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Speaker 1: Hey, snafoo fans, it's ed today.

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Speaker 2: I'm coming to you with an episode of a podcast

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Speaker 2: I have been loving. It's called Business History. Hosts Jacob

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Speaker 2: Goldstein and Robert Smith, former Planet Money guys, dig up

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Speaker 2: the wildest, most wait what stories about businesses big and small,

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Speaker 2: like how Hitler's favorite car became the ultimate hippie vehicle,

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Speaker 2: or why Thomas Edison got mixed up in the invention

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Speaker 2: of the electric chair. Every episode is a masterclass in

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Speaker 2: how fascinating people built something incredible and either watched it

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Speaker 2: soar or burn to the ground. Either way, it tells

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Speaker 2: us something about how we run business today. Today's tale

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Speaker 2: is really wacky, fueled by hot tubs, recreational drugs, and

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Speaker 2: a love of games. Nolan Bushnell took computer games out

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Speaker 2: of research labs and into bars, launching an industry. His

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Speaker 2: arcade game Pong was a monster hit, so he set

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Speaker 2: up Atari to build a home games console, which became

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Speaker 2: the must have Christmas present of nineteen seventy five. Atari

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Speaker 2: was the name on every kid's lips. But then the

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Speaker 2: investors came, and the investors brought pressure. Bushnell and his

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Speaker 2: engineers were pushed aside as Atari expanded, and in a

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Speaker 2: desperate bid to cash in on Hollywood hype, the company

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Speaker 2: concocted a wild plan for a game based on Steven

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Speaker 2: Spielberg's mega hit ET the Extra Terrestrial. Developed in mere weeks.

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Speaker 2: It tanked and brought Atari down with it, which is

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Speaker 2: ironic because I remember the game ET on Atari when

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Speaker 2: I was a little kid, and I loved it. Anyway,

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Speaker 2: here's the episode if you enjoy it. There's more tales

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Speaker 2: of founders, business success and spectac failures on Business History,

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Speaker 2: available on YouTube, Apple, Spotify, or wherever you get your podcasts.

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Speaker 1: Robert Smith, here is the big question for today's show. Yes,

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Speaker 1: how did Atari essentially invent the video game industry, win

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Speaker 1: the hearts of millions of young people in the nineteen

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Speaker 1: seventies and then blow up entirely in the early nineteen eighties,

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Speaker 1: basically never to be heard from again. It's a great question.

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Speaker 1: We are both of the age where we remember this personally.

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Speaker 3: Yeah, I remember my dad coming home with one of

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Speaker 3: the first Atari sets. It was like magic.

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Speaker 1: What was it?

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Speaker 3: It was pong, which was a ping pong game if

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Speaker 3: you know, little paddles and you'd send a little electronic

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Speaker 3: ball across the screen. And it was transformative because it

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Speaker 3: was the first time you could actually interact with a

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Speaker 3: television set which was sitting there in the center of

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Speaker 3: your home. And to be clear, I was not an

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Speaker 3: early adopter.

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Speaker 1: I was not cool.

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Speaker 3: Everybody had the Atari set.

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Speaker 1: I'm a little younger than you, not to throw it

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Speaker 1: in your face, but so for me, I don't remember Pong,

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Speaker 1: but I remember the Atari twenty six hundred came to

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Speaker 1: be called the twenty six hundred, which was like the

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Speaker 1: first video game system like we know it today where

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Speaker 1: you buy it and there's different cartridges, and this was,

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Speaker 1: you know, the dominant video game in the early eighties.

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Speaker 1: I loved it. I had Defender, had Journey, the game

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Speaker 1: Journey like the band played it for hours. And so

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Speaker 1: the big question is what happened.

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Speaker 3: I'm Jacob Goldstein and I'm Robert Smith, and this is

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Speaker 3: Business History.

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Speaker 1: What's it about Jacob Yesterday, Business Today?

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Speaker 3: On the show, How a company can invent something that

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Speaker 3: changes the future, changes all of culture and wind.

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Speaker 1: Up in utter failure, like literally wind up having to

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Speaker 1: bury hundreds of thousands of its own products, unsold video

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Speaker 1: game cartridges in a landfill in New Mexico.

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Speaker 3: I feel like today's show is like walking through my childhood.

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Speaker 3: We started with Atari, and our next step.

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Speaker 1: Is an amusement park that I initially called the Lagoon Utah,

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Speaker 1: and you pointed out it is called Lagoon. And you

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Speaker 1: know this because.

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Speaker 3: Because I grew up in Utah and went there once

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Speaker 3: a year and it was the best day of the year.

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Speaker 3: It's an amusement park, right, You play games, the rides,

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Speaker 3: you eat a lot of fried salty foods.

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Speaker 1: It was amazing, Robert, I guess you would have been

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Speaker 1: going to Lagoon in the seventies. A few years earlier.

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Speaker 1: It was this college kid named Nolan Bushnell who worked

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Speaker 1: summers there on the Midway, like where there was games

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Speaker 1: like whatever guess the way to the guy and knock

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Speaker 1: down the milk cans or whatever.

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Speaker 3: And just in case you have an image of someone

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Speaker 3: who's a carne working the milk jug games, this was

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Speaker 3: not Nolan Bushnell, but he.

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Speaker 1: Was a carnie genius. He became king of the Midway,

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Speaker 1: was running running all the games when he was like

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Speaker 1: twenty years old. Because he was really good at getting

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Speaker 1: people to spend their money on the games. Like one

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Speaker 1: example he gave later that is dear to my heart

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Speaker 1: is this. So there is that game where there's these

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Speaker 1: like metal milk jugs. I guess it's like metal bottles

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Speaker 1: and there's whatever four of them or six of them,

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Speaker 1: and they're stacked up, and you have a like a

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Speaker 1: softball or something. You throw it at it and try

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Speaker 1: and you're trying to win a stuffed animal. Yeah, maybe

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Speaker 1: a giant stuffed animal or something if you knock down

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Speaker 1: all the milk bottles right, and it turns out he

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Speaker 1: talked about this later, that like half of the bottles

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Speaker 1: are heavy and half of the bottles are light, and

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Speaker 1: so if you put the light bottles on the bottom,

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Speaker 1: it's really easy to knock them down, right. If you

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Speaker 1: put the heavy bottles on the bottom, it's really hard

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Speaker 1: to knock them down. Physics, And so he had this

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Speaker 1: movie he would make when like a bunch of high

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Speaker 1: school students would come. There'd be like, you know, the

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Speaker 1: captain of the football team, and then like the water

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Speaker 1: boy kind of trailing along behind. Okay, I was more

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Speaker 1: than the water boy. Obviously. He'd get the water Boy

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Speaker 1: to play, and he'd set it up the easy way

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Speaker 1: so that it's really easy to knock him down. The

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Speaker 1: water boy knocks him down and gets the big prize,

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Speaker 1: and then the captain of the football team's like, oh,

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Speaker 1: I'm definitely gonna just kill at this. But then Nolan

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Speaker 1: Bush Noel would set it up the hard way so

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Speaker 1: that the you know, football player throws it and they

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Speaker 1: don't fall down. He's like, Okay, I'll try again. I'll

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Speaker 1: try again, and he'd basically take all of the football

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Speaker 1: player's money because he couldn't knock him down.

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Speaker 3: He realized that games are psychology. Yeah, you know, it's

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Speaker 3: storytelling in psychology, and this would of course come in useful.

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Speaker 1: Yeah, And he had a real sense of fun, right,

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Speaker 1: Like this was fun for the water boy, not fun

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Speaker 1: for the football player. But like he he loved a party,

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Speaker 1: took a lot of drugs. He was studying electrical engineering

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Speaker 1: in school, but it took him like seven years to graduate. Eventually,

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Speaker 1: he moves to Silicon Valley, not called Silicon Valley yet,

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Speaker 1: but it's becoming that. Right, this is right where we

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Speaker 1: were at the end of last week's show, and he's

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Speaker 1: going to invent the video game industry, but he doesn't

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Speaker 1: know it yet.

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Speaker 3: So at the time, he works for a company called Ampex,

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Speaker 3: famous for the US in the radio business as the

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Speaker 3: makers of magnetic tape.

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Speaker 1: Did you use Ampex tape? Is?

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Speaker 3: Of course, my closets filled with its stillcitally it is,

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Speaker 3: actually can't get rid of them. But Ampex was notable

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Speaker 3: not just because it was an electronics company in the

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Speaker 3: Bay Area, but because it had this policy that allowed

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Speaker 3: their employees to basically take stuff home and tinker with it,

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Speaker 3: you know, to come up with new ideas based on

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Speaker 3: the equipment. And so Bushnell starts taking stuff home thinking

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Speaker 3: about games.

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Speaker 1: And in particular he's saying about video games, or really

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Speaker 1: video game because at this point in history, there's essentially

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Speaker 1: one video game, and it was created by these guys

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Speaker 1: at MIT, of course MIT in the early sixties, to

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Speaker 1: be run on you know, a computer, which at that

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Speaker 1: time was a big machine that you had at a

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Speaker 1: university that costs hundreds of thousands of dollars. The game

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Speaker 1: was called Space War exclamation mark. Great name for a game,

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Speaker 1: and it was fun if you understood like Newtonian gravity, right,

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Speaker 1: you like, have a spaceship and there's a star and

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Speaker 1: it's like I go around the Sun to get just

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Speaker 1: the gravity goes into the square of the distance whatever.

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Speaker 1: So he's thinking about Space War exclamation mark. And you

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Speaker 1: know when he first played it in college, he played

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Speaker 1: it at the university on this extremely expensive computer, where

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Speaker 1: it obviously wouldn't work anywhere else. It wouldn't work as

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Speaker 1: a business because the computer was too expensive. You just

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Speaker 1: did it at night for fun. But by the time

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Speaker 1: he's in Silicon Valley in the early seventies, you know,

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Speaker 1: Moore's law, like we talked about last time, is cranking along.

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Speaker 1: Computers are getting cheaper and cheaper and cheaper and faster

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Speaker 1: and faster and faster. And he's like, oh, maybe now

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Speaker 1: that technology has got to a place where I could

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Speaker 1: make Space War on a machine that I could build

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Speaker 1: cheaply enough to put it in a bar next to

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Speaker 1: a pinball machine and get people to put quarters in it.

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Speaker 3: That's Bushnell's law, which is basically, if people have coins

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Speaker 3: in a place of amusement, they will spend all the

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Speaker 3: coins they have on something that's new and fun.

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Speaker 1: Yes, And so he starts working with this other guy

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Speaker 1: from Ampex, and you know, he buys up a black

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Speaker 1: and white TV at Goodwill and he actually, interestingly, he

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Speaker 1: builds essentially a computer from the ground up, right, because

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Speaker 1: he is optimizing for cheapness, right, he wants to build

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Speaker 1: the cheapest functional machine he can. And he gets like

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Speaker 1: a little coin slot like they have in in pinball machines,

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Speaker 1: has like a paint thinner can for the coins to

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Speaker 1: go into. And they build a functional prototype of a

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Speaker 1: game that is a lot like Space War and it

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Speaker 1: looks like an arcade game, although there's not really any

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Speaker 1: such thing as arcade gets at this point. But it's

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Speaker 1: a box in the corner. Yeah, it's next to the

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Speaker 1: juke box.

