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Speaker 1: Pushkin too quick. No, it's perfect push kid stop. You

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Speaker 1: got it.

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Speaker 2: Robert Smith, here is the big question for today's show. Yes,

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Speaker 2: how did Atari essentially invent the video game industry, win

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Speaker 2: the hearts of millions of young people in the nineteen

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Speaker 2: seventies and then blow up entirely in the early nineteen

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Speaker 2: eighties basically never to be heard from again.

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Speaker 3: It's a great question.

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Speaker 2: 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 2: 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 what. Little paddles and you'd send a little

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

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

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

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

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Speaker 3: an early adopter. I was not cool. Everybody had the

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Speaker 3: Atari set.

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Speaker 2: I'm a little younger than you, not to throw it

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Speaker 2: in your face, but so for me, I don't remember Pong,

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Speaker 2: but I remember the Atari twenty six hundred came to

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Speaker 2: be called the twenty six hundred, which was like the

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Speaker 2: first video game system like we know it today where

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Speaker 2: you buy it and there's different cartridges. And this was,

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Speaker 2: you know, the dominant video game in the early eighties.

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Speaker 2: I loved it. I had Defender, had Journey, the game

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Speaker 2: Journey like the band played it for hours, and so

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Speaker 2: the big question is what happened. I'm Jacob Goldstein and

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Speaker 2: I'm Robert Smith, and this is business history. What's it about?

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Speaker 2: Jacob esterday 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 up

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Speaker 3: in utter failure, like literally wind up having to bury

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Speaker 3: hundreds of thousands of its own products, unsold video game

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Speaker 3: cartridges in a landfill.

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Speaker 2: 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 2: Is an amusement park that I initially called the Lagoon

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Speaker 2: in Utah, and you pointed out it is called Lagoon

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Speaker 2: And you know this because.

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

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Speaker 3: 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. It was amazing, Robert.

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Speaker 2: I guess you would have been going to Lagoon in

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Speaker 2: the seventies. A few years earlier. It was this college

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Speaker 2: kid named Nolan Bushnell who worked summers there on the Midway,

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Speaker 2: like where there was games like whatever, guess the way

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Speaker 2: to the guy and knock 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 carneye working the milk jug games, this was

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Speaker 3: not Nolan Bushnell, but.

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Speaker 2: He was a carneie genius. He became King of the Midway,

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Speaker 2: was running running all the games when he was like

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Speaker 2: twenty years old, because he was really good at getting

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Speaker 2: people to spend their money on the games. Like one

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Speaker 2: example he gave later that is dear to my heart

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Speaker 2: is this. So there is that game where there's these

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Speaker 2: like metal milk jugs. I guess it's like metal bottles,

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Speaker 2: and there's whatever four of them or six of them,

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Speaker 2: and they're stacked up and you have a like a

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Speaker 2: softball or something. You throw it at it and try and.

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Speaker 3: You're trying to win a stuffed animal.

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Speaker 2: Yeah, maybe a giant stuffed animal or something if you

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Speaker 2: knock down all the milk bottles, right, and it turns

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Speaker 2: out He talked about this later that like half of

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Speaker 2: the bottles are heavy and half of the bottles are light,

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Speaker 2: and so if you put the light bodels on the bottom,

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Speaker 2: it's really easy to knock them down, right, If you

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Speaker 2: put the heavy bottles on the bottom, it's really hard

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Speaker 2: to knock them down. Physics, And so he had this

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Speaker 2: movie he would make when like a bunch of high

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Speaker 2: school students would come. There'd be like, you know, the

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Speaker 2: captain of the football team, and then like the water

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Speaker 2: boy kind of trailing along behind.

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Speaker 3: Okay, I was more of the water play.

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Speaker 2: Obviously, he'd get the water boy to play, and he'd

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Speaker 2: set it up the easy way so that it's really

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Speaker 2: easy to knock him down. The water boy knocks him

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Speaker 2: down and gets the big prize, and then the captain

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Speaker 2: of the football team's like, oh, I'm definitely gonna just

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Speaker 2: kill at this. But then Nolan Bush nowould set it

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Speaker 2: up the hard way so that the you know, football

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Speaker 2: player throws and they don't fall down. He's like, Okay,

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Speaker 2: I'll try again. I'll try again, and he'd basically take

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Speaker 2: all of the football player's money because he couldn't knock

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Speaker 2: 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 2: Yeah, and he had a real sense of fun, right,

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Speaker 2: like this was fun for the water boy, not fun

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Speaker 2: for the football player. But like he he loved a party,

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Speaker 2: took a lot of drugs. He was studying electrical engineering

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Speaker 2: in school, but it took him like seven years to graduate.

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Speaker 2: Eventually he moves to Silicon Valley, not called Silicon Valley yet,

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Speaker 2: but it's becoming that. Right, this is right where we

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Speaker 2: were at the end of last week's show, and he's

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Speaker 2: going to invent the video game industry, but he doesn't

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Speaker 2: 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 those of us in the radio business as

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Speaker 3: the makers of magnetic tape.

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Speaker 2: Did you use Ampex tape?

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Speaker 3: Of course, my clauset's filled with its stillcitually 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 2: And in particular he's thinking about video games, or really

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Speaker 2: video game because at this part in history, there's essentially

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Speaker 2: one video game and it was created by these guys

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Speaker 2: at MIT, of course MIT in the early sixties, to

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Speaker 2: be run on, you know, a computer, which at that

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Speaker 2: time was a big machine that you had at a

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Speaker 2: university that costs hundreds of thousands of dollars. The game

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Speaker 2: was called Space War exclamation mark. Great name for a game,

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Speaker 2: and it was fun if you understood like Newtonian gravity, right,

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Speaker 2: you like have a spaceship and there's a star and

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Speaker 2: it's like I go around the Sun to get just

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Speaker 2: the gravity goes into the square of the distance. Whatever.

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Speaker 2: So he's thinking about Space War exclamation mark. And you

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Speaker 2: know when he first played it in college, he played

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Speaker 2: it at the university on this extremely expensive computer where

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Speaker 2: it obviously wouldn't work anywhere else. It wouldn't work as

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Speaker 2: a business because the computer was too expensive, and you

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Speaker 2: just did it at night for fun. But by the

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Speaker 2: time he's in Silicon Valley in the early seventies, you know,

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Speaker 2: Moore's law, like we talked about last time, is cranking along.

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Speaker 2: Computers are getting cheaper and cheaper and cheaper and faster

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Speaker 2: and faster and faster. And he's like, oh, maybe now

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Speaker 2: that technology has got to a place where I could

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Speaker 2: make Space War on a machine that I could build

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Speaker 2: cheaply enough to put it in a bar next to

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Speaker 2: a pinball machine and get people to put corners 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 2: Yes, And so he starts working with this other guy

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Speaker 2: from Ampex, and you know, he buys a black and

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Speaker 2: white TV at Goodwill and he actually, interestingly, he builds

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Speaker 2: essentially a computer from the ground up, right, because he

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Speaker 2: is optimizing for cheapness, right, he wants to build the

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Speaker 2: cheapest functional machine he can. And he gets like a

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Speaker 2: little coin slot like they have in pinball machines, has

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Speaker 2: like a paint thinner can for the coins to go into,

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Speaker 2: and they build a functional prototype of a game that

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Speaker 2: is a lot like Space War and it looks like

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Speaker 2: an arcade game, although there's not really any such thing

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Speaker 2: as our kid gets at this point, but it's a.

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Speaker 3: Box in the corner. It's next to the juke box.

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Speaker 3: It stands up and it has yeah, and it has

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

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Speaker 2: There's a screen, and there's controls, and there's a place

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Speaker 2: to put coins. It right, the three things you need.

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Speaker 2: They get this company to make fifteen hundred of the machines. Right,

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Speaker 2: it's going to be a thing in the world. Now

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Speaker 2: it gets out into the world, and and nobody really

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Speaker 2: wants to play it, basically because it's not that fun.

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Speaker 2: It seems it's it's violating one of the tenets you

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Speaker 2: laid 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, Yeah, or at

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Speaker 3: least like it helps if you understood physics.

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Speaker 2: You know what I think about physics when.

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Speaker 3: You're playing a video game, but not in a bar now.

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Speaker 2: Yeah, And so you know what do you do in

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Speaker 2: Silicon Valley if you make something and it's a failure,

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Speaker 2: you start your own company, exactly right, and they call it,

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Speaker 2: of course sissy g s y z y g.

