re one big family,” insisting instead that they’re a pro sports team. The reasoning is simple: in creative work, the best performers outperform average ones by 10x, so you want the absolute best in every role. And if someone’s a brilliant jerk, no matter how stellar their performance, they’re out: the cost to teamwork is too high.
Anyone scaling a business today can learn from Netflix’s core pillars: (1) Values are what you value, (2) High performance, (3) Freedom & responsibility, (4) Context, not control, (5) Highly aligned, loosely coupled, (6) Pay top of market, and (7) Promotions & development. You don’t have to agree with every tactic (we don’t), but it’s impossible to ignore how this approach transformed Netflix into a streaming juggernaut capable of continuous reinvention. Perhaps the biggest lesson is that culture isn’t some PR statement — it’s who gets rewarded, who moves up, and who’s asked to leave. As they put it, “Our culture is a work in progress … Every year we try to refine it further as we learn more.”
Select highlights from the original deck that stood out to us. See here for more comprehensive notes on the Netflix Culture Deck:
“The real company values, as opposed to the nice‐sounding values, are shown by who gets rewarded, promoted, or let go.”
“Great workplace is stunning colleagues … ‘adequate performance gets a generous severance package.’”
“When one of your talented people does something dumb, don’t blame them. Instead, ask yourself what context you failed to set.”
“We’re a team, not a family.”
(On keeping star players in every position.)
“There is also no clothing policy at Netflix, but no one has come to work naked lately.”
—Patty McCord, 2004
#2: Valve: Handbook for New Employees
From the outside, Valve might look like a gaming juggernaut — Half-Life, Counter-Strike, Portal, Team Fortress (and Steam!) are hall-of-fame successes in their own right. But peek under the hood, and you’ll find something even more fascinating: a radically flat, self-organizing culture that defies nearly every norm of corporate management. Valve’s Employee Handbook (“A fearless adventure in knowing what to do when no one’s there telling you what to do”) reads more like a crash course in trust, autonomy, and bold decision-making than a typical employee manual.
Essentially, everyone at Valve is both an owner and a potential leader. Your desk even has wheels so you can literally roll to projects that interest you. There’s no 20% “creative time” — at Valve, 100% of your time is self-directed. And if that sounds chaotic, Valve sees it differently: with truly empowered people, the company aligns itself organically around great ideas. Mistakes will happen, but no one gets fired for trying something new.
It’s a big difference from traditional management hierarchies: employees pick their own projects, form “cabals” (small, self-organized teams) to ship features, and disband when done. The bigger question is: Does it scale? Valve says yes — if you keep finding world-class, T-shaped people who can navigate ambiguity, learn fast, and support each other through honest feedback. It’s not for everyone, and they acknowledge the tradeoffs. But to them, it’s worth it.
Select highlights from the handbook that stood out to us. See here for more comprehensive notes on Valve’s culture:
“Any time you interview a potential hire … ask if they’re capable of literally running this company, because they will be.”
“We’ve heard that other companies have people allocate a percentage of their time to self-directed projects. At Valve, that percentage is 100.”
“Nobody expects you to devote time to every opportunity that comes your way. Instead, we want you to learn how to choose the most important work to do.”
“Screwing up is a great way to find out that your assumptions were wrong or that your model of the world was a little bit off. As long as you update your model and move forward with a better picture, you’re doing it right.”
“Over time, we have learned that our collective ability to meet challenges, take advantage of opportunity, and respond to threats is far greater when the responsibility for doing so is distributed as widely as possible.”
#3 Facebook’s Little Red Book
From the outside, Facebook might seem like the quintessential Silicon Valley success story: bold, fast, and unafraid of breaking tradition. But take one look at their internal “Little Red Book” and you’ll find an even richer narrative — one that’s equal parts optimism and paranoia. Mark Zuckerberg’s team is convinced they need to “create the thing that kills Facebook” before someone else does, demonstrating a radical embrace of constant reinvention.
Essentially, the Little Red Book is an ode to The Hacker Way: pushing boundaries, doing more with less, and never waiting for permission. Mistakes are inevitable, but if you’re not shipping, you’re standing still. And in Facebook’s world, standing still is the surest way to become obsolete. They also prioritize impact over everything else, believing that any five-year plan in tech is already outdated. Instead, they keep one eye on the six-month horizon and the other on a thirty-year vision, recalibrating constantly as the landscape shifts beneath them.
Yes, it’s about “move fast and break things,” but there’s also a deeper humility here—fear is recognized as a signpost of important work. They welcome it, even harness it. Just as Andy Grove once said, “Only the paranoid survive,” Facebook’s culture fosters a certain restless energy: if you’re not pushing forward, you’re falling behind.
Select highlights from the Little Red Book that stood out to us. See here for more comprehensive notes on Facebook’s culture (and for even more on Facebook, see this comprehensive research report (paywalled) or this 2 hour podcast (free)):
“There is no point in having a 5-year plan in this industry. With each step forward, the landscape you’re walking on changes.”