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Speaker 3: It stands up and it has and it has computer

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Speaker 3: space on it, and you're like, oh, computers space.

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Speaker 1: There's a screen, and there's controls, and there's a place

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Speaker 1: to put coins it, right, the three things you need.

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Speaker 1: They get this company to make fifteen hundred of the machines. Right,

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Speaker 1: it's going to be a thing in the world. Now

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Speaker 1: it gets out into the world and nobody really wants

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Speaker 1: to play it, basically because it's not that fun. It

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Speaker 1: seems it's it's violating one of the tenets you laid

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Speaker 1: out in your made up Bushnell's law.

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Speaker 3: Right, you had to have a lot of instructions to

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Speaker 3: play it. Is the way I understand.

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Speaker 1: Yeah, or at least like it helps if you understood physics,

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Speaker 1: you know what to think about physics when you're playing

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Speaker 1: a video game, but not in a bar now, Yeah,

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Speaker 1: and so you know what do you do in Silicon Valley?

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Speaker 1: If you make something and it's a failure, you start

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Speaker 1: your own company, exactly right, And they call it, of

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Speaker 1: course sissy g s y z y.

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Speaker 3: G y, really going in on the astronomical theme, which

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Speaker 3: you know SIGs win like the planet's lineup something.

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Speaker 1: Yeah, so I think so clearly a bad name, hard

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Speaker 1: to say, hard to spell, and kind of a lucky

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Speaker 1: break for Nolan Bushnell. It's already taken by a candlemaker

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Speaker 1: up in Mendocino. So they go with another name Atari.

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Speaker 3: And for those of you who have played the game Go,

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Speaker 3: it's like check in chess. You say Atari when you

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Speaker 3: have almost surrounded someone's stone.

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Speaker 1: You're saying this, like you play Go? Have you played?

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Speaker 1: I have played? You never talked about this?

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Speaker 3: Oh yeah yeahah, Tarry, And I mean so much so

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Speaker 3: that it also has.

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Speaker 1: Where is your Go? Game? It's okay? Really yeah, it's okay.

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Speaker 1: So now they have a company and a name one

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Speaker 1: key thing. They're missing a game that people want to play. Yeah,

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Speaker 1: minor thing. It's nineteen seventy two, and one day Bushnell

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Speaker 1: hears about a thing happening at a hotel in I

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Speaker 1: think Sunny Vale, somewhere in in Silicon Valley. Magnavox, the

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Speaker 1: TV company, they're working on their own video game. This

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Speaker 1: is actually going to be one not to put in

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Speaker 1: a bar, but to play at home. Right. Their idea

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Speaker 1: is they're going to have this machine that will help

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Speaker 1: them sell more televisions. Yeah, and so they have a

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Speaker 1: prototype of this machine, and you know, there's like a

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Speaker 1: special preview for insiders. And so Bushnell's like, I got

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Speaker 1: to see this thing. And so he drives over there

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Speaker 1: and he does not say I'm a competitor. Competitor, No,

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Speaker 1: he knows. He says, oh, yeah, I work at the

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Speaker 1: Magnavox store whatever over down El Camino or whatever. It is.

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Speaker 1: Corporate intrigue easier to get away with a lie, I

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Speaker 1: guess in nineteen seventy two, Right, they're not gonna come

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Speaker 1: up on the internet. And he gets to go in

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Speaker 1: and and see what this product is and it kind

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Speaker 1: of sucks. So he's relieved, right, It to him, is

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Speaker 1: clearly made by somebody who doesn't understand games. And one

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Speaker 1: thing about Bushnell is he really understands games because they're

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Speaker 1: just not that fun to play. But there is one

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Speaker 1: game that has some spark of promise to him, and

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Speaker 1: it's essentially like a simple tennis or ping pong game

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Speaker 1: where there's like two rectangular sort of paddles or rackets

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Speaker 1: and then like a square ball and it goes back

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Speaker 1: and forth and there's two players, but there's no score

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Speaker 1: in the game, there's no music like it's it's it's

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Speaker 1: just a weak version, but.

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Speaker 3: That shows some promise to him, and for those of

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Speaker 3: you who have played pong what he is about to develop,

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Speaker 3: it does have this amazing sound.

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Speaker 1: Dok doink, which is just so.

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Speaker 3: Like I can hear it in my brain right now.

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Speaker 1: Right. So Pushnell goes back to the office and there's

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Speaker 1: this engineer who's just started that day, and he's like,

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Speaker 1: you know, make this, make this kind of pingpong game,

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Speaker 1: but make it fun, make it do all these fun things.

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Speaker 1: And the engineer does a great job, and you know,

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Speaker 1: a few weeks later, they have this prototype of an

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Speaker 1: arcade style game that they call Pong. They just want

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Speaker 1: to see how it does, right, it's a prototype. So

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Speaker 1: there's this bar nearby. It's called Andy Capps Tavern.

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Speaker 3: Named after a cartoon character from the newspapers of the

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Speaker 3: nineteen seventies.

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Speaker 1: Too hard to explore. Its basically what we would call

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Speaker 1: today an alcoholic Yeah, a problem. Yes, And they say,

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Speaker 1: can we just put this machine in the corner here

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Speaker 1: at Andy Caap's tavern, like, you know, like a pinball machine,

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Speaker 1: And the guy at the bar says sure, And so

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Speaker 1: they put the machine there and it's you know, it's

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Speaker 1: really simple. It's called pong. It has two knobs, one

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Speaker 1: for each player, and unlike computer space, it has beautifully

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Speaker 1: simple instructions. Avoid miss ball for high score. That's it.

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Speaker 1: Love it just a few words, yeah, yeah, three plays

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Speaker 1: for one quarter. They plug it in and they go

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Speaker 1: back to the office. And a few days later, like

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Speaker 1: three days later, they get a call from the bar

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Speaker 1: and the guy at the bar is calling him says, yeah,

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Speaker 1: the machine's broken. I don't know what's going on. It's

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Speaker 1: not working. I like whatever, it's a prototype, you know,

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Speaker 1: it's a new kind of computer. Of course it's gonna break.

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Speaker 1: Somebody from Atari goes down there, to check it out,

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Speaker 1: and it turns out it is broken because the coin

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Speaker 1: box is full. It's broken because people have put too

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Speaker 1: much money into the machine. It's too good. It's too good. Yeah,

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Speaker 1: you know, Nolan Bush and out of his colleagues have

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Speaker 1: built a machine that people just cannot help themselves put

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Speaker 1: money into. We're gonna need a bigger coin You're gonna

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Speaker 1: need a bigger box. People love to put quarters into

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Speaker 1: a new thing.

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Speaker 3: Well, to see the new technology and then tell everyone

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Speaker 3: about it, right, that is the that's one of the

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Speaker 3: first insights of the technology.

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Speaker 1: Huh.

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Speaker 3: And then it's gotta be worth playing a second time,

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Speaker 3: which is what he also had.

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Speaker 1: He had the two pieces. It's super fun. It's a

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Speaker 1: new thing and it's super fun. Now he's got a scale,

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Speaker 1: very classic startup problem. You have a thing, people want it.

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Speaker 1: But remember he essentially stole the idea from Magnavox. By

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Speaker 1: the way lawsuit they said a out of court whatever.

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Speaker 1: Lots of people now you know it's Silicon Valley. People

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Speaker 1: are coming by Andy Kapstavern who are engineers who are like,

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Speaker 1: we can do this, and so he's got to get

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Speaker 1: video games out into the world fast, gonna need money.

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Speaker 1: He's gonna need money. Nobody's gonna give him money yet, right,

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Speaker 1: He's just some stoner with one video game in a bar.

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Speaker 1: So he makes a move that has already come up

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Speaker 1: a few times on our young show.

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Speaker 3: Your favorite negative cash conversion cycle.

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Speaker 1: The negative cash conversion cycle. He's able to sell games

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Speaker 1: before he has to pay for the parts. So the

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Speaker 1: parts to make a game cost Atari like three hundred dollars.

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Speaker 1: But crucially they don't have to pay for those parts

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Speaker 1: on delivery. Right, they have like a month, so the

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Speaker 1: parts come in, Ataria doesn't have to pay anything. They

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Speaker 1: put them together and sell the machine for nine hundred dollars,

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Speaker 1: and then a few months later they have to pay

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Speaker 1: three hundred but meanwhile they got the money from that machine.

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Speaker 1: They're growing. They're often running now other problem, classic scale

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Speaker 1: problem hiring. And then one day this like nineteen year

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Speaker 1: old hippie kid walks in and he says he won't

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Speaker 1: leave until they give him a job. And the receptionist

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Speaker 1: calls the head engineer and she goes, yeah, we got

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Speaker 1: a hippie kid in the lobby, says he won't leave

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Speaker 1: until we hire him. Should we call the cops or

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Speaker 1: let him in, and the engineer says, bring him on in.

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Speaker 3: It's nineteen seventy's a Silicon valley, and this guy wanders

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Speaker 3: in and he is whenever you tell a story like this,

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Speaker 3: you know who it is.

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Speaker 1: It's Steve Jobs. It's Steve Job. So fun, it's so

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Speaker 1: delightful and perfectly. Steve Jobs is very good at his job, yes,

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Speaker 1: and very unpleasant to wrqu classic unsurprising. He tells Bushnell

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Speaker 1: that like everybody's soldering wrong, right, they're actually putting together

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Speaker 1: the hardware, slatter the hardware. He's probably right, and Bushnell

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Speaker 1: was like, yeah, he was right. He keeps calling his

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Speaker 1: manager a dumb shit. Probably was not kind, not necessary.

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Speaker 1: Bushnell winds up putting Jobs on the night shift, partly

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Speaker 1: so he won't bother so many people, and partly because

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Speaker 1: he knew that Jobs like to hang out at night

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Speaker 1: with his buddy Steve Wozniak, who was a great engineer.

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Speaker 1: It would be great to have hanging around atari And

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Speaker 1: in fact, Jobs and Wozniak helped to make Breakout a

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Speaker 1: great a target. Remember breaking of.

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Speaker 3: Course, you're trying to knock down the bricks in a wall.

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Speaker 1: Still, games like that, we got a little paddle at

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Speaker 1: the bottom of it.

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Speaker 3: There's a moment when he goes through the wall and

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Speaker 3: then goes so satisfying.