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Speaker 3: Y really going in on the astronomical theme, which you

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

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Speaker 2: Yeah, so I think so clearly a bad name, hard

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Speaker 2: to say, hard to spell, and kind of a lucky

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Speaker 2: break for Nolan Bushnell. It's already taken by a candle

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Speaker 2: maker 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: I've almost surrounded someone's stone.

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Speaker 2: You're saying this, like you play Go? Have you played?

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Speaker 2: I have played? God? You never talked about this?

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Speaker 3: Oh yeah, yeahah Taro, And I mean so much so that.

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Speaker 2: It also has your Go game. It's okay, really yeah,

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Speaker 2: it's okay. So now they have a company and a name.

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Speaker 2: One key thing they're missing a game that people want

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Speaker 2: to play.

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Speaker 3: Yeah, minor thing.

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Speaker 2: It's nineteen seventy two, and one day Bushnell hears about

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Speaker 2: a thing happening at a hotel in I think Sunny Vale,

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Speaker 2: somewhere in in Silicon Valley. Magnavox, the TV company, they're

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Speaker 2: working on their own video game. This is actually going

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Speaker 2: to be one not to put in a bar, but

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Speaker 2: to play at home. Right. Their idea is they're going

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Speaker 2: to have this machine that will help them sell more televisions.

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Speaker 3: Yea.

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Speaker 2: And so they have a prototype of this machine, and

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Speaker 2: you know, there's like a special preview for insiders, and

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Speaker 2: so Bushnell's like, I got to see this thing, and

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Speaker 2: so he drives over there and he does not say

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Speaker 2: I'm a competitor or no. He says, oh, yeah, I

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Speaker 2: work at the Magnavox store whatever over down El Camino

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Speaker 2: or whatever.

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Speaker 3: It is. Corporate intrigue.

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Speaker 2: It's easier to get away with a lie. I guess

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Speaker 2: the nineteen seventy two, right, They're not gonna look him

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Speaker 2: up on the internet. And he gets to go in

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Speaker 2: and and see what this product is and it kind

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Speaker 2: of sucks, so he's relieved, right It to him is

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Speaker 2: clearly made by somebody who doesn't understand games. And one

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Speaker 2: thing about bushnells he really understands games because they're just

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Speaker 2: not that fun to play. But there is one game

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Speaker 2: that has some spark of promise to him, and it's

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Speaker 2: essentially like a simple tennis or ping pong game where

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Speaker 2: there's like two rectangular sort of paddles or rackets and

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Speaker 2: then like a square ball and it goes back and

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Speaker 2: forth and there's two players, but there's no score in

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Speaker 2: the game. There's no music like it's it's it's just

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Speaker 2: a weak version, but that shows some promise to him,

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Speaker 2: and for those of you who have played pong what

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Speaker 2: he is about to develop. It does have this amazing

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Speaker 2: sound 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 2: Right. So Pushnell goes back to the office and there's

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Speaker 2: this engineer who's just started that day, and he's like,

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Speaker 2: you know, make this, make this kind of pingpong game,

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Speaker 2: but make it fun, make it do all these fun things.

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Speaker 2: And the engineer does a great job, and you know,

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Speaker 2: a few weeks later, they have this prototype of an

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Speaker 2: arcade style game that they call pong. They just want

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Speaker 2: to see how it does, right, it's a prototype. So

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Speaker 2: 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. Too hard to explore.

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Speaker 2: Its basically what we would call today an alcoholic a problem. Yes,

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Speaker 2: and they say, can we just put this machine in

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Speaker 2: the corner here at Andy Caps Tavern, like you know,

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Speaker 2: like a pimball machine, And the guy at the bar

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Speaker 2: says sure, and so they put the machine there and

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Speaker 2: it's you know, it's really simple. It's called pong. It

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Speaker 2: has two knobs, one for each player, and unlike computer space,

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Speaker 2: it has beautiful simple instructions. Avoid missing ball for high score.

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Speaker 2: That's it. Love it, just a few words, yeah, yeah,

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Speaker 2: three plays for one quarter. They plug it in and

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Speaker 2: they go back to the office, and a few days later,

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Speaker 2: like three days later, they get a call from the bar,

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Speaker 2: and the guy at the bar is calling him says, yeah,

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Speaker 2: the machine's broken. I don't know what's going on. It's

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Speaker 2: not working. I like whatever. It's a prototype, you know,

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Speaker 2: it's a new kind of computer. Of course it's gonna break.

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Speaker 2: Somebody from Atari goes down there to check it out,

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Speaker 2: and it turns out it is broken because the coin

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Speaker 2: box is full. It's broken because people have put too

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Speaker 2: much money into the machine. It's too good. It's too good. Yeah,

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Speaker 2: you know, Nolan Bush and out of his colleagues have

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Speaker 2: built a machine that people just cannot help themselves put

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Speaker 2: money into. We're gonna need a bigger coin You're gonna

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Speaker 2: need a bigger box. People love to put quarters into

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Speaker 2: 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, and then it's gotta be

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Speaker 3: worth playing a second time, which is what he also had.

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Speaker 2: He had the two pieces. It's super fun. It's a

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Speaker 2: new thing and it's super fun. Now he's got a scale,

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Speaker 2: very classic startup problem. You have a thing, people want it.

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Speaker 2: But remember he essentially stole the idea from Magnavox. By

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Speaker 2: the way lawsuit, they said out of court whatever. Lots

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Speaker 2: of people now you know it's Silicon Valley. People are

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Speaker 2: coming by Andy Kapps Tavern, who are engineers who are like,

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Speaker 2: we can do this. And so he's got to get

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Speaker 2: video games out into the world fast.

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Speaker 3: Gonna need money.

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Speaker 2: He's gonna need money. Nobody's gonna give him money yet, Right,

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Speaker 2: he's just some stoner with one video game in a bar.

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Speaker 2: So he makes a move that has already come up

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Speaker 2: a few times.

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Speaker 3: On our young show, your favorite negative cash conversion cycle.

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Speaker 2: The negative cash conversion cycle. He's able to sell games

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Speaker 2: before he has to pay for the parts. So the

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Speaker 2: parts to make a game cost atari like three hundred dollars.

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Speaker 2: But crucially they don't have to pay for those parts

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Speaker 2: unto right, they have like a month. So the parts

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Speaker 2: come in Attaria doesn't have to pay anything. They put

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Speaker 2: them together and sell the machine for nine hundred dollars,

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Speaker 2: and then a few months later they have to pay

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Speaker 2: three hundred but meanwhile they got the money from that machine.

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Speaker 2: They're growing. They're often running now other problem, classic scale

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Speaker 2: problem hiring. And then one day this like nineteen year

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Speaker 2: old hippie kid walks in and he says he won't

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Speaker 2: leave until they give him a job, and the receptionist

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Speaker 2: calls the head engineer and she goes, yeah, we got

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Speaker 2: a hippie kid in the lobby. Says he won't leave

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Speaker 2: until we hire him. Should we call the cops or

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Speaker 2: let him in? And the engineer says, bring him on in.

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

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Speaker 3: in and he is when if you tell a story

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Speaker 3: like this, you know who it is.

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Speaker 2: It's Steve Jobs. It's Steve Job. So fun, it's so

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Speaker 2: delightful and perfectly. Steve Jobs is very good at his job, yes,

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Speaker 2: and very unpleasant to wrqu with class unsurprising. He tells

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Speaker 2: Bushnell that like everybody's soldering wrong, right, they're actually putting

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Speaker 2: together the hardware, soldering the hardware He's probably right, and

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Speaker 2: Bushnell was like, yeah, he was right. He keeps calling

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Speaker 2: his manager a dumb shit.

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Speaker 3: Probably was not.

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Speaker 2: Kind, but not necessary. Bushnell winds up putting Jobs on

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Speaker 2: the night shift, partly so he won't bother so many people,

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Speaker 2: and partly because he knew that Jobs like to hang

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Speaker 2: out at night with his buddy Steve Wozniak, who was

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Speaker 2: a great engineer, would be great to have hanging around Atari,

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Speaker 2: And in fact, Jobs and Wozniak helped to make Breakout

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Speaker 2: a great a target. Remember Breakout, of course.

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Speaker 3: You're trying to knock down the bricks in a wall.

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Speaker 2: Still, games like that, when you got a little paddle

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Speaker 2: at the bottom.

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Speaker 3: End, there's a moment when it goes through the wall

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Speaker 3: and then.

