The Founder Formula

Nolan Bushnell - Co-founder of Atari, Inc. Part 1

• Trace3 • Episode 25

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For the 25th episode of The Founder Formula, we thought we’d pull out all the stops, and invite one of the most famous founders in Silicon Valley history on the show for a two part extravaganza. If you spent any amount of time in the 1970’s & 1980’s playing Atari, you have our guest, Nolan Bushnell to thank.

Nolan founded Atari, and brought video games to the home user, selling over 30 million units. As if changing the video game industry wasn’t enough, Nolan also went on to found Chuck E. Cheese, which at the height of its popularity, had over 200 locations. Not to mention the countless boards he sits on, advisory roles he’s taken, and incubators he’s founded.

Listen to this and all of The Founder Formula episodes through your favorite podcast platform or Trace3.com.

Nolan Bushnell:

Gordon Moore always said, only the paranoid survive. And that's kind of true. And so what you have to realize is if you see something that is stronger, better, or you think it's more marketable or cheaper, and you don't do it because it will cannibalize your current business, that's a real mistake.

Outro:

The founder formula brings you in behind the curtains and inside the minds of today's brave executives at the most future leaning startups. Each interview will feature a transformative leader who's behind the wheel at a fast paced and innovative tech firm. They'll give you an insider's look at how companies are envisioned, created and scaled. We hope you're ready. Let's get into the show.

Todd Gallina:

Hey everybody, welcome to a very special 25th anniversary episode of the Founder Formula. We have pulled out all the stops on a red-letter day as today we welcome one of the most famous founders in Silicon Valley history, the father of video games, Nolan Bushnell. Before I welcome our guests, I'd like to welcome my co-host for this episode, who's a longtime colleague of mine and CMO at Trace3, Sandy Salty. Sandy, thanks for sharing this big day with me.

Sandy Salty:

Thanks, Todd. It's so good to be here. I'm excited about today because we get a chance to talk to not just an entrepreneur, but a true innovator. I mean, he launched entire industries. It's going to be a lot of fun.

Todd Gallina:

Yep, I know. Crazy, crazy. And I couldn't think of a better person to conduct this interview with. For our listeners, we're going to follow the similar format that we normally do on this podcast, asking a ton of founder questions, but we're going to do it in more of a chronological order. of Nolan's career. But before we do that, let me give you a little rundown on Nolan's history. Nolan Bushnell started more than 20 companies. Possibly he is most known for being the founder of the legendary video game company, Atari. While there, he redefined the coin-operated business when he invented the first blockbuster game, Pong. And if that wasn't enough, he went on to famously bring video games to the home user. In total, over 30 million Atari 2600s were sold, and it gave birth to virtually a new industry. Later, he went on to found Chuck E. Cheese, which at its high point had over 200 locations, and he found the incubator Catalyst, where he was able to shift his attention to different industries such as robotics, personal computers, education, and then eventually virtual reality. There's so much to cover that we actually plan on doing this interview as two parts. So in some ways, this is our first two-parter episode. Nolan is coming to us from his workshop in Los Angeles. We're thrilled to have him. Nolan, welcome to the Founder Formula.

Nolan Bushnell:

Thanks a lot, you guys.

Sandy Salty:

Nolan, so currently you're the CEO of Versix. Can you tell our listeners about what they do?

Nolan Bushnell:

Versix is a company that we're actually in the game business, but we're in the board game business, and we use the Amazon Echo and Google Home to augment the board game experience. So, for example, Echo is a Much better timer than a little simple, you know, hourglass. And you can add now sound effects and music. But more than that, you can now have a computer AI as an NPC. So our first game was called Saint Noir. And it was a, or is, a murder mystery. It's available on Amazon. And you can go around the town interviewing people. And everybody has to tell the truth except the perp who can lie. And so it's all about figuring out who's lying to be able to solve the mystery. And it's kind of a collaborative game and really, really fun. We've won all kinds of awards. We've won Innovation of the Year award from CES this year and a couple of others. But our current... game that we're actually going to be doing a Kickstarter on. I love your people's support. But it's called Screen Test. And it's about reading eight lines of a script in a dialect or a language that is unique to that. And it's hilarious. Maybe one of the funniest things that we've ever done in terms of a test group. So Screen Tests will be out later this month. And it's just, you know, it's fun to design games around a new technology and use the technology maybe in a little bit of an unexpected way.

Sandy Salty:

And tell our audience where they can download Screen Tests, Nolan.