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Speaker 1: So good. So Jobs worked at Atari for a little

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Speaker 1: while and then decided he wanted to go off to

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Speaker 1: India to find his guru perfect and asked Atari to

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Speaker 1: pay for the trip. Nobody ever said he lacked moxie

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Speaker 1: and wound up making a deal with Atari where they

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Speaker 1: pay him to go part of the way there. There

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Speaker 1: was they had exported some games to Germany and there

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Speaker 1: was some kind of problem with the games in Germany,

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Speaker 1: and they're like, we'll send you to Germany to fix

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Speaker 1: the games and then you can get the rest of

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Speaker 1: the way to India from there. And that's what happened.

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Speaker 1: And you know, the Germans said Jobs was terrible to

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Speaker 1: work with, but he fixed the games.

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Speaker 3: You know, there's an alternative history where we're carrying around

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Speaker 3: Atari devices in our pocket.

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Speaker 1: It's true. And you know, there is something right I

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Speaker 1: was thinking about, like the link between Atarian Jobs and

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Speaker 1: what did he learn there, and it felt like maybe

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Speaker 1: a little overdetermined, but I do think you know, clearly

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Speaker 1: he had this profound sense of aesthetics and of delight, right,

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Speaker 1: Like think of the Macintosh, right, this breakthrough Apple machine

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Speaker 1: in the eighties. It was round and instead of squares,

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Speaker 1: it was rounded, and it cost them more money, but

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Speaker 1: it was beautiful and it was fun and you were

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Speaker 1: engaged with it like a game.

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Speaker 3: It almost looked a little bit like an arcade game

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Speaker 3: with the curves. Yeah, but more than that, I think

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Speaker 3: that especially at Silicon Valley at the time when they

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Speaker 3: were dealing in actual silicon Right, if you're making chips

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Speaker 3: for somebody, you're thinking about the future and the computer.

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Speaker 3: You're not thinking about the psychology of the customer, because

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Speaker 3: the customer was another electronics.

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Speaker 1: Company, right.

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Speaker 3: And so Atari and the strength of it was really

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Speaker 3: the first time where they're just like, how will a

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Speaker 3: regular human being who has no training whatsoever interact with technology?

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Speaker 1: Yeah? Yeah, with a computer? Right, Like what they are

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Speaker 1: making is going to become essentially the first widely adopted

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Speaker 1: home computer, the first computer that ordinary people literally children

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Speaker 1: can just plug in and turn on and interact with.

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Speaker 3: But the inside Bushnel had is that it wasn't labeled

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Speaker 3: a computer. Yeah, it was a fun game.

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Speaker 1: Yeah. Yeah. So Atari now mid seventies, they're selling all

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Speaker 1: the machines they can make. They're growing, they need more space,

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Speaker 1: and so they rent an abandoned roller rink. They stencyle

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Speaker 1: Atari on the window, and they turn it into this

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Speaker 1: office slash video game factory. I've been ten years older.

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Speaker 3: I would have loved to have worked in a roller

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Speaker 3: rink video game factory.

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Speaker 1: Yes, everybody smoked weed. Yeah, there was a hot tub.

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Speaker 1: There was a pool party where everybody ended up naked

401
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Speaker 1: in the pool at Bushnell himself looked back on it

402
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Speaker 1: later and said, if that isn't a horror show for

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Speaker 1: any HR person today, I don't know what is. But

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Speaker 1: it was the seventies. It was a weirdo startup. I'm

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Speaker 1: guessing they didn't have an HR department. I don't know.

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Speaker 1: This is a company that's making games, right, and so

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Speaker 1: you need engineering brains, but you also need a sense

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Speaker 1: of play, of fun, of freedom, right, And clearly Bushnell

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Speaker 1: was deliberately trying to create that. You know, he he

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Speaker 1: had this culture that was free and creative. His office

411
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Speaker 1: door was always open, and right next to that open

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Speaker 1: door was a keg of beer. So Atari's doing well.

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Speaker 1: You know, Pong is a huge hit, but Bushnell knows

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Speaker 1: the big opportunity. The hockey stick will be if they

415
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Speaker 1: can make a home video game, you know, like Magnavox

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Speaker 1: was trying to do, but that nobody has cracked yet.

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Speaker 3: All they have to do is get rich people into

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Speaker 3: a roller rink with a hot tub and some beer

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Speaker 3: and it's all going to work out. Yeah, they need money,

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Speaker 3: and in order to get money, he's going to have

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Speaker 3: to convince people that this is going to be a

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Speaker 3: global phenomenon.

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Speaker 1: After the break, Okay, that's the end of the ads.

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Speaker 1: We're going back to the show nineteen seventy four, Atari

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Speaker 1: Nolan Bushnell has dreams of selling a version of Pong

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Speaker 1: that people can play at home. We know it's going

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Speaker 1: to work because you played it young Robert Smith's waiting.

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Speaker 1: How are they going to get the money to do it? Well?

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Speaker 3: At this point, as we've earned in the last show,

430
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Speaker 3: like venture capital is just starting to be a thing.

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Speaker 3: Rich people on the East Coast are starting to realize

432
00:22:07,480 --> 00:22:09,400
Speaker 3: that there's a bunch of geniuses who can make money

433
00:22:09,440 --> 00:22:11,639
Speaker 3: on the West Coast and are starting to at least

434
00:22:11,720 --> 00:22:12,800
Speaker 3: shop around that money.

435
00:22:12,840 --> 00:22:14,560
Speaker 1: But there's not a whole system for it. There's not

436
00:22:14,560 --> 00:22:17,600
Speaker 1: a whole system for it. The culture hasn't caught up

437
00:22:17,640 --> 00:22:19,720
Speaker 1: that much. He talked about the culture shift last time.

438
00:22:19,760 --> 00:22:21,959
Speaker 1: And so, you know, a few vcs do go by

439
00:22:22,000 --> 00:22:25,680
Speaker 1: Atari and they see that it's a roller rink full

440
00:22:25,720 --> 00:22:27,800
Speaker 1: of weed smokers, and they're like, this is not the

441
00:22:27,840 --> 00:22:31,800
Speaker 1: business we're in. But one day a venture capitalist named

442
00:22:31,880 --> 00:22:36,640
Speaker 1: Don Valentine walked in. Valentine had worked at Fairchild Semiconductor,

443
00:22:36,640 --> 00:22:38,879
Speaker 1: that a company that was at the heart of the

444
00:22:38,920 --> 00:22:41,160
Speaker 1: birth of Silicon Valley that we talked about last time.

445
00:22:41,720 --> 00:22:46,359
Speaker 1: Valentine was the sales manager there and Fairchild was like

446
00:22:46,440 --> 00:22:49,560
Speaker 1: this fountain of startups, they called them the fair Children.

447
00:22:50,520 --> 00:22:53,080
Speaker 1: Somebody from there started AMD, still one of the biggest

448
00:22:53,119 --> 00:22:55,560
Speaker 1: chip makers in the world. And Valentine, because he had

449
00:22:55,600 --> 00:22:59,680
Speaker 1: worked with these guys knew them, had invested out of

450
00:22:59,720 --> 00:23:02,399
Speaker 1: his own pocket in some of the companies, understood what

451
00:23:02,440 --> 00:23:05,560
Speaker 1: was happening in technology, and he started in the early

452
00:23:05,600 --> 00:23:11,240
Speaker 1: seventies a venture capital firm called Sequoia.

453
00:23:10,000 --> 00:23:13,200
Speaker 3: A little bit famous, right. They invested in Apple, Google

454
00:23:13,359 --> 00:23:18,240
Speaker 3: and Video Instagram, WhatsApp, like one of the you know, maybe.

455
00:23:17,880 --> 00:23:21,640
Speaker 1: Two or three biggest most important VC firms, But at

456
00:23:21,640 --> 00:23:25,760
Speaker 1: this time it was Valentine and he went to visit Atari.

457
00:23:26,600 --> 00:23:28,760
Speaker 1: He smelled the weed smoke. He said it was enough

458
00:23:28,800 --> 00:23:32,040
Speaker 1: to knock you to your knees. At some point he

459
00:23:32,080 --> 00:23:34,960
Speaker 1: took a meeting in the hot tub, and so he's like, yes,

460
00:23:35,000 --> 00:23:39,080
Speaker 1: it's obviously super sketchy, but also he was like, Oh,

461
00:23:39,160 --> 00:23:41,080
Speaker 1: these guys are onto something. This could be a way

462
00:23:41,119 --> 00:23:45,520
Speaker 1: to get the computer into the house, this giant, transformative thing.

463
00:23:45,640 --> 00:23:49,400
Speaker 1: And so he offers Bushnel this interesting deal. He says,

464
00:23:49,440 --> 00:23:51,440
Speaker 1: I'm not going to give you money to start with,

465
00:23:51,600 --> 00:23:54,520
Speaker 1: but i will help you. I will help you, you know,

466
00:23:55,200 --> 00:23:57,919
Speaker 1: find a partner essentially, so that you can get to

467
00:23:57,960 --> 00:24:00,760
Speaker 1: the next level. And if you don't screw it up,

468
00:24:01,200 --> 00:24:04,359
Speaker 1: then I'll give you money. Yes, And you know, the

469
00:24:04,440 --> 00:24:07,720
Speaker 1: key thing Valentine wants to help Atari with at this

470
00:24:07,800 --> 00:24:11,399
Speaker 1: point is how do you get this little stoner video

471
00:24:11,400 --> 00:24:16,560
Speaker 1: game company connected with a big national retailer to distribute

472
00:24:16,600 --> 00:24:20,200
Speaker 1: their first consumer product across the country. So they're working

473
00:24:20,200 --> 00:24:24,240
Speaker 1: on this together and toys Rus turns them down, Radio

474
00:24:24,280 --> 00:24:25,280
Speaker 1: Shack turns them down.

475
00:24:25,400 --> 00:24:27,800
Speaker 3: Oh, they're waiting for the big Tandy computer they were

476
00:24:27,840 --> 00:24:29,840
Speaker 3: going to sell years later at out the Tierrasadi.

477
00:24:30,400 --> 00:24:32,600
Speaker 1: They go to the New York Toy Fair. Nobody is

478
00:24:32,640 --> 00:24:37,280
Speaker 1: interested and this is partly because the Magnavox Odyssey, it

479
00:24:37,320 --> 00:24:40,399
Speaker 1: was called the game that Bushnell saw under development from Magnavox,

480
00:24:40,640 --> 00:24:42,640
Speaker 1: had come out. There was a you know, somebody tried

481
00:24:42,640 --> 00:24:44,720
Speaker 1: a home video game and it had done badly. But

482
00:24:44,840 --> 00:24:46,440
Speaker 1: it turns out that's because it was a bad game,

483
00:24:46,480 --> 00:24:47,960
Speaker 1: and Magnavox just thought of it as a way to

484
00:24:47,960 --> 00:24:52,760
Speaker 1: sell TVs Classic Incumbent mistake, right, They're just thinking about

485
00:24:52,760 --> 00:24:58,119
Speaker 1: their old product. Eventually, Valentine does get Atari a key break.