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Speaker 2: Goes so good. So Jobs worked at Atari for a

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Speaker 2: little while and then decided he wanted to go off

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Speaker 2: to India to find his guru perfect and asked Atari

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Speaker 2: to pay for the trip. Nobody, ever, said he lacked moxie,

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Speaker 2: and wound up making a deal with Atari where they

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Speaker 2: pay him to go part of the way there. There

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Speaker 2: they had exported some games to Germany and there was

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Speaker 2: some kind of problem with the games in Germany, and

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Speaker 2: they're like, we'll send you to Germany to fix the

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Speaker 2: games and then you can get the rest of the

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Speaker 2: way to India from there. And that's what happened. And

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Speaker 2: you know, the Germans said Jobs was terrible to work with,

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Speaker 2: 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 2: It's true. And you know, there is something, right, I

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Speaker 2: was thinking about, like the link between Atarian Jobs and

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Speaker 2: what did he learn there, and it felt like maybe

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Speaker 2: a little overdetermined, but I do think you know, clearly

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Speaker 2: he had this profound sense of aesthetics and of delight, right,

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Speaker 2: Like think of the Macintosh, right, this breakthrough Apple machine

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Speaker 2: in the eighties. It was round and instead of squares,

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Speaker 2: it was rounded, and it costs them more money, but

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Speaker 2: it was beautiful and it was fun and you were

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Speaker 2: 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 with him making chips

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

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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 company, right, And so Atari

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Speaker 3: and the strength of it was really the first time

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Speaker 3: where they're just like, how will a regular human being

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

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Speaker 2: Yeah? Yeah, with a computer? Right, Like what they are

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Speaker 2: making is going to become essentially the first widely adopted

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Speaker 2: home computer, the first computer that ordinary people literally children

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Speaker 2: 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 2: Yeah Yeah. So Atari Now mid seventies, they're selling all

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Speaker 2: the machines they can make. They're growing, they need more space,

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Speaker 2: and so they rent an abandoned roller rink. They stencil

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Speaker 2: Atari on the window, and they turn it into this

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Speaker 2: office slash video game factory.

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Speaker 3: I've been ten years older. I would have loved to

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Speaker 3: have worked in a roller rink video game factor.

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Speaker 2: Yes, everybody smoked weed. Yeah, there was a hot tub.

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Speaker 2: There was a pool party where everybody ended up naked

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Speaker 2: in the pool at Bushnell himself looked back on it

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Speaker 2: later and said, if that isn't a horror show for

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Speaker 2: any hr person today, I don't know what is, but

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Speaker 2: it was the seventies. It was a weirdo startup. I'm

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Speaker 2: guessing they didn't have an HR department. I don't know.

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Speaker 2: This is a company that's making games, right, and so

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Speaker 2: you need engineering brains, but you also need a sense

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Speaker 2: of play, of fun, of freedom, right, and clearly Bushnell

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Speaker 2: was deliberately trying to create that.

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Speaker 3: You know, he had this culture that was free and creative.

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Speaker 2: His office door was always open, and right next to

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Speaker 2: that open door was a keg of beer. So Atari's

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Speaker 2: doing well. You know, Pong is a huge hit, but

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Speaker 2: Bushnell knows the big opportunity the hockey stick will be

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Speaker 2: if they can make a home video game, you know,

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Speaker 2: like Magnavox was trying to do, but that nobody has

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Speaker 2: 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 4: After the break, Okay, that's the end of the ads.

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Speaker 2: We're going back to the show.

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Speaker 3: Nineteen seventy four.

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Speaker 2: Atari Nolan Bushnell has dreams of selling a version of

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Speaker 2: pong that people can play at home. We know it's

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00:20:08,680 --> 00:20:11,399
Speaker 2: going to work because you played it young Robert Smith's waiting,

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00:20:12,080 --> 00:20:14,240
Speaker 2: how are they going to get the money to do

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Speaker 2: it well?

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Speaker 3: At this point, as we learned in the last show,

405
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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

407
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Speaker 3: that there's a bunch of geniuses who can make money

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00:20:24,920 --> 00:20:27,119
Speaker 3: on the West Coast and are starting to at least

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Speaker 3: shop around that money.

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Speaker 2: But there's not a whole system for it. There's not

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Speaker 2: a whole system for it. The culture hasn't caught up

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Speaker 2: that much. You talked about the culture shift last time.

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Speaker 2: And so you know, a few vcs do go by

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Speaker 2: Atari and they see that it's a roller rink full

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Speaker 2: of weed smokers, and they're like, this is not the

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Speaker 2: business we're in. But one day a venture capitalist named

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00:20:47,359 --> 00:20:52,080
Speaker 2: Don Valentine walked in. Valentine had worked at Fairchild Semiconductor,

418
00:20:52,119 --> 00:20:54,359
Speaker 2: that a company that was at the heart of the

419
00:20:54,359 --> 00:20:56,600
Speaker 2: birth of Silicon Valley that we talked about last time.

420
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Speaker 2: Valentine was the sales manager there and Fairchild was like

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Speaker 2: this fountain of startups. They called them the Fair Children.

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Speaker 2: Somebody from there started AMD, still one of the biggest

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Speaker 2: chip makers in the world. And Valentine, because he had

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Speaker 2: worked with these guys, knew them, had invested out of

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Speaker 2: his own pocket in some of the companies, understood what

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Speaker 2: was happening in technology, and he started in the early

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Speaker 2: seventies a venture capital firm called Sequoia a.

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Speaker 3: Little bit famous, right, They invested in Apple, Google and

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Speaker 3: video Instagram, WhatsApp.

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Speaker 2: Yeah, like one of the you know, maybe two or

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Speaker 2: three biggest most important VC firms. But at this time

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Speaker 2: it was Valentine and he went to visit Atari. He

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Speaker 2: smelled the weed smoke. He said it was enough to

434
00:21:44,920 --> 00:21:47,760
Speaker 2: knock you to your knees. At some point he took

435
00:21:47,760 --> 00:21:50,400
Speaker 2: a meeting in the hot tub, and so he's like, yes,

436
00:21:50,440 --> 00:21:54,520
Speaker 2: this is obviously super sketchy, but also he was like, oh,

437
00:21:54,640 --> 00:21:56,560
Speaker 2: these guys are onto something. This could be a way

438
00:21:56,600 --> 00:22:01,000
Speaker 2: to get the computer into the house, this giant, transformative thing.

439
00:22:01,080 --> 00:22:04,840
Speaker 2: And so he offers Bushnel this interesting deal. He says,

440
00:22:04,880 --> 00:22:06,920
Speaker 2: I'm not going to give you money to start with,

441
00:22:07,040 --> 00:22:10,000
Speaker 2: but I will help you. I will help you, you know,

442
00:22:10,680 --> 00:22:13,399
Speaker 2: find a partner essentially, so that you can get to

443
00:22:13,440 --> 00:22:16,240
Speaker 2: the next level, and if you don't screw it up,

444
00:22:16,640 --> 00:22:19,800
Speaker 2: then I'll give you money. Yes, And you know, the

445
00:22:19,920 --> 00:22:23,159
Speaker 2: key thing Valentine wants to help Atari with at this

446
00:22:23,280 --> 00:22:26,879
Speaker 2: point is how do you get this little stoner video

447
00:22:26,880 --> 00:22:32,040
Speaker 2: game company connected with a big national retailer to distribute

448
00:22:32,080 --> 00:22:35,680
Speaker 2: their first consumer product across the country. So they're working

449
00:22:35,680 --> 00:22:39,679
Speaker 2: on this together and toys Rus turns them down, Radio

450
00:22:39,720 --> 00:22:40,800
Speaker 2: Shack turns them down.

451
00:22:40,880 --> 00:22:43,280
Speaker 3: Oh, they're waiting for the big Tandy computer they were

452
00:22:43,280 --> 00:22:44,400
Speaker 3: going to sell years later.