Nolan Bushnell:

Screen Tests will be available on Kickstarter. So you can buy them there and support the project. There's another interesting thing. You can also submit scripts that you write and things that you do uniquely, and we'll try to integrate them into the game. So we're not just crowdsourcing funding. We want to crowdsource the creativity. Yeah, the gameplay. Yeah, because everybody's smarter than anybody. And so I've always liked the idea of the brilliance of the masses.

Todd Gallina:

Yeah, that is a great and perfect environment to take advantage of that. Hey, Nolan, let's go back a little bit to the beginning. And we wanted to talk about growing up in the right environment and being in the right environment. You grew up in Utah, and you obviously went to the University of Utah, which has its own amazing computer lab. I mean, it's got some famous people that were there, including Edwin Cadmo, who was one of the founders of Pixar. You grew up there, and then you also spent a tremendous amount of time in the Silicon Valley. Can you talk about how those environments impacted you? Massively. And it was actually

Nolan Bushnell:

happenstance. I mean, it wasn't happenstance. I was born in Utah, but I was probably the only engineer in the world that was managing a games department at an amusement park to put himself through college. And so I understood about coin-operated games because there was a couple of arcades that I was responsible for. And then the magic of dr evans and he he was basically the first guy that got serious about hooking video monitors up to big computers and we played a game called space war at the university late at night we'd break into the computer lab and it was clear to me that if i had a coin slot on this screen it would make a lot of money in one of my arcades but you take 25 cents for three minutes and divide it into a half a million dollar computer and the math doesn't work. So I just kind of filed it away, graduated, went to California, Silicon Valley. And there, all of a sudden, I heightened my digital skills. And all of a sudden, the TTL circuitry, which are basically the building blocks for the computers at the time, went from $2 a chip to 15 cents a chip. And I said, hey, the price is right. So

Todd Gallina:

you talk about that and you were working on computer space, which leads me to my next question, which is retaining IP. Our understanding is that you had a full-time job, but then you would be working on these things in the evenings and weekends. How important is it to retain your IP and just to make sure that you've got yourself covered while you're potentially working with somebody else? Massively

Nolan Bushnell:

important. And so you can do that by several ways. And I actually got sued by that company thinking that they were going to be able to get what they call a shop right. But here I was lucky again. There was a half hour class, a half credit class in my senior year in my engineering degree called business law. And they talked a lot about how you can secure trademarks, patents, copyrights, and the things you have to be aware of. So I realized that I had to not do anything on the company clock that it had to be on my own clock. Otherwise, you hypothecate some of your invention. I also wrote up a contract, single page. In a lot of ways, single page contracts are better than multi-page contracts because you get right to the point and it's the essence of the deal. So I was able to maintain my control of video game technology and the rest is history.

Sandy Salty:

So Nolan, fast forward a couple of years and you start a company by the name of Syzygy. Can you tell us what Syzygy is?

Nolan Bushnell:

Syzygy was right out of the last S in the dictionary and it means a conjunction of planets in a solar system. Like we're in the Syzygy right now, which gives us really, really high tides. The moon and the sun and the earth are all in line. But we named it and pretty much figured out that nobody could pronounce it, nobody could spell it, which is kind of a bad name for a company. When we went to incorporate, it turns out that a candle maker in Mendocino had already taken the name. And so the way you did it by snail mail in those days is you listed all the names that you were going to name your corporation. And Atari was actually the third on the list. Syzygy was number one, and I don't remember what was number two. But Atari was number three, and it came back, and we said, oh, that's okay. And it turned out to be a really great name.

Sandy Salty:

So Syzygy becomes Atari, and you hire your first engineer. That's Alan Alcorn. Is that right?

Nolan Bushnell:

That's correct.

Sandy Salty:

And Alan, with your guidance, of course, and mentorship, develops Pong.

Nolan Bushnell:

It was meant to be a training program for him because it was just a really simple game. You know, if you look at the difference in complexity between Pong and Computer Space, Computer Space filled up three complete boards of chips. Pong only needed one, which made it much more reliable and the game earned more money because it was simple.

Sandy Salty:

So you create Pong gains tremendous amount of popularity and puts Atari on the map. I once heard you say in an interview that part of what made Pong such a huge hit is that the typical woman could beat the typical man. And that really stuck with me. What was the significance of that during that time specifically? It's arguably the same reason a game like that would resonate even in current times. Dive into that for us.

Nolan Bushnell:

Well, This is conjecture on my part, but the reality is that women have better small muscle coordination than men do. Men have better large muscle coordination. This is just on the average, and I'm not saying, you know, anything other than that. So, Pong required small muscle coordination. And it was really empowering because it was kind of at the beginning of the women's liberation movement, and all of a sudden it was... It was empowering. More than that, it turned out that it could become ladies' choice, meaning that the game required two players. Women loved the game. And so it became very normal for a woman to say to somebody on the barstool, hey, would you come over and play pong with me? And we all know that women are much better at relationship making than men are. We're just clumsy clods out there kind of bumping around. And I think that was also a help. It was kind of a matchmaker.