486
00:24:58,960 --> 00:25:02,640
Speaker 1: He sets up a meeting with Sears, which of course

487
00:25:02,720 --> 00:25:05,000
Speaker 1: was the biggest retailer in the country at this point,

488
00:25:05,000 --> 00:25:07,439
Speaker 1: as we talked about a few weeks ago, gets inm

489
00:25:07,480 --> 00:25:10,879
Speaker 1: this meeting to pitch Home Pong right Pong for the

490
00:25:10,920 --> 00:25:14,560
Speaker 1: home Valentine's sent Bushnell to Sears headquarters in Chicago for

491
00:25:14,600 --> 00:25:17,760
Speaker 1: a meeting, told him to wear a suit, or at

492
00:25:17,840 --> 00:25:21,680
Speaker 1: least that's Valentine's version of the story. Interestingly, Bushnell has

493
00:25:21,680 --> 00:25:25,680
Speaker 1: a different version. According to Bushnell, Atari Cold called Sears

494
00:25:26,119 --> 00:25:28,480
Speaker 1: got put through to a buyer who was immediately interested

495
00:25:28,520 --> 00:25:31,360
Speaker 1: and came out to California right away. And I actually

496
00:25:31,440 --> 00:25:33,480
Speaker 1: love these two different stories. I think there's like a

497
00:25:33,480 --> 00:25:37,040
Speaker 1: little in stop looking at your computer. I'm sorry, Plan Pung.

498
00:25:38,560 --> 00:25:41,720
Speaker 3: Yes, it's addictive, yes, God, And I.

499
00:25:41,720 --> 00:25:45,040
Speaker 1: Actually think there's something interesting in the fact that these

500
00:25:45,040 --> 00:25:48,000
Speaker 1: two guys remember this so differently, because it speaks to

501
00:25:48,040 --> 00:25:52,359
Speaker 1: this divide between venture capitalists and founders that persist today. Right,

502
00:25:52,400 --> 00:25:55,639
Speaker 1: and the question is what is venture capital really doing.

503
00:25:55,720 --> 00:25:58,119
Speaker 1: A lot of founders will say, oh, they're just putting

504
00:25:58,160 --> 00:26:00,879
Speaker 1: up the money, and most of the ventures will be like, no, no,

505
00:26:00,920 --> 00:26:02,480
Speaker 1: these are guys who don't know what they're doing. We're

506
00:26:02,480 --> 00:26:03,280
Speaker 1: putting up the money.

507
00:26:03,359 --> 00:26:06,280
Speaker 3: We make introductions, right, we help guide your decisions.

508
00:26:06,400 --> 00:26:09,480
Speaker 1: Yeah. Yeah. And so I don't know what happened in

509
00:26:09,480 --> 00:26:12,439
Speaker 1: this case, but whatever was the case. A buyer from

510
00:26:12,520 --> 00:26:16,000
Speaker 1: Sears did come out to Atari one day in April

511
00:26:16,040 --> 00:26:19,679
Speaker 1: of nineteen seventy five, showed up at eight am, and

512
00:26:19,720 --> 00:26:22,000
Speaker 1: of course nobody from Atari is in the office yet.

513
00:26:22,400 --> 00:26:25,560
Speaker 1: But eventually Bushnell and the others show up. They let

514
00:26:25,600 --> 00:26:29,040
Speaker 1: the Sears buy or play with their pong prototype. It's fun,

515
00:26:29,119 --> 00:26:32,080
Speaker 1: you know. Bushnell gives him a sales pitch. Bushnell's a

516
00:26:32,080 --> 00:26:36,040
Speaker 1: great salesman, and the Seers guy wants in and he

517
00:26:36,080 --> 00:26:39,840
Speaker 1: asks Atari, how many of these you know, home video

518
00:26:39,880 --> 00:26:44,400
Speaker 1: game devices? Can you make for this year's Christmas shopping season?

519
00:26:45,400 --> 00:26:49,639
Speaker 1: It's April right at this point, Atari has made zero

520
00:26:50,080 --> 00:26:53,080
Speaker 1: of these home machines. Yes, not even really this prototype,

521
00:26:53,760 --> 00:26:57,359
Speaker 1: because it's a fake prototype. It's this wood box painted

522
00:26:57,400 --> 00:26:59,800
Speaker 1: to look like it's plastic and like glued to whatever

523
00:27:00,040 --> 00:27:02,879
Speaker 1: coffee table, and it's got a hole underneath it, and

524
00:27:02,880 --> 00:27:06,160
Speaker 1: there's wires running down to like a much bigger, essentially

525
00:27:06,200 --> 00:27:08,879
Speaker 1: computer they've jerry rigged in like an apple crate hidden

526
00:27:08,920 --> 00:27:10,840
Speaker 1: under the table, and then an eight year old moving

527
00:27:10,840 --> 00:27:14,560
Speaker 1: the pixels around. Yeah. Right, it's a mechanical turk home pong.

528
00:27:16,000 --> 00:27:18,239
Speaker 1: So the Seriers guy asks, you know, how many can

529
00:27:18,280 --> 00:27:20,919
Speaker 1: you make for Sears, the biggest retailer in the world,

530
00:27:20,960 --> 00:27:23,520
Speaker 1: I believe still at this point, And Bushnell's like, give

531
00:27:23,520 --> 00:27:25,200
Speaker 1: me a minute to talk with the team, and he

532
00:27:25,240 --> 00:27:27,520
Speaker 1: goes out and he talks to his head of manufacturing,

533
00:27:27,880 --> 00:27:29,160
Speaker 1: and you know, they've been making it at this point

534
00:27:29,200 --> 00:27:32,720
Speaker 1: big arcade games where a big run is five thousand machines.

535
00:27:33,480 --> 00:27:35,640
Speaker 1: The head of Manufacturing's like, how many can we make,

536
00:27:35,720 --> 00:27:37,320
Speaker 1: you know, in a few months to get him in time,

537
00:27:37,640 --> 00:27:41,399
Speaker 1: we can make twenty five thousand, twenty five thousand, So

538
00:27:41,520 --> 00:27:44,480
Speaker 1: Bushnell goes back in with the Seers guy and he says,

539
00:27:45,080 --> 00:27:48,280
Speaker 1: for this year, we can make you seventy five thousand.

540
00:27:48,560 --> 00:27:50,840
Speaker 1: Just multiply it by three. That's good. That's a good

541
00:27:50,920 --> 00:27:52,399
Speaker 1: CEO move. If they asked him how he did it,

542
00:27:52,400 --> 00:27:54,399
Speaker 1: he didn't even say multiply by three. He's talking about it

543
00:27:54,480 --> 00:27:57,600
Speaker 1: later in an interview he said, quote, I was just

544
00:27:57,720 --> 00:28:00,359
Speaker 1: pulling it out of my butt. Also a good CEO.

545
00:28:01,040 --> 00:28:06,160
Speaker 3: Sears guy here seventy five thousand and thanks, we're Seers.

546
00:28:07,160 --> 00:28:09,920
Speaker 1: Come on, come on, wit seventy thousand. You think you're

547
00:28:09,920 --> 00:28:12,639
Speaker 1: talking to J. C. Penny here, Montgomery Ward, come on

548
00:28:12,840 --> 00:28:16,120
Speaker 1: Radio Shack. One hundred and fifty thousand is what they order,

549
00:28:16,600 --> 00:28:20,479
Speaker 1: and Bushnell says, okay, they have a few months to

550
00:28:20,480 --> 00:28:24,119
Speaker 1: do it. Now. Bushnell really does need that capital, but

551
00:28:24,160 --> 00:28:27,280
Speaker 1: he also has a huge order from the biggest retailer

552
00:28:27,400 --> 00:28:30,880
Speaker 1: of the world. Much easier to get funding. And Valentine

553
00:28:31,200 --> 00:28:35,199
Speaker 1: Sequoya comes through with the money. Atari becomes Sequoia's first

554
00:28:35,359 --> 00:28:40,680
Speaker 1: ever investment, and Sears now does the Sears thing that

555
00:28:40,760 --> 00:28:43,360
Speaker 1: we talked about on the Sears Show. Right. They help

556
00:28:43,440 --> 00:28:47,480
Speaker 1: this little company figure out how to scale really quickly. Right,

557
00:28:48,080 --> 00:28:50,840
Speaker 1: They get Bushnell set up with the Sears Bank, which

558
00:28:51,160 --> 00:28:54,000
Speaker 1: is cool at a like nerdy finance way. They create

559
00:28:54,040 --> 00:28:56,960
Speaker 1: this bonded warehouse so that now when Atari makes this

560
00:28:57,360 --> 00:29:00,480
Speaker 1: you know, one home Pong game, they don't have to

561
00:29:00,480 --> 00:29:02,240
Speaker 1: to get money for it. Then get eighty percent of

562
00:29:02,240 --> 00:29:03,640
Speaker 1: the value of it right as soon as it goes

563
00:29:03,640 --> 00:29:06,160
Speaker 1: into the warehouse. Clearly, a roller rink is not going

564
00:29:06,240 --> 00:29:08,520
Speaker 1: to work to make one hundred and fifty thousand home

565
00:29:08,600 --> 00:29:10,960
Speaker 1: video game consoles. So they get a you know, a

566
00:29:11,040 --> 00:29:14,000
Speaker 1: kind of real factory with a conveyor belt where Bushnell

567
00:29:14,080 --> 00:29:16,720
Speaker 1: loves to ride around in a box on the conveyor belt.

568
00:29:16,760 --> 00:29:18,920
Speaker 1: The guy loved to play, right, he loved he loved

569
00:29:18,960 --> 00:29:22,000
Speaker 1: to play, which is essential. Actually, one day some serious

570
00:29:22,040 --> 00:29:24,480
Speaker 1: execs in suits show up and Bushnell's in fact riding

571
00:29:24,560 --> 00:29:27,560
Speaker 1: on the conveyor belt in a box. They're like, okay, whatever,

572
00:29:27,640 --> 00:29:32,479
Speaker 1: just keep making the games, and they do. Atari that

573
00:29:32,600 --> 00:29:36,680
Speaker 1: year shipped over one hundred and fifty thousand units. They

574
00:29:36,680 --> 00:29:38,520
Speaker 1: exceeded that one hundred and fifty thousand number for the

575
00:29:38,600 --> 00:29:42,600
Speaker 1: nineteen seventy five Christmas season, and Sears sold all of them.