453
00:22:44,240 --> 00:22:46,760
Speaker 2: At out the Tierrasady. They go to the New York

454
00:22:46,920 --> 00:22:51,000
Speaker 2: Toy Fair. Nobody is interested, and this is partly because

455
00:22:51,200 --> 00:22:54,080
Speaker 2: the Magnavox Odyssey, it was called the game that Bushnell

456
00:22:54,119 --> 00:22:57,119
Speaker 2: saw under development from Magnavox, had come out. There was

457
00:22:57,160 --> 00:22:58,879
Speaker 2: a you know, somebody tried a home video game and

458
00:22:58,920 --> 00:23:01,120
Speaker 2: it had done badly. But it turns out that's because

459
00:23:01,160 --> 00:23:02,879
Speaker 2: it was a bad game, and Magnavox just thought of

460
00:23:02,920 --> 00:23:07,480
Speaker 2: it as a way to sell TVs. Classic incumbent mistake, right,

461
00:23:07,480 --> 00:23:11,840
Speaker 2: They're just thinking about their old product. Eventually, Valentine does

462
00:23:12,080 --> 00:23:15,480
Speaker 2: get Atari a key break. He sets up a meeting

463
00:23:15,640 --> 00:23:19,240
Speaker 2: with Sears, which of course was the biggest retailer in

464
00:23:19,240 --> 00:23:21,280
Speaker 2: the country at this point, as we talked about a

465
00:23:21,280 --> 00:23:24,479
Speaker 2: few weeks ago, gets in this meeting to pitch home

466
00:23:24,520 --> 00:23:28,600
Speaker 2: Pong right Pong for the home. Valentine's sent Bushnell to

467
00:23:28,640 --> 00:23:31,320
Speaker 2: Sears headquarters in Chicago for a meeting, told him to

468
00:23:31,320 --> 00:23:34,840
Speaker 2: wear a suit, or at least that's Valentine's version of

469
00:23:34,880 --> 00:23:38,840
Speaker 2: the story. Interestingly, Bushnell has a different version. According to Bushnell,

470
00:23:39,520 --> 00:23:42,680
Speaker 2: Atari Cold called Sears got put through to a buyer

471
00:23:42,720 --> 00:23:45,560
Speaker 2: who was immediately interested and came out to California right away.

472
00:23:46,160 --> 00:23:48,439
Speaker 2: And I actually love these two different stories. I think

473
00:23:48,480 --> 00:23:50,760
Speaker 2: there's like a little in stop looking at your computer.

474
00:23:51,480 --> 00:23:52,480
Speaker 2: I'm sorry, Plan Pung.

475
00:23:54,040 --> 00:23:56,760
Speaker 3: Yes, it's addictive, yes God.

476
00:23:56,800 --> 00:24:00,160
Speaker 2: And I actually think there's something interesting in the fact

477
00:24:00,160 --> 00:24:02,960
Speaker 2: that these two guys remember this so differently, because it

478
00:24:03,000 --> 00:24:07,000
Speaker 2: speaks to this divide between venture capitalists and founders that

479
00:24:07,040 --> 00:24:10,119
Speaker 2: persist today, right, and the question is what is venture

480
00:24:10,160 --> 00:24:12,960
Speaker 2: capital really doing. A lot of founders will say, oh,

481
00:24:12,960 --> 00:24:15,080
Speaker 2: they're just putting up the money, and most of the

482
00:24:15,200 --> 00:24:16,960
Speaker 2: venture capitals will be like, no, No, these are guys who

483
00:24:16,960 --> 00:24:18,720
Speaker 2: don't know what they're doing. We're putting up the money.

484
00:24:18,800 --> 00:24:21,800
Speaker 3: We make introductions, right, we help guide your decisions.

485
00:24:21,880 --> 00:24:24,960
Speaker 2: Yeah, yeah, and so I don't know what happened in

486
00:24:24,960 --> 00:24:27,960
Speaker 2: this case, but whatever was the case. A buyer from

487
00:24:28,000 --> 00:24:31,480
Speaker 2: Sears did come out to Atari one day in April

488
00:24:31,520 --> 00:24:35,159
Speaker 2: of nineteen seventy five, showed up at eight am, and

489
00:24:35,200 --> 00:24:37,440
Speaker 2: of course nobody from Atari is in the office yet,

490
00:24:37,880 --> 00:24:41,080
Speaker 2: but eventually Bushnell and the others show up. They let

491
00:24:41,080 --> 00:24:44,520
Speaker 2: the Sears buy or play with their pong prototype. It's fun,

492
00:24:44,600 --> 00:24:47,560
Speaker 2: you know. Bushnell gives him a sales pitch. Bushnell's a

493
00:24:47,560 --> 00:24:51,480
Speaker 2: great salesman, and the Seers guy wants in and he

494
00:24:51,560 --> 00:24:55,359
Speaker 2: asks Atari, how many of these, you know, home video

495
00:24:55,359 --> 00:24:59,840
Speaker 2: game devices can you make for this year's Christmas shopping season.

496
00:25:00,880 --> 00:25:05,119
Speaker 2: It's April right at this point, Atari has made zero

497
00:25:05,560 --> 00:25:08,440
Speaker 2: of these home machines. Yes, not even really this prototype,

498
00:25:09,200 --> 00:25:13,240
Speaker 2: because it's a fake prototype box painted to look like

499
00:25:13,280 --> 00:25:16,200
Speaker 2: it's plastic and like glued to whatever, a coffee table,

500
00:25:16,560 --> 00:25:19,000
Speaker 2: and it's got a hole underneath it and there's wires

501
00:25:19,080 --> 00:25:22,240
Speaker 2: running down to like a much bigger, essentially computer they've

502
00:25:22,320 --> 00:25:24,960
Speaker 2: jerry rigged in like an apple crate hidden under the table.

503
00:25:25,080 --> 00:25:27,159
Speaker 3: And then an eight year old moving the pixels around.

504
00:25:27,240 --> 00:25:31,960
Speaker 2: Yeah right, it's a mechanical Turk home Pong. So the

505
00:25:32,000 --> 00:25:34,000
Speaker 2: Seriers guy asks, you know, how many can you make

506
00:25:34,040 --> 00:25:36,800
Speaker 2: for Sears, the biggest retailer in the world, I believe

507
00:25:36,800 --> 00:25:39,119
Speaker 2: still at this point, and Bushnell's like, give me a

508
00:25:39,160 --> 00:25:41,120
Speaker 2: minute to talk with the team. And he goes out

509
00:25:41,160 --> 00:25:43,639
Speaker 2: and he talks to his head of manufacturing, and you know,

510
00:25:43,640 --> 00:25:45,800
Speaker 2: they've been making at this point big arcade games where

511
00:25:45,800 --> 00:25:49,280
Speaker 2: a big run is five thousand machines. The head of

512
00:25:49,320 --> 00:25:51,440
Speaker 2: manufacturing is like, many can we make, you know, in

513
00:25:51,480 --> 00:25:53,440
Speaker 2: a few months to get him in time, we can

514
00:25:53,480 --> 00:25:57,880
Speaker 2: make twenty five thousand, twenty five thousand. So Bushnell goes

515
00:25:57,920 --> 00:26:00,639
Speaker 2: back in with the Seers guy and he says, for

516
00:26:00,720 --> 00:26:03,720
Speaker 2: this year, we can make you seventy five thousand.

517
00:26:04,040 --> 00:26:05,240
Speaker 3: Just multiply it by three.

518
00:26:05,480 --> 00:26:05,920
Speaker 2: That's good.

519
00:26:05,960 --> 00:26:06,879
Speaker 3: That's a good CEO move.

520
00:26:06,920 --> 00:26:08,120
Speaker 2: If they asked him how he did it, he didn't

521
00:26:08,119 --> 00:26:10,080
Speaker 2: even say multiply by three. He's talking about it later

522
00:26:10,119 --> 00:26:13,480
Speaker 2: in an interview he said, quote, I was just pulling

523
00:26:13,520 --> 00:26:16,080
Speaker 2: it out of my butt. Also a good CEO move.

524
00:26:16,480 --> 00:26:21,600
Speaker 3: Sears guy, here, seventy five thousand, and thanks, we're Seers.

525
00:26:22,640 --> 00:26:25,359
Speaker 2: Come on, come on, wit seventy thousand. You think you're

526
00:26:25,400 --> 00:26:27,879
Speaker 2: talking to J. C. Penny here, Montgomery Ward.

527
00:26:27,760 --> 00:26:30,919
Speaker 3: Come on radio. Scheck one hundred and fifty thousand is

528
00:26:30,920 --> 00:26:31,359
Speaker 3: what they.

