Stephen O’Grady has a piece today, Software is the New On Base Percentage, which proposes that effective use of software is no longer a way for a business to gain a competitive advantage, but rather the price of entry for being a viable market participant.

It begs the question, how does a company gain a competitive advantage these days? My argument would be that the most effective approach is to recruit and retain creative people, and to free them to do their best work. I think this is the real lesson for any business in the Valve employee handbook. Yes, I’m talking about it again.

Valve’s employee handbook is, as much as anything, a recruiting tool. It’s a promise that if you have good ideas, nobody at at the company is going to stand in your way. That’s a great pitch.

At Etsy, we find that the people who are the easiest to recruit are the ones who read the company’s engineering blog, Code as Craft, tried to apply things they learned at their own company, and eventually gave up and just looked for a job at Etsy instead.

Companies that put obstacles in the way of people solving problems find that the first rate employees look for other jobs, and that second rate employees devote their time to using Facebook rather than looking for ways to make things better.

The most effective way to gain a competitive advantage at a company is to create a culture where employees are free to use as much of their brain as they want to build value for the company.