576
00:29:42,840 --> 00:29:46,800
Speaker 1: Pong was the hit game of the year. Merry Christmas, tiny,

577
00:29:46,880 --> 00:29:51,320
Speaker 1: Robert Smith happy ending. There are no happy endings in technology. Nope,

578
00:29:51,320 --> 00:29:54,280
Speaker 1: they're only happy middles. Right. You do not get to

579
00:29:54,320 --> 00:29:57,040
Speaker 1: make Home Pong and then coast on it forever. It

580
00:29:57,120 --> 00:30:00,440
Speaker 1: is not Barbie, it is not monopoly. Right. Because of

581
00:30:00,480 --> 00:30:03,520
Speaker 1: Moore's law, essentially every year people are going to make

582
00:30:03,560 --> 00:30:06,320
Speaker 1: better video games. Right. This is clear to anybody in

583
00:30:06,320 --> 00:30:08,840
Speaker 1: Silicon Valley. It's clear to Bushell. And in fact, the

584
00:30:08,920 --> 00:30:12,800
Speaker 1: year after Atari wins Christmas in nineteen seventy six, our

585
00:30:12,840 --> 00:30:17,520
Speaker 1: old friend Fairchild, Fairchild Semiconductor. Yes, they start selling a

586
00:30:17,520 --> 00:30:20,000
Speaker 1: home video game console that is not just one game

587
00:30:20,320 --> 00:30:24,320
Speaker 1: like Pong, but it allows you to buy different cartridges

588
00:30:24,480 --> 00:30:28,320
Speaker 1: and swap in different games. It's called Channel F like Fairchild,

589
00:30:28,400 --> 00:30:31,400
Speaker 1: but also Channel Fun. Because I was reading that, I

590
00:30:31,400 --> 00:30:33,640
Speaker 1: was also like, remember channels. I don't think my kids

591
00:30:33,720 --> 00:30:36,440
Speaker 1: know what a channel is, I guess. And then there

592
00:30:36,480 --> 00:30:38,920
Speaker 1: were six of them. They were free and they sucked.

593
00:30:39,560 --> 00:30:43,240
Speaker 1: So now Atari needs to make its own cartridge based game,

594
00:30:44,800 --> 00:30:48,080
Speaker 1: and they need much much more money than they needed

595
00:30:48,120 --> 00:30:51,640
Speaker 1: for Home Pong, right, like Sears Bank funding them isn't

596
00:30:51,640 --> 00:30:53,760
Speaker 1: going to do it that. The capital costs are just

597
00:30:53,800 --> 00:30:57,000
Speaker 1: too high. Venture capital isn't big enough at this point

598
00:30:57,000 --> 00:31:00,560
Speaker 1: to fund that they consider going public, but it doesn't workout.

599
00:31:01,160 --> 00:31:05,440
Speaker 1: So in nineteen seventy six, Bushnell and Valentine decide that

600
00:31:06,040 --> 00:31:08,360
Speaker 1: they need to sell. They need to sell Atari to

601
00:31:08,400 --> 00:31:11,880
Speaker 1: get the capital to take the next step, and they

602
00:31:11,920 --> 00:31:15,120
Speaker 1: look around at you know, big incumbents who might buy them,

603
00:31:15,160 --> 00:31:19,600
Speaker 1: and one possibility is Warner Communications, based in New York.

604
00:31:19,840 --> 00:31:24,440
Speaker 3: It owns movie studios, record labels, getting into cable TV

605
00:31:24,520 --> 00:31:24,960
Speaker 3: at this time.

606
00:31:25,040 --> 00:31:26,960
Speaker 1: Yeah, it's a media company. It ess actually big media

607
00:31:27,000 --> 00:31:31,280
Speaker 1: company run by a guy named Steve Ross, who coincidentally

608
00:31:31,280 --> 00:31:34,240
Speaker 1: had recently taken his kids to Disneyland, where they spent

609
00:31:34,360 --> 00:31:37,600
Speaker 1: a long time putting quarters into an Atari video game

610
00:31:37,720 --> 00:31:40,440
Speaker 1: called Indy eight hundred, a driving game. So he had

611
00:31:40,440 --> 00:31:42,720
Speaker 1: a steering wheel. Steering wheel, I'm sure, yeah, so good.

612
00:31:42,800 --> 00:31:44,240
Speaker 1: Remember the one where you could sit in it and

613
00:31:44,240 --> 00:31:46,719
Speaker 1: it will go around you. Yeah, it was rad. So

614
00:31:47,560 --> 00:31:51,520
Speaker 1: Ross sends the Warner jet out to California to pick

615
00:31:51,560 --> 00:31:57,160
Speaker 1: up Bushnell and Valentine to discuss a possible acquisition. On

616
00:31:57,200 --> 00:31:59,560
Speaker 1: the way to New York, the jet stops in Sun

617
00:31:59,640 --> 00:32:02,880
Speaker 1: Valley to pick up Clint Eastwood, who is starring in

618
00:32:02,920 --> 00:32:05,640
Speaker 1: a Warner Brothers movie at the time, and they get

619
00:32:05,640 --> 00:32:07,080
Speaker 1: to New York and Ross puts them up in this

620
00:32:07,160 --> 00:32:10,480
Speaker 1: beautiful suite at the Waldorf Astoria and invites him over

621
00:32:10,520 --> 00:32:13,080
Speaker 1: to his you know, penthouse on Fifth Avenue for a

622
00:32:13,240 --> 00:32:15,800
Speaker 1: screening of the Clint Eastwood movie that's not out yet.

623
00:32:15,880 --> 00:32:16,440
Speaker 1: This is a.

624
00:32:16,400 --> 00:32:19,400
Speaker 3: Whole different league and a whole different business coming into

625
00:32:19,440 --> 00:32:20,080
Speaker 3: video games.

626
00:32:20,200 --> 00:32:26,440
Speaker 1: Yes, and bush Nell loves it. Here's here's here's what

627
00:32:26,480 --> 00:32:31,400
Speaker 1: he said later looking back on this experience. Were we impressed? Yeah?

628
00:32:31,600 --> 00:32:35,120
Speaker 1: Were we smitten? Yeah? Did he warm us up and

629
00:32:35,200 --> 00:32:39,040
Speaker 1: you know, ready for the kill? Yeah? Yeah. I Mean,

630
00:32:39,120 --> 00:32:40,640
Speaker 1: when I think about it, you just have to really

631
00:32:40,680 --> 00:32:43,360
Speaker 1: hand it to somebody that's a bigger con artist than

632
00:32:43,400 --> 00:32:49,040
Speaker 1: you are. I love this guy, Byschanel. He's so good. Yeah,

633
00:32:49,080 --> 00:32:52,320
Speaker 1: he knows, he knows what's happening, at least he knows

634
00:32:52,360 --> 00:32:55,760
Speaker 1: in retrospect, and he respects it. It's like the Midway, right,

635
00:32:55,800 --> 00:32:59,600
Speaker 1: It's like Steve Ross is like the Carney, and bush

636
00:32:59,640 --> 00:33:03,680
Speaker 1: Nell is the room. Is the Room. He's played at

637
00:33:03,720 --> 00:33:06,840
Speaker 1: a much higher level respect, respect, and he respects it.

638
00:33:07,080 --> 00:33:10,560
Speaker 1: So the next morning, the morning after the screening, Bushnell

639
00:33:10,680 --> 00:33:14,680
Speaker 1: agreed to sell Atari to Ross to Warner for twenty

640
00:33:14,680 --> 00:33:19,080
Speaker 1: eight million dollars, and Bushnell stayed on, kept running the

641
00:33:19,080 --> 00:33:20,960
Speaker 1: company as he had been, and now he has the

642
00:33:21,040 --> 00:33:24,440
Speaker 1: capital to work on this console that you know we

643
00:33:24,480 --> 00:33:27,160
Speaker 1: will eventually know as the Atari twenty six hundred.

644
00:33:27,680 --> 00:33:30,560
Speaker 4: It had the stick of joy, had the literal stick

645
00:33:30,680 --> 00:33:35,360
Speaker 4: of joy, one joy stick, the orange button, one button

646
00:33:35,400 --> 00:33:38,040
Speaker 4: that you usually you would fire or jump with the things.

647
00:33:38,040 --> 00:33:40,120
Speaker 3: It would do a million times yead so.

648
00:33:40,200 --> 00:33:44,040
Speaker 1: Fast, not just a knob. Now there's a button comes

649
00:33:44,080 --> 00:33:48,160
Speaker 1: out in nineteen seventy seven, and it does It does

650
00:33:48,200 --> 00:33:52,080
Speaker 1: like okay does pretty well, but it does not do

651
00:33:52,640 --> 00:33:55,200
Speaker 1: amazingly well. It is not the success that we know

652
00:33:55,280 --> 00:33:58,200
Speaker 1: it will come to be. And the executives in New

653
00:33:58,280 --> 00:34:03,040
Speaker 1: York at Warner decide the hippies out in California need

654
00:34:03,080 --> 00:34:05,720
Speaker 1: a grown up to help them become a real grown

655
00:34:05,800 --> 00:34:10,080
Speaker 1: up company. Classic moment. Barry and Warner brings in this

656
00:34:10,160 --> 00:34:15,120
Speaker 1: guy named Ray Kazar to work with Atari. Not a

657
00:34:15,120 --> 00:34:18,480
Speaker 1: tech guy. I'd been an executive at a big textile firm,

658
00:34:19,360 --> 00:34:23,680
Speaker 1: started his own shirt company, O Shirts, Kids Love Shirts,

659
00:34:23,719 --> 00:34:29,720
Speaker 1: and you know, initially because Kazar is kind of consulting whatever,

660
00:34:30,000 --> 00:34:33,080
Speaker 1: but after a few months, the executives at Warner tell

661
00:34:33,200 --> 00:34:36,320
Speaker 1: Bushnell that he can stay on his chairman, but Kazar

662
00:34:36,520 --> 00:34:41,560
Speaker 1: is going to be the CEO of Atari, and Bushnell says, no, no,

663
00:34:41,640 --> 00:34:43,520
Speaker 1: this shirt guy is not going to be the CEO

664
00:34:43,560 --> 00:34:45,640
Speaker 1: of Atari, and Warner says, yeah, we own the company.

665
00:34:45,840 --> 00:34:47,840
Speaker 1: He is going to be the CEO and if you

666
00:34:47,840 --> 00:34:52,759
Speaker 1: don't like it, you're fired, and Bushnell says, no, I'm not.

667
00:34:52,960 --> 00:34:56,840
Speaker 1: You can't fire me. I quit Ah.

668
00:34:57,160 --> 00:34:59,000
Speaker 3: Expect something a little more creative from Bushnell.

669
00:34:59,040 --> 00:35:00,560
Speaker 1: But maybe he made up. Maybe he was the first

670
00:35:00,560 --> 00:35:03,120
Speaker 1: guy to say this, and it's definitely on Bushnell's kind

671
00:35:03,120 --> 00:35:05,200
Speaker 1: of cowboy brand, right. He doesn't need the money, made

672
00:35:05,200 --> 00:35:08,919
Speaker 1: a bunch of money selling Atari, And interestingly he has

673
00:35:09,360 --> 00:35:12,480
Speaker 1: this little side hustle at this point a place he

674
00:35:12,560 --> 00:35:15,520
Speaker 1: started in order to collect all the quarters that people

675
00:35:15,520 --> 00:35:19,080
Speaker 1: were putting into the Atari Arcade games. A place called

676
00:35:19,640 --> 00:35:23,279
Speaker 1: Chuck E. Cheese's Pizza Time Theater. Oh yeah, he had

677
00:35:23,320 --> 00:35:26,840
Speaker 1: started as part of Atari, and then when Warner bought Atari,

678
00:35:26,840 --> 00:35:28,480
Speaker 1: they're like, we don't want to own a pizza place,

679
00:35:28,520 --> 00:35:30,760
Speaker 1: so he bought it from them for five hundred thousand dollars.