529
00:26:31,359 --> 00:26:35,840
Speaker 2: Order, and Bushnell says, okay, I have a few months

530
00:26:35,840 --> 00:26:39,440
Speaker 2: to do it. Now. Bushnell really does need that capital,

531
00:26:39,520 --> 00:26:42,280
Speaker 2: but he also has a huge order from the biggest

532
00:26:42,280 --> 00:26:45,040
Speaker 2: retailer of the world. Much easier to get funding, and

533
00:26:45,640 --> 00:26:50,159
Speaker 2: Valentine Sequoia comes through with the money. Atari becomes Sequoia's

534
00:26:50,320 --> 00:26:56,040
Speaker 2: first ever investment, and Sears now does the Sears thing

535
00:26:56,080 --> 00:26:57,920
Speaker 2: that we talked about on the Sears Show. Right, they

536
00:26:58,600 --> 00:27:02,960
Speaker 2: help this little company figure out how to scale really quickly. Right,

537
00:27:03,520 --> 00:27:06,320
Speaker 2: They get Bushnell set up with the Sears Bank, which

538
00:27:06,640 --> 00:27:09,440
Speaker 2: is cool at a like nerdy finance way. They create

539
00:27:09,480 --> 00:27:12,440
Speaker 2: this bonded warehouse so that now when Ataris makes this

540
00:27:12,800 --> 00:27:15,359
Speaker 2: you know, one home pong game, they don't have to

541
00:27:15,440 --> 00:27:17,600
Speaker 2: wait to get money for it. Then get eighty percent

542
00:27:17,640 --> 00:27:18,920
Speaker 2: of the value of it right as soon as it

543
00:27:18,920 --> 00:27:21,639
Speaker 2: goes into the warehouse. Clearly, a roller rink's not going

544
00:27:21,680 --> 00:27:24,000
Speaker 2: to work to make one hundred and fifty thousand home

545
00:27:24,080 --> 00:27:26,439
Speaker 2: video game consoles. So they get a you know, a

546
00:27:26,480 --> 00:27:29,480
Speaker 2: kind of real factory with a conveyor belt where Bushnell

547
00:27:29,520 --> 00:27:32,200
Speaker 2: loves to ride around in a box on the conveyor belt.

548
00:27:32,200 --> 00:27:34,400
Speaker 2: The guy loved to play, right, he loved he loved

549
00:27:34,400 --> 00:27:37,480
Speaker 2: to play, which is essential. Actually, one day some serious

550
00:27:37,520 --> 00:27:39,919
Speaker 2: execs in suits show up and Bushnell's in fact riding

551
00:27:40,000 --> 00:27:43,040
Speaker 2: on the conveyor belt in a box. They're like, okay, whatever,

552
00:27:43,119 --> 00:27:47,919
Speaker 2: just keep making the games, and they do. Atari that

553
00:27:48,080 --> 00:27:52,119
Speaker 2: year shipped over one hundred and fifty thousand units. They

554
00:27:52,160 --> 00:27:53,960
Speaker 2: exceeded that one hundred and fifty thousand number for the

555
00:27:54,040 --> 00:27:58,080
Speaker 2: nineteen seventy five Christmas season, and Sears sold all of them.

556
00:27:58,320 --> 00:28:02,280
Speaker 2: Pong was the hit game of the year. Merry Christmas, Tiny,

557
00:28:02,359 --> 00:28:03,000
Speaker 2: Robert Smith.

558
00:28:03,280 --> 00:28:03,920
Speaker 3: Happy ending.

559
00:28:04,560 --> 00:28:07,240
Speaker 2: There are no happy endings in technology. Nope, they're only

560
00:28:07,280 --> 00:28:10,240
Speaker 2: happy middles. Right. You do not get to make home

561
00:28:10,280 --> 00:28:13,400
Speaker 2: Pong and then coast on it forever. It is not Barbie,

562
00:28:13,440 --> 00:28:14,440
Speaker 2: it is not monopoly.

563
00:28:14,880 --> 00:28:15,040
Speaker 1: Right.

564
00:28:15,200 --> 00:28:18,679
Speaker 2: Because of Moore's law, essentially every year people are going

565
00:28:18,760 --> 00:28:21,320
Speaker 2: to make better video games. Right. This is clear to

566
00:28:21,320 --> 00:28:23,640
Speaker 2: anybody in Silicon Valley. It's clear to Bushnell. And in fact,

567
00:28:24,200 --> 00:28:27,640
Speaker 2: the year after Atari wins Christmas in nineteen seventy six,

568
00:28:28,160 --> 00:28:32,800
Speaker 2: our old friend Fairchild, Fairchild Semiconductor. Yes, they start selling

569
00:28:32,880 --> 00:28:35,080
Speaker 2: a home video game console that is not just one

570
00:28:35,160 --> 00:28:39,120
Speaker 2: game like Pong, but it allows you to buy different

571
00:28:39,160 --> 00:28:42,880
Speaker 2: cartridges and swap in different games. It's called Channel F

572
00:28:43,120 --> 00:28:46,760
Speaker 2: like Fairchild, but also Channel Fun. Because I was reading that,

573
00:28:46,760 --> 00:28:48,840
Speaker 2: I was also like, remember channels. I don't think my

574
00:28:48,920 --> 00:28:51,560
Speaker 2: kids know what a channel is. I guess. And then

575
00:28:51,800 --> 00:28:54,400
Speaker 2: there were six of them. They were free and they sucked.

576
00:28:55,000 --> 00:28:58,720
Speaker 2: So now Atari needs to make its own cartridge based game,

577
00:29:00,240 --> 00:29:03,560
Speaker 2: and they need much much more money than they needed

578
00:29:03,560 --> 00:29:07,120
Speaker 2: for Home Pong, right like Sears Bank funding them isn't

579
00:29:07,120 --> 00:29:09,240
Speaker 2: going to do it that the capital costs are just

580
00:29:09,280 --> 00:29:12,480
Speaker 2: too high. Venture capital isn't big enough at this point

581
00:29:12,480 --> 00:29:15,560
Speaker 2: to fund that. They consider going public, but it doesn't

582
00:29:15,600 --> 00:29:20,200
Speaker 2: work out. So in nineteen seventy six, Bushnell and Valentine

583
00:29:20,200 --> 00:29:23,160
Speaker 2: decide that they need to sell. They need to sell

584
00:29:23,160 --> 00:29:25,440
Speaker 2: Atari to get the capital to take the next step,

585
00:29:26,640 --> 00:29:29,960
Speaker 2: and they look around at you know, big incumbents who

586
00:29:30,000 --> 00:29:34,480
Speaker 2: might buy them, and one possibility is Warner Communications based

587
00:29:34,520 --> 00:29:35,080
Speaker 2: in New York.

588
00:29:35,320 --> 00:29:39,880
Speaker 3: It owns movie studios, record labels, getting into cable TV

589
00:29:39,960 --> 00:29:40,400
Speaker 3: at this time.

590
00:29:40,480 --> 00:29:42,800
Speaker 2: Yeah, it's a media company. It's actually big media company

591
00:29:43,240 --> 00:29:46,880
Speaker 2: run by a guy named Steve Ross, who coincidentally had

592
00:29:46,880 --> 00:29:49,880
Speaker 2: recently taken his kids to Disneyland, where they spent a

593
00:29:49,920 --> 00:29:53,400
Speaker 2: long time putting quarters into an Atari video game called

594
00:29:53,520 --> 00:29:55,240
Speaker 2: Indy eight hundred, a driving game.

595
00:29:55,320 --> 00:29:56,560
Speaker 3: So he had a steering wheel.

596
00:29:56,640 --> 00:29:58,680
Speaker 2: Steering wheel, I'm sure, yeah, so good. Remember the one

597
00:29:58,680 --> 00:29:59,960
Speaker 2: where you could sit in it and it will go

598
00:30:00,080 --> 00:30:04,160
Speaker 2: around you. Yeah, it was rad. So Ross sends the

599
00:30:04,480 --> 00:30:08,040
Speaker 2: Warner Jet out to California to pick up Bushnell and

600
00:30:08,120 --> 00:30:12,960
Speaker 2: Valentine to discuss a possible acquisition. On the way to

601
00:30:13,000 --> 00:30:15,920
Speaker 2: New York, the jet stops in Sun Valley, Idaho, to

602
00:30:15,920 --> 00:30:18,760
Speaker 2: pick up Clint Eastwood, who is starring in a Warner

603
00:30:18,800 --> 00:30:21,320
Speaker 2: Brothers movie at the time. And they get to New

604
00:30:21,400 --> 00:30:23,440
Speaker 2: York and Ross puts him up in this beautiful suite

605
00:30:23,480 --> 00:30:26,080
Speaker 2: at the Waldorf Astoria and in fights him over to

606
00:30:26,120 --> 00:30:29,280
Speaker 2: his you know, penthouse on Fifth Avenue for a screening

607
00:30:29,320 --> 00:30:31,400
Speaker 2: of the Clint Eastwood movie that's not out yet. This

608
00:30:31,560 --> 00:30:31,920
Speaker 2: is a.

609
00:30:31,840 --> 00:30:34,840
Speaker 3: Whole different league and a whole different business coming into

610
00:30:34,920 --> 00:30:35,560
Speaker 3: video games.

611
00:30:35,680 --> 00:30:42,200
Speaker 2: Yes, and Bushnell loves it. Here's here's what he said

612
00:30:42,280 --> 00:30:46,880
Speaker 2: later looking back on this experience. Were we impressed? Yeah?