Todd Gallina:

So tremendous success, obviously, with Pong and Atari is underway. I want to talk a little bit about innovation and the importance of innovation while you were there. A couple of things stand out to me in your story. One is that you had a manifesto that you would not copy anyone else's. and you would only create new games. The other thing is that, and this is the first that I'd seen of this, you kind of created, far away from the Atari HQ, you created a place outside in Grass Valley where you wanted to, quote, create things that people said could not be created. It was the first kind of big tank. Yeah. No matter

Nolan Bushnell:

what happens, if you've got a factory in the back room, you're constantly feeding that beast. And so I felt that it was important to have somebody that had a next year agenda as opposed to next week agenda. And because a lot of times things that are truly revolutionary require more time. And so that was the prime focus of that. One, get it away from the factory that always had to be fed. And that was kind of the key. The reason Our manifesto was for creativity, is that we had less money. We didn't have all our manufacturing figured out yet. You know, we were just kind of making it up as we go along. And we were not as initially, we were considered to be the odd people out in terms of distribution. They kind of liked our products. They weren't sure about us because we were too new as a long term. So in some ways, innovation was the only tool we had. That was the way that we could differentiate ourselves in the marketplace because, quite frankly, our machines weren't as put together well. We didn't have as good coin nets and all the normal stuff that all the other companies had spent 40 years honing. We didn't have any of that. And so it was everything except innovation, we were in disadvantage. We even had a shipping disadvantage because everybody else was in Chicago. And so if you were shipping to the East Coast, we had a $200 machine disadvantage price-wise just in shipping costs. Wow. So it was a thing where if you looked at it objectively, everything was against us except innovation.

Sandy Salty:

Well, I'm going to continue to hurdle down the provocative question track. Okay. Nolan, the concept of eating your babies is a very personal concept in the context of our company. We've heard our founder use that phrase before several times, especially in the context of writing playbooks that are designed to sort of evolve our business. Sometimes you have to eat your baby to get better or to innovate in a different way. Please tell the audience that If you could share with the audience what eating your baby means in the context of innovation and entrepreneurship and why you coined this phrase in the first place.

Nolan Bushnell:

Well, it's really about being scared. You know, Gordon Moore always said, you know, only the paranoid survive. And that's kind of true. And so what you have to realize is if you see something that is stronger, better, or you think it's more marketable or cheaper, and you don't do it because it will cannibalize your current business, that's a real mistake. Because if you can see it, somebody else can see it, and they will come along maybe a month later, maybe a year later, and do the very thing that you're avoiding. So you have to be willing to compete with your main grid line. You just have to do it. And that can be construed as eating your own babies because it's, you know, it's your wonderful thing that's supporting your company. Now you're going to compete with it and maybe decimate

Todd Gallina:

it. Yeah, you know, in context for our listeners, for Tari, this is something that when you coined this phrase, you had been asking to develop the next generation of the home system. In some ways, that was rejected. They stuck with the older BCS. And the reason I mention this is because you are absolutely right. What you predicted in some ways, came true for Atari, and if perhaps they had eaten their baby at the time that you had mentioned it, things might have been a bit different for the company. Well, it was so

Nolan Bushnell:

clear to

Todd Gallina:

me

Nolan Bushnell:

that from the time we started designing the VCS to the time we got it on the market, the cost of memory per bit had dropped by three orders of magnitude. And so it was very, very clear to me that if you could just do a line buffer, that all of a sudden you'd get rid of the quarter-inch pixels, on the 2600 and do something that was closer to real-time graphics. In fact, that's exactly what Nintendo did. Yeah.

Sandy Salty:

Let's talk a little bit more about that. I'm of the belief that the structures, processes, and sunk cost bias of a big corporation is the nemesis of the consummate entrepreneur and innovator in a lot of ways. And while we have Nolan, I want to pick his brain about what it's like to go from building a company that is wildly successful, pioneered home gaming in every sense of the word, to then getting acquired by Warner, a bigger company, and what that transition is like for the founder himself.