680
00:35:31,600 --> 00:35:35,640
Speaker 1: So Bushnell is, you know, riding off into the sunset

681
00:35:35,719 --> 00:35:41,280
Speaker 1: on an animatronic singing rats. Yeah, yeah, he's done an Atari.

682
00:35:41,440 --> 00:35:44,319
Speaker 3: But luckily the geniuses at a giant media company know

683
00:35:44,600 --> 00:35:46,000
Speaker 3: how to run a video game company.

684
00:35:46,080 --> 00:36:13,640
Speaker 1: Right, that's after the break. We're back from the ad break.

685
00:36:15,120 --> 00:36:18,920
Speaker 1: Bushnell is out and Kazar the shirt guy is in

686
00:36:19,239 --> 00:36:23,719
Speaker 1: at Atari. And the next thing that happens is really surprising.

687
00:36:25,040 --> 00:36:27,880
Speaker 1: This East Coast businessman who doesn't know anything about video

688
00:36:27,880 --> 00:36:32,799
Speaker 1: games or engineering turns the Atari twenty six hundred into

689
00:36:32,840 --> 00:36:36,320
Speaker 1: a smash hit. Turns out he's a really good marketer

690
00:36:36,440 --> 00:36:38,719
Speaker 1: as a sense of what's going on, and he has

691
00:36:38,760 --> 00:36:41,920
Speaker 1: the good sense to license a hit arcade game that

692
00:36:42,080 --> 00:36:45,800
Speaker 1: was not made by Atari, a game called Space Invaders

693
00:36:45,840 --> 00:36:48,480
Speaker 1: I'm sure you remember, well, of course, beautiful game. He

694
00:36:48,560 --> 00:36:51,840
Speaker 1: licenses it for Atari to develop for the twenty six hundred,

695
00:36:52,640 --> 00:36:54,279
Speaker 1: and it is a huge hit.

696
00:36:54,920 --> 00:36:57,200
Speaker 3: And this is a smart thing that a big media

697
00:36:57,200 --> 00:37:01,400
Speaker 3: company can do. Recognize basically franchises, right that are popular

698
00:37:01,440 --> 00:37:03,360
Speaker 3: at the pizza place, which is where I played it,

699
00:37:03,400 --> 00:37:07,279
Speaker 3: Red Banjo Pizza in Parks of Utah, and then get

700
00:37:07,320 --> 00:37:09,799
Speaker 3: that into a home game, right, make money off of

701
00:37:09,920 --> 00:37:11,000
Speaker 3: the name, and that's great.

702
00:37:11,160 --> 00:37:14,720
Speaker 1: Yes, And remember they're in the console business, right, console

703
00:37:14,719 --> 00:37:17,520
Speaker 1: business is not doing great. The console business needs its

704
00:37:17,600 --> 00:37:21,000
Speaker 1: killer app. Space Invaders becomes the killer app, and the

705
00:37:21,040 --> 00:37:24,480
Speaker 1: popularity of this piece of software drives the sales of

706
00:37:24,520 --> 00:37:28,000
Speaker 1: the hardware. Right, everybody goes out and buys a twenty

707
00:37:28,040 --> 00:37:31,800
Speaker 1: six hundred so they can play Space Invaders. So revenue

708
00:37:31,840 --> 00:37:35,239
Speaker 1: at Atari, before Kazar got there it was less than

709
00:37:35,280 --> 00:37:39,400
Speaker 1: one hundred million, And after he'd been running Atari for

710
00:37:39,440 --> 00:37:42,600
Speaker 1: a few years, revenues are over a billion. Right, he

711
00:37:42,640 --> 00:37:46,240
Speaker 1: has ten ext it more. And now it's the early

712
00:37:46,440 --> 00:37:52,720
Speaker 1: eighties and America is going bananas for video Pacman Fever.

713
00:37:53,160 --> 00:37:55,120
Speaker 1: I don't know the name mac fever is an actual.

714
00:37:55,160 --> 00:37:57,759
Speaker 1: It was. I got a pocket full of quarters and

715
00:37:57,800 --> 00:37:59,799
Speaker 1: I'm headed for the arcade. I don't make a lot

716
00:37:59,800 --> 00:38:02,080
Speaker 1: of money, but I'm spending everything I make. I didn't

717
00:38:02,080 --> 00:38:05,480
Speaker 1: look it up. I remember it, and if I'm misremembering it,

718
00:38:06,040 --> 00:38:10,000
Speaker 1: you can tell me business history at pushkin FM. Everybody's

719
00:38:10,000 --> 00:38:12,600
Speaker 1: getting into the video games business now. Toy companies in

720
00:38:12,600 --> 00:38:15,239
Speaker 1: particular are looking at this and being like, oh, this

721
00:38:15,320 --> 00:38:19,399
Speaker 1: is a toy so Mattel Barbie. You know they make

722
00:38:19,520 --> 00:38:23,440
Speaker 1: the intelevision Kaliko, which around this time is making Cabbage

723
00:38:23,440 --> 00:38:27,880
Speaker 1: Patch Kids. Another eighties shout out, Kalico makes Calliko Vision,

724
00:38:28,480 --> 00:38:32,040
Speaker 1: but Atari is winning. They are dominant. They have something

725
00:38:32,200 --> 00:38:36,360
Speaker 1: like eighty percent market share. Incredible, and this is the peak.

726
00:38:36,680 --> 00:38:39,120
Speaker 1: This is the moment. You have finished the rise, and

727
00:38:39,200 --> 00:38:45,080
Speaker 1: now we begin the fall. The fall starts with pac Man. Interestingly,

728
00:38:45,160 --> 00:38:49,280
Speaker 1: this huge hit game, this huge hit arcade game, Atari

729
00:38:49,800 --> 00:38:52,560
Speaker 1: doesn't make it. So they license it. Figure like work

730
00:38:52,640 --> 00:38:56,759
Speaker 1: for Space Invaders, it'll work for pac Man. They make

731
00:38:57,040 --> 00:39:02,200
Speaker 1: twelve million cartridges of Packman, despite the fact that only

732
00:39:02,320 --> 00:39:05,719
Speaker 1: ten million people own Atari twenty six hundred. They think

733
00:39:05,719 --> 00:39:08,600
Speaker 1: this game is going to be so popular that everyone

734
00:39:08,640 --> 00:39:11,359
Speaker 1: with an Atari will buy it, and two million more

735
00:39:11,400 --> 00:39:16,480
Speaker 1: people will buy Atari consoles to play. It doesn't happen.

736
00:39:17,080 --> 00:39:20,839
Speaker 1: The game kind of sucks, just technically doesn't play as well.

737
00:39:20,880 --> 00:39:23,319
Speaker 3: Because part of the pac Man appeal was that it

738
00:39:23,320 --> 00:39:25,120
Speaker 3: was a very fast movie game, like you had to

739
00:39:25,200 --> 00:39:27,399
Speaker 3: turn on a dime. You have like like you had

740
00:39:27,400 --> 00:39:30,000
Speaker 3: these whole systems you had when you played in the arcades,

741
00:39:30,200 --> 00:39:32,600
Speaker 3: and you wanted to use those systems at home. And

742
00:39:32,640 --> 00:39:34,520
Speaker 3: if there's a little bit of a lag, it doesn't

743
00:39:34,560 --> 00:39:35,600
Speaker 3: really quite work.

744
00:39:36,080 --> 00:39:38,640
Speaker 1: It's not fun enough. Right. There is this thing where

745
00:39:38,640 --> 00:39:41,200
Speaker 1: a videogram has to be really fun to be a

746
00:39:41,200 --> 00:39:43,880
Speaker 1: big hit, and pac Man for the twenty six hundred

747
00:39:44,080 --> 00:39:46,680
Speaker 1: is not fun enough. So it's starting to get bad,

748
00:39:47,160 --> 00:39:50,280
Speaker 1: and it's gonna get worse. And the reason it gets worse,

749
00:39:50,920 --> 00:39:54,960
Speaker 1: which I love, is Et the Extraterrestrial.

750
00:39:55,000 --> 00:39:58,919
Speaker 3: Wait Et never made anything worse. He was so adorable.

751
00:39:59,040 --> 00:40:02,719
Speaker 1: It's not his fault out. So Et comes out in

752
00:40:02,760 --> 00:40:06,279
Speaker 1: the summer of eighty two. So giant hit holds up

753
00:40:06,320 --> 00:40:07,840
Speaker 1: by the way, at least I held up by budget.

754
00:40:07,880 --> 00:40:09,920
Speaker 1: I don't know. Eight years ago, with my children made

755
00:40:10,000 --> 00:40:13,239
Speaker 1: Reese's Pieces a big hit. Two toful movie was not

756
00:40:13,320 --> 00:40:16,560
Speaker 1: distributed by Warner Brothers. It's not distributed by Warner the

757
00:40:16,560 --> 00:40:20,839
Speaker 1: company that owns Atari, Right and a. Ross. The guy

758
00:40:20,920 --> 00:40:24,520
Speaker 1: running Warner Brothers really wants to work with Spielberg. Of course,

759
00:40:24,520 --> 00:40:26,480
Speaker 1: you want to work with Spielberg. You're running a movie studio.

760
00:40:26,560 --> 00:40:28,960
Speaker 1: You want to work with Spielberg. And so he thinks

761
00:40:29,000 --> 00:40:34,120
Speaker 1: that turning Et into a hit game would help entice

762
00:40:34,160 --> 00:40:36,919
Speaker 1: Spielberg to come work at Warner Brothers. So he makes

763
00:40:36,960 --> 00:40:39,879
Speaker 1: this deal with Spielberg in the summer of eighty two.

764
00:40:40,680 --> 00:40:42,520
Speaker 1: First of all, he pays a ton of money to

765
00:40:42,680 --> 00:40:45,600
Speaker 1: license the game, and he tells Spielberg, we will have

766
00:40:45,640 --> 00:40:49,640
Speaker 1: a great version of et for the Atari twenty six

767
00:40:49,680 --> 00:40:54,600
Speaker 1: hundred out in time for the Christmas season. A problem

768
00:40:54,640 --> 00:40:57,320
Speaker 1: with this is it takes like five or six months

769
00:40:57,360 --> 00:41:01,120
Speaker 1: to make a new video game, but to have the

770
00:41:01,200 --> 00:41:03,799
Speaker 1: game in stores in time to sell it for the

771
00:41:03,840 --> 00:41:07,040
Speaker 1: Christmas season. This is the summer already. Yeah, and they

772
00:41:07,040 --> 00:41:09,560
Speaker 1: have to, you know, produce the games. They're gonna have

773
00:41:09,600 --> 00:41:12,440
Speaker 1: to write this game in like five or six weeks

774
00:41:12,719 --> 00:41:14,879
Speaker 1: instead of five or six months. And people that are

775
00:41:14,920 --> 00:41:16,919
Speaker 1: tired like, no, we can't do it. You can't make

776
00:41:16,960 --> 00:41:19,399
Speaker 1: a good game that fast. It's just not the way

777
00:41:19,400 --> 00:41:22,160
Speaker 1: it works. Kazar, who's running Atari, is like, no, whatever,

778
00:41:22,200 --> 00:41:24,040
Speaker 1: it's Spielberg. What are you gonna say no to Spielberg?