613
00:30:47,040 --> 00:30:50,600
Speaker 2: Were we smitten? Yeah? Did he worm us up? And

614
00:30:50,640 --> 00:30:54,520
Speaker 2: you know, ready for the kill? Yeah? Yeah. I mean,

615
00:30:54,560 --> 00:30:56,120
Speaker 2: when I think about it, you just have to really

616
00:30:56,160 --> 00:30:58,800
Speaker 2: hand it to somebody that's a bigger con artist than

617
00:30:58,840 --> 00:30:59,200
Speaker 2: you are.

618
00:31:02,120 --> 00:31:04,080
Speaker 3: I love this guy Byschanel. He's so good.

619
00:31:04,320 --> 00:31:07,560
Speaker 2: Yeah, he knows, he knows what's happening, at least he

620
00:31:07,600 --> 00:31:11,240
Speaker 2: knows in retrospect, and he respects it. It's like the Midway, right,

621
00:31:11,280 --> 00:31:16,160
Speaker 2: It's like Steve is like the Carney, and Bushnell is

622
00:31:16,600 --> 00:31:19,440
Speaker 2: the room is the Room. He's played at a much

623
00:31:19,560 --> 00:31:22,800
Speaker 2: higher level respect respect, and he respects it. So the

624
00:31:22,880 --> 00:31:26,680
Speaker 2: next morning, the morning after the screening, Bushnell agreed to

625
00:31:26,800 --> 00:31:31,080
Speaker 2: sell Atari to Ross to Warner for twenty eight million dollars.

626
00:31:32,320 --> 00:31:35,000
Speaker 2: And Bushnell stayed on. He kept running the company as

627
00:31:35,040 --> 00:31:37,000
Speaker 2: he had been, and now he has the capital to

628
00:31:37,120 --> 00:31:40,560
Speaker 2: work on this console that you know, we will eventually

629
00:31:40,680 --> 00:31:43,520
Speaker 2: know as the Atari twenty six hundred. It had the

630
00:31:43,560 --> 00:31:48,560
Speaker 2: Stick of Joy, had general stick of Joy, one joy stick,

631
00:31:49,160 --> 00:31:52,000
Speaker 2: the orange button, one button that you usually you would

632
00:31:52,040 --> 00:31:54,120
Speaker 2: fire or jump where the things it would do a

633
00:31:54,200 --> 00:31:58,200
Speaker 2: million times so fast, not just a knob. Now there's

634
00:31:58,240 --> 00:32:01,840
Speaker 2: a button comes out in nineteen seventy seven, and it

635
00:32:02,000 --> 00:32:06,720
Speaker 2: does it does like okay, does pretty well, but it

636
00:32:06,840 --> 00:32:10,160
Speaker 2: does not do amazingly well, it is not the success

637
00:32:10,240 --> 00:32:12,640
Speaker 2: that we know it will come to be. And the

638
00:32:12,760 --> 00:32:16,800
Speaker 2: executives in New York at Warner decide the hippies out

639
00:32:16,840 --> 00:32:20,480
Speaker 2: in California need a grown up to help them become

640
00:32:20,560 --> 00:32:21,680
Speaker 2: a real grown up company.

641
00:32:21,840 --> 00:32:22,560
Speaker 3: Classic moment.

642
00:32:22,840 --> 00:32:27,160
Speaker 2: Barry and Warner brings in this guy named Ray Kazar

643
00:32:27,640 --> 00:32:32,000
Speaker 2: to work with Atari. Not a tech guy. I'd been

644
00:32:32,080 --> 00:32:35,640
Speaker 2: an executive at a big textile firm, started his own

645
00:32:35,800 --> 00:32:40,240
Speaker 2: shirt company, shirts, Kids Love Shirts, and you know, initially

646
00:32:40,600 --> 00:32:45,920
Speaker 2: because Kuzar is kind of consulting whatever. But after a

647
00:32:45,960 --> 00:32:49,440
Speaker 2: few months, the executives at Warner tell Bushnell that he

648
00:32:49,520 --> 00:32:52,360
Speaker 2: can stay on his chairman, but Kazar is going to

649
00:32:52,400 --> 00:32:56,880
Speaker 2: be the CEO of Atari, and Bushell says, no, no,

650
00:32:57,120 --> 00:32:58,960
Speaker 2: this shirt guy is not going to be the CEO

651
00:32:59,000 --> 00:33:01,040
Speaker 2: of Atari, and Warner says, yeah, we own the company.

652
00:33:01,280 --> 00:33:03,280
Speaker 2: He is going to be the CEO and if you

653
00:33:03,320 --> 00:33:08,160
Speaker 2: don't like it, you're fired. And Bushnell says, no, I'm not.

654
00:33:08,440 --> 00:33:09,120
Speaker 2: You can't fire me.

655
00:33:10,200 --> 00:33:14,480
Speaker 3: I quit Ah expect something a little more creative from Bushnell,

656
00:33:14,520 --> 00:33:16,000
Speaker 3: But maybe he made it. Maybe he was the first

657
00:33:16,040 --> 00:33:16,560
Speaker 3: guy to say this.

658
00:33:17,000 --> 00:33:19,800
Speaker 2: It's definitely on Bushnell's kind of cowboy brand, right, he

659
00:33:19,840 --> 00:33:21,880
Speaker 2: doesn't need the money made a bunch of money selling Atari,

660
00:33:22,640 --> 00:33:26,240
Speaker 2: And interestingly, he has this little side hustle at this

661
00:33:26,400 --> 00:33:30,080
Speaker 2: point a place he started in order to collect all

662
00:33:30,120 --> 00:33:33,000
Speaker 2: the quarters that people were putting into the Atari arcade games.

663
00:33:33,640 --> 00:33:38,520
Speaker 2: A place called Chuck E. Cheese's Pizza Time Theater. Oh yeah,

664
00:33:38,560 --> 00:33:41,400
Speaker 2: he had started as part of Atari, and then when

665
00:33:41,440 --> 00:33:43,239
Speaker 2: Warner bought Atari, they're like, we don't want to own

666
00:33:43,240 --> 00:33:45,040
Speaker 2: a pizza place, so he bought it from them for

667
00:33:45,120 --> 00:33:49,880
Speaker 2: five hundred thousand dollars. So Bushnell is, you know, riding

668
00:33:49,960 --> 00:33:54,640
Speaker 2: off into the sunset on an animatronic singing rat. Yeah, yeah,

669
00:33:55,720 --> 00:33:56,680
Speaker 2: he's done an Atari.

670
00:33:56,880 --> 00:33:59,720
Speaker 3: But luckily the geniuses at a giant media company know

671
00:34:00,040 --> 00:34:01,440
Speaker 3: how to run a video game company.

672
00:34:01,560 --> 00:34:29,040
Speaker 2: Right. That's after the break. We're back from the ad break.

673
00:34:30,600 --> 00:34:34,320
Speaker 2: Bushnell is out and Kazar the shirt guy is in

674
00:34:34,680 --> 00:34:39,160
Speaker 2: at Atari. And the next thing that happens is really surprising.

675
00:34:40,520 --> 00:34:43,279
Speaker 2: This East Coast businessman who doesn't know anything about video

676
00:34:43,360 --> 00:34:48,239
Speaker 2: games or engineering turns the Atari twenty six hundred into

677
00:34:48,320 --> 00:34:51,760
Speaker 2: a smash hit. Turns out he's a really good marketer

678
00:34:51,920 --> 00:34:54,160
Speaker 2: as a sense of what's going on, and he has

679
00:34:54,239 --> 00:34:57,320
Speaker 2: the good sense to license a hit arcade game that

680
00:34:57,520 --> 00:35:01,200
Speaker 2: was not made by Atari, a game called Space Invaders.

681
00:35:01,280 --> 00:35:03,800
Speaker 2: I'm sure you remember, well, of course, beautiful game. He

682
00:35:04,040 --> 00:35:07,320
Speaker 2: licenses it for Atari to develop for the twenty six hundred,

683
00:35:08,080 --> 00:35:09,680
Speaker 2: and it is a huge hit.

684
00:35:10,360 --> 00:35:12,960
Speaker 3: And this is a smart thing a big media company

685
00:35:13,040 --> 00:35:17,000
Speaker 3: can do. Recognize basically franchises, right that are popular at

686
00:35:17,040 --> 00:35:19,040
Speaker 3: the pizza place, which is where I played it, Red

687
00:35:19,080 --> 00:35:22,800
Speaker 3: Banjo Pizza in Parks of Utah, and then get that

688
00:35:23,120 --> 00:35:25,799
Speaker 3: into a home game, right, make money off of the name,

689
00:35:25,880 --> 00:35:26,439
Speaker 3: and that's great.