Nolan Bushnell:

Well, for me, I've often thought that if I'd just taken a couple of weeks vacation, I wouldn't have sold. But I was tired. Atari never had enough money. We were growing like a weed. And though we were always profitable, we just never had enough cash to feel comfortable. So it was scary. And then all of a sudden, I found the VCS required a lot of capital. And we needed to be able to get that, either through VCs or... or an IPO. The stock market was not good for IPOs at the time. And so it kind of became necessary to sell, though sometimes you think things are necessary that really aren't. I could probably have hacked my way through and got the 2600 launched without venture capital, but maybe not. And what it did with me, it allowed me to kind of clear my head a little bit and I wanted to get married again and have a family. I kind of lost my first wife on the altar of Atari because she didn't like the life of the wife of an entrepreneur. It was too unpredictable and scary for her. And so I met and wed my wife at 42, 43 years now. And I'm really glad on that aspect that I sort of had my financial house in order and my personal life in order. was able to get married to a wonderful woman who started having kids.

Sandy Salty:

It's funny. We've never ventured down the path of entrepreneurship and the impact it can have on the personal life, the family life. And that's, I mean, I think if we have time at the end, it's something we could definitely dive into a little bit deeper.

Todd Gallina:

Yeah. So that would be great because I think that a lot of big decisions are made and we forget sometimes the lens that big decisions are made in. So I have a question, Nolan, about leading and inventing, right? So you're an entrepreneur and an inventor. Just one more brief moment while you're at Atari and we can move forward. So you're leading the company. Pong had been a huge hit, but you hadn't created a game yourself for over a year. And then you kind of rolled up your sleeves and created Breakout, which ended up being another huge, colossal hit for the company. Can you tell us a little bit of the straddling that line between leading a company and then actually inventing for it at the same time?

Nolan Bushnell:

You know, I kind of feel like that's like asking a fish to discover water. You know, I just somehow get ideas and I don't know where they come from, but I get them and they tend to be, you know, I'm actually pretty good at seeing holes in the market and products that can fill them. And if I could characterize the mistakes I consistently make is I do things sometimes a little bit ahead of its time. I get a little too out in front of the technology because the place you make money is where the technology is somewhat settled and down in price as opposed to founding your company to be a research project, which is really scary. And so you What you really want to do is find little pieces of technology and adapt them in unique ways.

Sandy Salty:

Gosh, everything you say honestly leads me to like a million more questions that I want to ask you. It's when I think about entrepreneurship, especially in the context of innovation, obviously timing is a key component. The concept itself is a key component. The financial, the investment scenario is obviously a critical component. Are there other aspects of innovation that you think play an impactful role in kind of the success or failure of that company or concept?

Nolan Bushnell:

Trends. Having a good idea about timelines and tracking trends of things that are important are important. So, for example, had I been a little bit smarter and looked at the trends myself, of the cost of memory, I could have actually put memory into the 26, more memory in the 2600 because the trend all said, hey, by the time this product gets to market, the memory is going to be, you know, one one thousandth of what it was. And so that was a fail on my part is the way I look at it. But trends are important because we, a lot of entrepreneurship, particularly if it's innovative, You're predicting the future and trends give you an idea of what the future may be. You know, you can make mistakes that way, but it's one way where you can start something and do something before other people think it's feasible just because you've tracked it and figured out where it's going to be at the right time.

Sandy Salty:

Makes total sense. So I think we've spent a lot of time on the gaming topic.

Todd Gallina:

Yeah. This might be a good time to hit the pause button on part one of this interview and then pick it up on part two. Before we let you go, is there anything else you want to share with the audience?

Nolan Bushnell:

Yeah, I'm also on the board of a self-driving car company called Perrone Robotics, and they have such a brilliant stack of software. They can actually, instead of having a supercomputer in the backseat like the other guys do, They can actually run their software with better outcomes in a Raspberry Pi if they wanted to. And they're going to be doing a crowdfunding thing about the same time that you're out. And I just encourage people to take a look at it because their software is truly remarkable. That's Perrone Robotics on WeFunder.

Todd Gallina:

Okay, perfect. And for our listeners, you can go check that out at wefunder.com slash perrone.robotics. And Perrone is spelled P-E-R-R-O-N-E. And Nolan, you can count on the support from myself, Sandy, and the rest of the Tracery folks to help move this along. For the rest of our listening audience, please check that out. And please join us for the second part of our interview with Nolan. That'll be our next episode queued up on the podcast feed. Until then, thanks a lot. See ya.

Outro:

Trace3 is hyper-focused on helping IT leaders deliver business outcomes by providing a wide variety of data center solutions and consulting services. If you're looking for emerging technology to solve tried and true business problems, Trace3 is here to help. We believe all possibilities live in technology. You can learn more at trace3.com slash podcast. That's trace the number three dot com slash podcast. you've been listening to the founder formula the podcast for all things startup from silicon valley to innovators across the country if you want to know what it takes to lead tomorrow's tech companies subscribe to the show wherever you get your podcasts until next time