779
00:41:24,080 --> 00:41:25,799
Speaker 1: You say no to the CEO. No, we can make

780
00:41:25,800 --> 00:41:27,799
Speaker 1: a shirt. We can make a shirt in like three hours.

781
00:41:27,920 --> 00:41:29,880
Speaker 1: Not many shirts we could make my Christmas. You just

782
00:41:29,880 --> 00:41:34,440
Speaker 1: gotta make one game. So they eventually find an engineer

783
00:41:34,480 --> 00:41:36,200
Speaker 1: to make the game. A good engineer, guy who made

784
00:41:36,280 --> 00:41:37,799
Speaker 1: Yars Revenge. I don't know if you remember that one.

785
00:41:37,840 --> 00:41:39,880
Speaker 1: It was a hit game at Atari. He gets it

786
00:41:39,920 --> 00:41:44,360
Speaker 1: done in a matter of weeks. Atari makes five million copies,

787
00:41:45,200 --> 00:41:47,480
Speaker 1: gets them on the shelves in time for the Christmas season.

788
00:41:48,760 --> 00:41:53,680
Speaker 1: And the game is bad. The game is not fun.

789
00:41:53,920 --> 00:41:55,640
Speaker 3: You just like you move them along and he like

790
00:41:55,680 --> 00:41:58,480
Speaker 3: falls into holes and holes and he makes it like

791
00:41:59,000 --> 00:41:59,359
Speaker 3: it's like.

792
00:42:00,280 --> 00:42:02,200
Speaker 1: I'm gonna read a couple of reviews from the time,

793
00:42:02,440 --> 00:42:07,799
Speaker 1: one from a publication called Joystick. No c ET has

794
00:42:07,880 --> 00:42:12,600
Speaker 1: nothing to phone home about? What another review from Electronic Games.

795
00:42:13,040 --> 00:42:16,520
Speaker 1: If ET does call home, please don't tell them about this.

796
00:42:17,680 --> 00:42:22,640
Speaker 1: I see a theme. So a there are millions of

797
00:42:22,760 --> 00:42:28,080
Speaker 1: unsold copies. The engineer who made the game ends up

798
00:42:28,160 --> 00:42:31,719
Speaker 1: leaving Atari, leaving the business eventually becomes a therapist. It

799
00:42:31,800 --> 00:42:34,760
Speaker 1: goes a lot for him to deal with. And Atari sucks.

800
00:42:34,800 --> 00:42:37,239
Speaker 1: Now right now, the thing is like, oh, I went,

801
00:42:37,400 --> 00:42:38,879
Speaker 1: I paid a lot of money for this game and

802
00:42:38,920 --> 00:42:39,520
Speaker 1: it sucks.

803
00:42:40,400 --> 00:42:44,280
Speaker 3: It's interesting, right, Like the thrill of a new invention

804
00:42:44,600 --> 00:42:48,640
Speaker 3: only lasts so long. Right, you know, the very first

805
00:42:48,880 --> 00:42:52,239
Speaker 3: movie of you know, people moving around a garden, everybody's like,

806
00:42:52,280 --> 00:42:54,719
Speaker 3: oh my god, it's amazing. You know, three weeks later

807
00:42:54,760 --> 00:42:57,600
Speaker 3: they're like, eh, the plot kind of sucks. Maybe an

808
00:42:57,600 --> 00:43:01,799
Speaker 3: explosion or something, right, you know, probably same with Gutenberg, right, Yeah, Yeah,

809
00:43:01,960 --> 00:43:02,600
Speaker 3: that's amazing.

810
00:43:02,680 --> 00:43:05,360
Speaker 1: Yeah, I read the Bible. You got else? What's the

811
00:43:05,600 --> 00:43:07,640
Speaker 1: Hotness book? Was it your harness? I think it's your

812
00:43:07,640 --> 00:43:11,000
Speaker 1: honest but don't know business history of pushing dount of him.

813
00:43:11,520 --> 00:43:16,440
Speaker 1: End of the eighty two actually Warner announces earnings. Right,

814
00:43:16,480 --> 00:43:18,920
Speaker 1: they're a public company. They're way worse than expected. The

815
00:43:18,960 --> 00:43:22,840
Speaker 1: stock crashes, and as we go into eighty three, now

816
00:43:23,400 --> 00:43:28,279
Speaker 1: it's not just Atari, the whole video game industry collapses.

817
00:43:28,840 --> 00:43:33,000
Speaker 1: There is this incredible glut of consoles. All these different

818
00:43:33,000 --> 00:43:35,960
Speaker 1: companies are selling consoles of games. There's a lot of

819
00:43:35,960 --> 00:43:39,440
Speaker 1: really bad games. There's like third party companies are selling games.

820
00:43:39,560 --> 00:43:43,480
Speaker 1: Apparently chuck Wagon dog Food. There's like a Chuck Wagon

821
00:43:43,520 --> 00:43:46,759
Speaker 1: dog Food video game. And on top of all that,

822
00:43:46,920 --> 00:43:51,560
Speaker 1: now you have home computers, real computers like we would

823
00:43:51,600 --> 00:43:53,560
Speaker 1: think of as computers with keyboards. You know, there's the

824
00:43:53,600 --> 00:43:57,120
Speaker 1: Commodore sixty four is coming out. At this time. At

825
00:43:57,160 --> 00:44:00,560
Speaker 1: my house, we had the lesser known Texas Instruments ninety

826
00:44:00,600 --> 00:44:03,560
Speaker 1: nine four A which I remember for its cassette deck

827
00:44:03,640 --> 00:44:07,480
Speaker 1: instead of a disk drive. So Atari is now losing

828
00:44:07,840 --> 00:44:12,000
Speaker 1: hundreds of millions of dollars. Kazar, the CEO, he gets

829
00:44:12,000 --> 00:44:15,920
Speaker 1: accused by the sec of insider trading of selling shares

830
00:44:16,960 --> 00:44:19,040
Speaker 1: just before that bad earnings announcement at the end of

831
00:44:19,040 --> 00:44:22,879
Speaker 1: eighty two. He leaves the company in the summer, says

832
00:44:22,880 --> 00:44:24,920
Speaker 1: he didn't do anything wrong, but he's out word of

833
00:44:24,920 --> 00:44:28,319
Speaker 1: replaces him with a marketing guy from Philip Morris who

834
00:44:28,320 --> 00:44:31,520
Speaker 1: helped come up with the Marlborough Man, and a few

835
00:44:31,560 --> 00:44:36,440
Speaker 1: months later in the second half of eighty three, Atari

836
00:44:36,560 --> 00:44:41,680
Speaker 1: actually has so much unsold merchandise, so many video games

837
00:44:41,760 --> 00:44:45,080
Speaker 1: that nobody wants to buy, that they actually go and

838
00:44:45,680 --> 00:44:50,239
Speaker 1: supposedly dump hundreds of thousands of unsold cartridges in a

839
00:44:50,360 --> 00:44:54,440
Speaker 1: landfill and a pit in Alamo Gordo, New Mexico, and

840
00:44:54,880 --> 00:44:57,960
Speaker 1: cover it up. It's heartbreaking. It's heartbreaking, and does is

841
00:44:58,000 --> 00:45:01,000
Speaker 1: it even true? Delightfully, ten years ago or so, they

842
00:45:01,000 --> 00:45:03,400
Speaker 1: made a documentary they actually went and dug up the

843
00:45:03,480 --> 00:45:07,360
Speaker 1: landfill in Alamogordo, and in fact they found et cartridges

844
00:45:07,400 --> 00:45:12,439
Speaker 1: there and other video games. This is really the end

845
00:45:12,680 --> 00:45:16,799
Speaker 1: for Atari, and it's perfect obviously metaphorically right, like it's

846
00:45:16,840 --> 00:45:21,319
Speaker 1: a burial. They are burying video games, and you know,

847
00:45:21,400 --> 00:45:23,880
Speaker 1: Atari is going to have this sort of shambalic afterlife

848
00:45:23,920 --> 00:45:26,279
Speaker 1: as brands do as companies do. They get acquired and

849
00:45:26,280 --> 00:45:30,120
Speaker 1: acquired and whatever. So let's go back to the question

850
00:45:30,200 --> 00:45:33,440
Speaker 1: we asked at the beginning and try and answer it right. Like, Atari,

851
00:45:34,640 --> 00:45:38,080
Speaker 1: practically speaking, invented video games. They changed culture, they changed business,

852
00:45:38,080 --> 00:45:41,280
Speaker 1: They brought the computer to the home. Video games continued

853
00:45:41,320 --> 00:45:45,479
Speaker 1: to be this giant thing. Atari disappeared. Why, Like why

854
00:45:45,520 --> 00:45:47,879
Speaker 1: did that happen? And I think there are a few

855
00:45:47,920 --> 00:45:51,279
Speaker 1: answers that it's worth going through. Right on. One is

856
00:45:51,480 --> 00:45:54,480
Speaker 1: just timing. One is just kind of bad luck, right,

857
00:45:54,560 --> 00:45:57,919
Speaker 1: Like the crash of eighty three, The video game crash

858
00:45:57,920 --> 00:46:02,799
Speaker 1: of eighty three was brutal, and it took out everybody, right,

859
00:46:02,840 --> 00:46:05,400
Speaker 1: It took out Atari, but it also took out Callco,

860
00:46:05,520 --> 00:46:07,920
Speaker 1: which was making Calleco Vision. It also took out you know,

861
00:46:07,960 --> 00:46:10,240
Speaker 1: Mattel gave up on intelevision.

862
00:46:09,760 --> 00:46:13,440
Speaker 3: And so as the incumbent Atari had more money invested

863
00:46:13,520 --> 00:46:16,080
Speaker 3: they had, they were further out over their skis when

864
00:46:16,120 --> 00:46:21,239
Speaker 3: the crash came. Yes, Yes, and huge warehouses, employees, engineers,

865
00:46:21,280 --> 00:46:22,040
Speaker 3: the whole.

866
00:46:21,719 --> 00:46:23,640
Speaker 1: Thing, hundreds of thousands of cartridges.