690
00:35:26,640 --> 00:35:30,160
Speaker 2: Yes, And remember they're in the console business, right, console

691
00:35:30,200 --> 00:35:32,960
Speaker 2: business is not doing great. The console business needs its

692
00:35:33,080 --> 00:35:36,400
Speaker 2: killer app. Space Invaders becomes the killer app, and the

693
00:35:36,520 --> 00:35:39,920
Speaker 2: popularity of this piece of software drives the sales of

694
00:35:40,000 --> 00:35:43,439
Speaker 2: the hardware. Right, Everybody goes out and buys a twenty

695
00:35:43,480 --> 00:35:47,240
Speaker 2: six hundred so they can play Space Invaders. So revenue

696
00:35:47,280 --> 00:35:50,640
Speaker 2: at Atari, before Kazar got there it was less than

697
00:35:50,760 --> 00:35:54,800
Speaker 2: one hundred million, and after he'd been running Atari for

698
00:35:54,880 --> 00:35:58,040
Speaker 2: a few years, revenues are over a billion. Right, he

699
00:35:58,080 --> 00:36:02,320
Speaker 2: has ten ext it more. Now it's the early eighties

700
00:36:02,880 --> 00:36:08,640
Speaker 2: and America is going bananas for video Pacman Feva, I

701
00:36:08,680 --> 00:36:10,960
Speaker 2: don't know the name is an actual It was an

702
00:36:11,000 --> 00:36:13,160
Speaker 2: actual hit song. I got a pocket full of quarters

703
00:36:13,200 --> 00:36:15,160
Speaker 2: and I'm headed for the arcade. I don't make a

704
00:36:15,200 --> 00:36:17,279
Speaker 2: lot of money, but I'm spending everything I make. I

705
00:36:17,280 --> 00:36:19,880
Speaker 2: didn't look it up. I remember it, and if I'm

706
00:36:19,960 --> 00:36:24,160
Speaker 2: misremembering it, you can tell me business history at pushkin FM.

707
00:36:24,960 --> 00:36:27,880
Speaker 2: Everybody's getting into the video games business now. Toy companies

708
00:36:27,920 --> 00:36:30,160
Speaker 2: in particular are looking at this and being like, oh,

709
00:36:30,520 --> 00:36:34,440
Speaker 2: this is a toy so Mattel Barbie. You know, they

710
00:36:34,640 --> 00:36:38,279
Speaker 2: make the intelevision Kaliko, which around this time is making

711
00:36:38,520 --> 00:36:42,359
Speaker 2: Cabbage Patch Kids, another eighties shout out a Kalico makes

712
00:36:42,480 --> 00:36:46,960
Speaker 2: Calliko Vision. But Atari is winning. They are dominant. They

713
00:36:47,000 --> 00:36:51,040
Speaker 2: have something like eighty percent market share. Incredible, and this

714
00:36:51,239 --> 00:36:53,560
Speaker 2: is the peak. This is the moment. You have finished

715
00:36:53,640 --> 00:36:57,399
Speaker 2: the rise, and now we begin the fall. The fall

716
00:36:57,560 --> 00:37:02,400
Speaker 2: starts with pac Man. Interestingly, this huge hit game, this

717
00:37:02,560 --> 00:37:06,160
Speaker 2: huge hit arcade game, Atari doesn't make it, so they

718
00:37:06,320 --> 00:37:09,960
Speaker 2: license it. Figure like work for Space Invaders, it'll work

719
00:37:10,040 --> 00:37:15,719
Speaker 2: for pac Man. They make twelve million cartridges of pac Man,

720
00:37:16,360 --> 00:37:20,120
Speaker 2: despite the fact that only ten million people own Atari

721
00:37:20,160 --> 00:37:21,840
Speaker 2: twenty six hundred. They think this game is going to

722
00:37:21,880 --> 00:37:25,440
Speaker 2: be so popular that everyone with an Atari will buy it,

723
00:37:25,680 --> 00:37:29,359
Speaker 2: and two million more people will buy Atari consoles to play.

724
00:37:29,400 --> 00:37:34,920
Speaker 2: It doesn't happen. The game kind of sucks, just technically

725
00:37:35,000 --> 00:37:36,080
Speaker 2: doesn't play as well.

726
00:37:36,320 --> 00:37:38,719
Speaker 3: Because part of the pac Man appeal was that it

727
00:37:38,800 --> 00:37:40,600
Speaker 3: was a very fast movie game, like you had to

728
00:37:40,680 --> 00:37:42,839
Speaker 3: turn on a dime. You have, like like you had

729
00:37:42,880 --> 00:37:45,400
Speaker 3: these whole systems you had when you played in the arcades,

730
00:37:45,680 --> 00:37:48,040
Speaker 3: and you wanted to use those systems at home, And

731
00:37:48,080 --> 00:37:49,920
Speaker 3: if there's a little bit of a lag, it doesn't

732
00:37:50,040 --> 00:37:51,120
Speaker 3: really quite works.

733
00:37:51,239 --> 00:37:53,480
Speaker 2: YEA, Well, it's not fun enough, right, There is this

734
00:37:53,680 --> 00:37:56,360
Speaker 2: thing where a videogram has to be really fun to

735
00:37:56,480 --> 00:37:58,759
Speaker 2: be a big hit, and pac Man for the twenty

736
00:37:58,800 --> 00:38:01,680
Speaker 2: six hundred is not fun enough. So it's starting to

737
00:38:01,719 --> 00:38:04,760
Speaker 2: get bad, and it's gonna get worse. And the reason

738
00:38:04,960 --> 00:38:10,360
Speaker 2: it gets worse, which I love, is Et the Extraterrestrial.

739
00:38:10,480 --> 00:38:14,359
Speaker 3: Wait Et never made anything worse. He was so adorable.

740
00:38:14,480 --> 00:38:18,160
Speaker 2: It's not his fault. Ou so Et comes out in

741
00:38:18,239 --> 00:38:21,759
Speaker 2: the summer of eighty two. So giant hit holds up,

742
00:38:21,800 --> 00:38:23,320
Speaker 2: by the way, at least I held up my budget.

743
00:38:23,320 --> 00:38:25,399
Speaker 2: I don't know, eight years ago with my children made

744
00:38:25,400 --> 00:38:29,440
Speaker 2: Reesi's Pieces a big hit. Twotiful movie was not distributed

745
00:38:29,480 --> 00:38:32,360
Speaker 2: by Warner Brothers. It's not distributed by Warner the company

746
00:38:32,400 --> 00:38:36,680
Speaker 2: that owns Atari, right and a Ross. The guy running

747
00:38:36,800 --> 00:38:39,960
Speaker 2: Warner Brothers really wants to work with Spielberg. Of course,

748
00:38:40,000 --> 00:38:41,960
Speaker 2: you want to work with Spielberg. You're runing a movie studio.

749
00:38:42,000 --> 00:38:44,359
Speaker 2: You want to work with Spielberg. And so he thinks

750
00:38:44,440 --> 00:38:49,600
Speaker 2: that turning ET into a hit game would help entice

751
00:38:49,600 --> 00:38:52,359
Speaker 2: Spielberg to come work at Warner Brothers. So he makes

752
00:38:52,400 --> 00:38:55,279
Speaker 2: this deal with Spielberg in the summer of eighty two.

753
00:38:56,120 --> 00:38:57,920
Speaker 2: First of all, he pays a ton of money to

754
00:38:58,160 --> 00:39:00,960
Speaker 2: license the game, and he tells Spielberg, we will have

755
00:39:01,120 --> 00:39:05,040
Speaker 2: a great version of ET for the Atari twenty six

756
00:39:05,160 --> 00:39:10,040
Speaker 2: hundred out in time for the Christmas season. A problem

757
00:39:10,120 --> 00:39:12,399
Speaker 2: with this is it takes like five, five or six

758
00:39:12,480 --> 00:39:16,279
Speaker 2: months to make a new video game, but to have

759
00:39:16,520 --> 00:39:19,120
Speaker 2: the game in stores in time to sell it for

760
00:39:19,200 --> 00:39:22,200
Speaker 2: the Christmas season. This is the summer already. Yeah, yeah,

761
00:39:22,280 --> 00:39:24,719
Speaker 2: and they have to you know, produce the games. They're

762
00:39:24,719 --> 00:39:27,120
Speaker 2: gonna have to write this game in like five or

763
00:39:27,160 --> 00:39:30,040
Speaker 2: six weeks instead of five or six months, and people

764
00:39:30,120 --> 00:39:32,120
Speaker 2: are tired, like, no, we can't do it. You can't

765
00:39:32,200 --> 00:39:34,640
Speaker 2: make a good game that fast. It's just not the

766
00:39:34,680 --> 00:39:37,600
Speaker 2: way it works. Kazar, who's running Atari, is like, no, whatever,

767
00:39:37,640 --> 00:39:39,480
Speaker 2: it's Spielberg. What are you gonna say no to Spielberg?