(For more on this concept, see this piece on the Piton Network.)
“The Hacker Way is about pushing boundaries … It’s putting peanut butter and jelly on a tortilla because you’re out of bread.”
“Ship no matter what. Products that don’t exist rarely change the world.”
“If we don’t create the thing that kills Facebook, someone else will.”
“Connection is the fundamental unit of society … When everyone has a printing press, influence must be earned.”
#4 The Duolingo Handbook
From an unlikely headquarters in Pittsburgh, a cartoon green owl named Duo has become the face of one of tech's most fascinating cultural experiments. While most education companies are mired in a sterile professionalism, Duolingo has chosen to embrace the absurd – creating a mascot that's both a wholesome teacher and an unhinged motivator who might "temporarily relocate your family" to ensure you complete your daily language lessons.
Behind this playful exterior lies a company culture built on fascinating contradictions. Duolingo combines ruthless data-driven decision making with wildly creative experimentation and has somehow turned their mascot's internet memes into a powerful business moat. It’s a team of hackers and creatives bound together by a mission-oriented design philosophy. They have created a $10 billion education empire by making learning feel less like homework and more like an addictive mobile game.
Select highlights from the Duolingo culture handbook that stood out to us. See here for more comprehensive notes on Duolingo’s culture:
“Better a hole than an asshole”
(On hiring.)
“But these characters—inspired more by brands like Nintendo than traditional learning companies—also serve an important strategic purpose. We see this IP as a crucial moat for our business, especially in the era of AI learning tools. That same emotional connection that makes learning enjoyable also makes our product stickier over time. Even if someone cloned our entire app, learners would still come back to Duolingo for the characters.”
“One key to maintaining high standards is assigning ownership. That means putting a person or team on a task, providing a clear mandate and saying, ‘You are responsible.’ We’ve seen it again and again: only things that are owned become excellent.”
“Metrics, when available, should be at the center of all our work and communications. Decisions must be grounded in evidence, not abstract narratives.”
“Our mascot was initially designed to encourage regular practice. But once the internet got their hands on him, he grew into a more complicated — even menacing — character with his own lore. He’s still cute and cuddly. But he’s also willing to temporarily relocate your family to ensure you finish your lessons.”
#5 Peter Kaufman on Culture
Peter Kaufman, the CEO of Glenair and the force behind Charlie Munger’s Poor Charlie’s Almanack, sees culture as an emergent effect—something greater than the sum of its parts once people, principles, and incentives align. At the heart of a healthy culture is trust: people follow leaders they find principled, trustworthy, and calm. Leadership, as Kaufman frames it, is distinct from management: leaders guide and inspire people, while managers allocate and oversee things. To cultivate buy-in, leaders should model win–win relationships where counterparts feel so satisfied they no longer “shop for a better deal.”
Aligned incentives are equally vital. Kaufman proposes six features—simplicity, significance, timeliness, game-proofing for both payer and payee, and a group-based reward pool—to ensure everyone is pulling in the same direction. This group dynamic helps eliminate freeloaders as teams naturally police themselves. Kaufman also highlights the latent potential in an organization’s “bottom half,” arguing it should be treated like “helium,” not “lead,” by lowering barriers and encouraging fresh perspectives. Indeed, many groundbreaking innovations have come from outsiders or newcomers unafraid to question the status quo. Finally, he reminds us that great leaders share recognition generously, never say anything they don’t mean, and back up their words with genuine actions.
“Management is how you deal with allocation, direction, and oversight of things… leadership ... is how you deal with people.”
“The art of leadership lies in simple things—commonsense actions that ensure high morale and increase the odds of winning. Show me an organization in which employees take ownership, and I will show you one that beats its competitors.”
—Michael Abrashoff, It’s Your Ship
“The quality of being ‘All-in’ is necessary for any group … to enjoy the kind of unified energy, productivity, collaboration and ingenuity that can lift a house and move it down the block. Through an environment of trust, caring, sharing, etc. we want to create conditions that induce our team members to go: ‘All-in.’”
“If you could see the world the way I see it, you’d understand why I behave the way I do.”
“What you honor, measure and rewards tends to be what you get.”
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Wrap-up
If you’ve got any thoughts, questions, or feedback, please drop either of us a line — we’d love to chat! You can find us on Twitter at @kevg1412 and @nicholasachow, Kevin’s email at kevin@12mv2.com, or Nick’s LinkedIn here.
If you're a fan of business or technology in general, please check out some of our other projects!
Speedwell Research — Comprehensive research on great public companies including Constellation Software, Floor & Decor, Meta (Facebook) and interesting new frameworks like the Consumer’s Hierarchy of Preferences.
Point in Time — Musings on code, capital, and craft.
Excellent, thank you for sharing!