867
00:46:23,760 --> 00:46:26,239
Speaker 3: Yeah, and they have to keep, you know, putting out

868
00:46:26,280 --> 00:46:29,080
Speaker 3: these things to support their legacy systems, right, it's a classic,

869
00:46:29,520 --> 00:46:30,680
Speaker 3: classic incumbent proplem.

870
00:46:30,719 --> 00:46:33,080
Speaker 1: Yeah, and the glut goes on for a few years

871
00:46:33,440 --> 00:46:36,520
Speaker 1: through the mid eighties, and and you know, retailers themselves

872
00:46:36,600 --> 00:46:38,799
Speaker 1: don't want to stock video games anymore. They were left

873
00:46:38,840 --> 00:46:42,279
Speaker 1: with them. And in fact, when the next video game

874
00:46:42,320 --> 00:46:45,920
Speaker 1: revival comes, it's driven notably by a game that doesn't

875
00:46:45,920 --> 00:46:49,640
Speaker 1: call itself a video game, calls itself an entertainment system,

876
00:46:49,719 --> 00:46:54,600
Speaker 1: the Nintendo Entertainment System Classic. So you know, maybe anybody

877
00:46:54,640 --> 00:46:56,840
Speaker 1: would have got wiped out. Maybe there was nothing Atari

878
00:46:56,880 --> 00:47:00,759
Speaker 1: could have done, But I do wonder. You have to wonder, right,

879
00:47:01,440 --> 00:47:04,279
Speaker 1: what would have happened if Bushnell had managed to hold

880
00:47:04,320 --> 00:47:06,440
Speaker 1: onto the company, if he'd managed to say, go public,

881
00:47:06,840 --> 00:47:12,680
Speaker 1: to not have to sell to Warner, Because clearly Bushnell

882
00:47:13,480 --> 00:47:15,960
Speaker 1: was the perfect guy to run a video game company,

883
00:47:16,040 --> 00:47:20,239
Speaker 1: right he was the amusement park carneie genius, who knew

884
00:47:20,280 --> 00:47:22,279
Speaker 1: what fun was, who knew what games were, who was

885
00:47:22,320 --> 00:47:26,600
Speaker 1: also an engineer, who also created this culture where engineers

886
00:47:26,600 --> 00:47:30,400
Speaker 1: could come and play and be creative. And when he sold,

887
00:47:30,960 --> 00:47:35,600
Speaker 1: he sold to an entertainment company. It's not about the

888
00:47:35,640 --> 00:47:38,680
Speaker 1: engineering for them, which is why they sent a shirt

889
00:47:38,719 --> 00:47:40,240
Speaker 1: guy to run Atari.

890
00:47:40,360 --> 00:47:42,880
Speaker 3: Right, He knew logistics, he knew selling, he knew how

891
00:47:42,920 --> 00:47:43,960
Speaker 3: to get things into stores.

892
00:47:44,000 --> 00:47:46,719
Speaker 1: Sure, but it does seem like he thought the engineers

893
00:47:46,719 --> 00:47:50,400
Speaker 1: were just employees on an assembly line. And that was

894
00:47:51,560 --> 00:47:54,040
Speaker 1: a key mistake. And there's one story that I want

895
00:47:54,040 --> 00:47:56,640
Speaker 1: to end with and I think really reveals this fact

896
00:47:56,719 --> 00:48:00,840
Speaker 1: what a mistake that was. And that's this, long after

897
00:48:01,040 --> 00:48:04,960
Speaker 1: Kazar took over a few of the engineers, the game designers,

898
00:48:04,960 --> 00:48:09,160
Speaker 1: the guys actually creating these games, realized that they had

899
00:48:09,160 --> 00:48:12,200
Speaker 1: created games that were making the company millions of dollars,

900
00:48:12,840 --> 00:48:17,040
Speaker 1: and they were, you know, staff employees making like twenty

901
00:48:17,080 --> 00:48:20,200
Speaker 1: thousand dollars a year or something, and so they went

902
00:48:20,239 --> 00:48:22,480
Speaker 1: to Gazar to ask for a better deal. They're like, look,

903
00:48:22,520 --> 00:48:24,799
Speaker 1: we're making these games, they're making all this money, give

904
00:48:24,880 --> 00:48:27,319
Speaker 1: us a better deal. And because I said no, he's like,

905
00:48:27,360 --> 00:48:29,239
Speaker 1: anybody can do that, you know, you guys are just

906
00:48:29,440 --> 00:48:33,240
Speaker 1: cranking out these things. And so these game designers left

907
00:48:33,840 --> 00:48:36,920
Speaker 1: and they started their own video game company, not to

908
00:48:37,000 --> 00:48:40,120
Speaker 1: make hardware, just to make games, which was not a

909
00:48:40,160 --> 00:48:44,720
Speaker 1: thing yet. Right, they are inventing the standalone video game company,

910
00:48:44,760 --> 00:48:49,600
Speaker 1: and they create a company called Activision, and Activision survives

911
00:48:49,640 --> 00:48:51,839
Speaker 1: the crash of eighty three and goes on to become

912
00:48:51,880 --> 00:48:55,480
Speaker 1: one of the biggest video game companies in the world.

913
00:48:55,640 --> 00:48:59,680
Speaker 1: They create Call of Duty, this gigantic franchise. They eventually

914
00:49:00,280 --> 00:49:04,279
Speaker 1: with another company called Blizzard, and in twenty twenty two

915
00:49:04,440 --> 00:49:12,960
Speaker 1: Activision Blizzard gets bought by Microsoft for sixty nine billion dollars. Nice. So,

916
00:49:12,960 --> 00:49:15,560
Speaker 1: so you know, when you look at the video game

917
00:49:15,600 --> 00:49:19,319
Speaker 1: industry over the long arc, what you see is the

918
00:49:19,360 --> 00:49:22,200
Speaker 1: companies that wind up dominating it are not media companies,

919
00:49:22,280 --> 00:49:29,040
Speaker 1: right basically Nintendo, Sony, Microsoft, These are all companies with

920
00:49:29,320 --> 00:49:32,640
Speaker 1: very deep roots in electronics. They are all at some

921
00:49:32,880 --> 00:49:38,719
Speaker 1: level technology companies. And once Bushnell left Atari, I think

922
00:49:38,719 --> 00:49:41,960
Speaker 1: at a deep level it wasn't fundamentally run like a

923
00:49:42,000 --> 00:49:47,280
Speaker 1: technology company anymore, and that is why Atari failed. I disagree.

924
00:49:47,320 --> 00:49:51,160
Speaker 3: I think Bushnell had his moment, he changed the world,

925
00:49:51,239 --> 00:49:54,279
Speaker 3: but as we often see with technology companies, the person

926
00:49:54,320 --> 00:49:56,880
Speaker 3: who founded the company might not be the person to

927
00:49:56,960 --> 00:49:59,120
Speaker 3: take it all the way. You know, he was using

928
00:49:59,160 --> 00:50:01,800
Speaker 3: it as a game company, and it would eventually become

929
00:50:01,800 --> 00:50:05,400
Speaker 3: a multi media you know, essentially movies in a box,

930
00:50:05,480 --> 00:50:08,760
Speaker 3: a huge technological innovation that I'm not sure he could

931
00:50:08,760 --> 00:50:11,719
Speaker 3: have done. And we see this across other industries.

932
00:50:11,840 --> 00:50:13,200
Speaker 1: Right, the first mover.

933
00:50:13,440 --> 00:50:17,880
Speaker 3: Advantage is usually not an advantage, right, because you have

934
00:50:17,960 --> 00:50:20,760
Speaker 3: to spend all this money solving problems that other people

935
00:50:20,800 --> 00:50:23,200
Speaker 3: can come and just take from you. But also you

936
00:50:23,280 --> 00:50:29,640
Speaker 3: have a certain arrogance, right you are the successful leader.

937
00:50:29,920 --> 00:50:33,440
Speaker 3: Everyone wants an Atari, everyone has an Atari system, so

938
00:50:33,520 --> 00:50:35,400
Speaker 3: you don't really have to innovate to make a better

939
00:50:35,440 --> 00:50:37,319
Speaker 3: Atari system. You just have to get them to just

940
00:50:37,440 --> 00:50:40,719
Speaker 3: keep buying cartridges. And yes, Atari did try and come

941
00:50:40,760 --> 00:50:43,439
Speaker 3: up with a new system and it was okay, right,

942
00:50:43,480 --> 00:50:48,080
Speaker 3: It just didn't work that well because I think they

943
00:50:48,080 --> 00:50:51,160
Speaker 3: were like, the world will always have Atari. Atari will

944
00:50:51,200 --> 00:50:54,120
Speaker 3: always be number one. You can't conceive of a world

945
00:50:54,160 --> 00:50:54,920
Speaker 3: without Atari.

946
00:50:55,680 --> 00:50:59,120
Speaker 1: And then it happened we live in a world without Atari.

947
00:51:00,200 --> 00:51:02,439
Speaker 1: If you were into video games, there's a good chance

948
00:51:02,480 --> 00:51:04,799
Speaker 1: you have thoughts about the things we got wrong on

949
00:51:04,800 --> 00:51:05,439
Speaker 1: today's show.

950
00:51:05,480 --> 00:51:06,919
Speaker 3: And I don't take it to Reddit.

951
00:51:07,080 --> 00:51:10,040
Speaker 1: Take it to the email systems. Write to us at

952
00:51:10,280 --> 00:51:12,760
Speaker 1: business History at pushkin dot fm, or leave us a comment.

953
00:51:13,360 --> 00:51:15,360
Speaker 1: I will read all the emails in the comments because frankly,

954
00:51:15,400 --> 00:51:17,160
Speaker 1: we don't get that many yet, and I want to

955
00:51:17,160 --> 00:51:18,920
Speaker 1: get more and I want to make the show better.

956
00:51:19,320 --> 00:51:20,759
Speaker 1: Tell us if you listen to the show, if you

957
00:51:20,800 --> 00:51:22,600
Speaker 1: watch the show, what do you want to hear? What

958
00:51:22,640 --> 00:51:23,920
Speaker 1: do you want to see? We want to make shows

959
00:51:23,920 --> 00:51:26,799
Speaker 1: that you like. We're very grateful that you're listening, and

960
00:51:26,840 --> 00:51:29,799
Speaker 1: tell a friend if you like it. Today's show was

961
00:51:29,880 --> 00:51:33,360
Speaker 1: produced by Gabriel Hunter Chang, it was engineered by Sarah Bruguerer,

962
00:51:34,040 --> 00:51:37,399
Speaker 1: and it was edited by our showrunner Ryan Dilley, who

963
00:51:37,440 --> 00:51:39,240
Speaker 1: told me that if you had told him in nineteen

964
00:51:39,280 --> 00:51:42,400
Speaker 1: eighty two that he could play et at home and

965
00:51:42,520 --> 00:51:44,640
Speaker 1: have a Coca cola, he would have thought it was

966
00:51:44,680 --> 00:51:46,280
Speaker 1: the greatest thing in the world.