768
00:39:39,520 --> 00:39:40,359
Speaker 2: You say no to the CEO.

769
00:39:40,480 --> 00:39:42,279
Speaker 3: No, we can make a s We can make a

770
00:39:42,360 --> 00:39:43,279
Speaker 3: shirt in like three hours.

771
00:39:43,400 --> 00:39:45,279
Speaker 2: Not many shirts. We could make my Christmas. You just

772
00:39:45,360 --> 00:39:49,840
Speaker 2: gotta make one game. So they eventually find an engineer

773
00:39:49,920 --> 00:39:51,680
Speaker 2: to make the game. A good engineer, guy who made

774
00:39:51,760 --> 00:39:53,279
Speaker 2: Yars Revenge. I don't know if you remember that when

775
00:39:53,280 --> 00:39:55,279
Speaker 2: it was a hit game at Atari. He gets it

776
00:39:55,360 --> 00:39:59,760
Speaker 2: done in a matter of weeks. Atari makes five million copies,

777
00:40:00,640 --> 00:40:02,920
Speaker 2: gets them on the shelves in time for the Christmas season.

778
00:40:04,200 --> 00:40:09,080
Speaker 2: And the game is bad. The game is not fun.

779
00:40:09,360 --> 00:40:11,040
Speaker 3: You just like you move them along, and he like

780
00:40:11,160 --> 00:40:15,200
Speaker 3: falls into hole and he makes it like er Like yeah,

781
00:40:15,239 --> 00:40:15,879
Speaker 3: I'm going I'm.

782
00:40:15,800 --> 00:40:17,640
Speaker 2: Gonna read you. A couple of reviews from the time,

783
00:40:17,880 --> 00:40:23,279
Speaker 2: one from a publication called Joystick. No c Et has

784
00:40:23,360 --> 00:40:28,040
Speaker 2: nothing to phone home about? What another review from Electronic Games.

785
00:40:28,480 --> 00:40:31,840
Speaker 2: If Et does call home, please don't tell him about this.

786
00:40:33,120 --> 00:40:38,000
Speaker 2: I see a theme. So a there are millions of

787
00:40:38,200 --> 00:40:43,560
Speaker 2: unsold copies. The engineer who made the game ends up

788
00:40:43,640 --> 00:40:47,160
Speaker 2: leaving Atari, leaving the business, eventually becomes a therapist. It

789
00:40:47,239 --> 00:40:50,120
Speaker 2: goes a lot for him to deal with, and Atari sucks.

790
00:40:50,280 --> 00:40:52,680
Speaker 2: Now right now, the thing is like, oh, I went,

791
00:40:52,840 --> 00:40:54,239
Speaker 2: I paid a lot of money for this game and

792
00:40:54,400 --> 00:40:54,960
Speaker 2: it sucks.

793
00:40:55,880 --> 00:40:59,680
Speaker 3: It's interesting, right, Like the thrill of a new invention

794
00:41:00,080 --> 00:41:04,080
Speaker 3: only lasts so long. Right, you know the very first

795
00:41:04,360 --> 00:41:07,719
Speaker 3: movie of you know, people moving around a garden, everybody's like,

796
00:41:07,719 --> 00:41:10,160
Speaker 3: oh my god, it's amazing. You know, three weeks later

797
00:41:10,200 --> 00:41:13,680
Speaker 3: they're like, the plot kind of sucks. Maybe an explosion

798
00:41:13,800 --> 00:41:17,279
Speaker 3: or something, right, Yeah, probably the same thing with Gutenberg, right, yeah, yeah,

799
00:41:17,400 --> 00:41:18,040
Speaker 3: that's amazing.

800
00:41:18,120 --> 00:41:20,319
Speaker 2: Yeah, I read the Bible. You got to go anything else?

801
00:41:20,360 --> 00:41:22,799
Speaker 2: What's what's the honess? Was it your horness? I think

802
00:41:22,800 --> 00:41:25,839
Speaker 2: it's your honest, but don't know. Business history of push

803
00:41:25,920 --> 00:41:29,840
Speaker 2: him out of him. End of the eighty two Actually,

804
00:41:29,920 --> 00:41:33,399
Speaker 2: Warner announces earnings. Right, they're a public company, They're way

805
00:41:33,480 --> 00:41:36,680
Speaker 2: worse than expected. The stock crashes and as we go

806
00:41:36,760 --> 00:41:41,640
Speaker 2: into eighty three, now it's not just Atari, the whole

807
00:41:41,880 --> 00:41:47,840
Speaker 2: video game industry collapses. There is this incredible glut of consoles.

808
00:41:47,880 --> 00:41:51,120
Speaker 2: All these different companies are selling consoles of games there's

809
00:41:51,120 --> 00:41:53,680
Speaker 2: a lot of really bad games. There's like third party

810
00:41:53,719 --> 00:41:58,120
Speaker 2: companies are selling games, apparently chuck Wagon dog Food. There's

811
00:41:58,200 --> 00:42:01,360
Speaker 2: like a chuck Wagon dog Food video game. And on

812
00:42:01,480 --> 00:42:06,160
Speaker 2: top of all that, now you have home computers, real

813
00:42:06,200 --> 00:42:08,480
Speaker 2: computers like we would think of as computers with keyboards.

814
00:42:08,520 --> 00:42:10,759
Speaker 2: You know. There's the Commodore sixty four is coming out.

815
00:42:10,760 --> 00:42:13,680
Speaker 2: At this time. At my house, we had the lesser

816
00:42:13,719 --> 00:42:16,919
Speaker 2: known Texas Instruments t I ninety nine four A, which

817
00:42:16,960 --> 00:42:20,080
Speaker 2: I remember for its cassette deck instead of a disk drive.

818
00:42:21,000 --> 00:42:25,720
Speaker 2: So Atari is now losing hundreds of millions of dollars. Kazar,

819
00:42:25,920 --> 00:42:29,920
Speaker 2: the CEO, he gets accused by the sec of insider

820
00:42:30,000 --> 00:42:34,040
Speaker 2: trading of selling shares just before that bad earnings announcement

821
00:42:34,080 --> 00:42:36,560
Speaker 2: at the end of eighty two. He leaves the company

822
00:42:37,080 --> 00:42:39,239
Speaker 2: in the summer, says he didn't do anything wrong, but

823
00:42:39,280 --> 00:42:42,080
Speaker 2: he's out. Word of replaces him with a marketing guy

824
00:42:42,120 --> 00:42:45,319
Speaker 2: from Philip Morris, who helped come up with the Marlborough Man,

825
00:42:46,440 --> 00:42:49,880
Speaker 2: and a few months later in the second half of

826
00:42:50,640 --> 00:42:55,560
Speaker 2: eighty three, Atari actually has so much unsold merchandise, so

827
00:42:55,640 --> 00:42:59,279
Speaker 2: many video games that nobody wants to buy, that they

828
00:42:59,360 --> 00:43:04,400
Speaker 2: actually go and supposedly dump hundreds of thousands of unsold

829
00:43:04,440 --> 00:43:08,680
Speaker 2: cartridges in a landfill and a pit in Alamo Gordo,

830
00:43:08,880 --> 00:43:12,840
Speaker 2: New Mexico and cover it up. It's heartbreaking, it's heartbreaking,

831
00:43:12,920 --> 00:43:15,680
Speaker 2: and is it even true? Delightfully, I don't know. Ten

832
00:43:15,760 --> 00:43:17,680
Speaker 2: years ago or so they made a documentary they actually

833
00:43:17,760 --> 00:43:20,960
Speaker 2: went and dug up the landfill in Alamogordo, and in

834
00:43:21,040 --> 00:43:24,240
Speaker 2: fact they found et cartridges there and other video games.

835
00:43:25,280 --> 00:43:29,760
Speaker 2: This is really the end for Atari, and it's perfect

836
00:43:29,840 --> 00:43:33,960
Speaker 2: obviously metaphorically right, Like it's a burial. They are burying

837
00:43:34,760 --> 00:43:37,719
Speaker 2: video games, and you know Atari is going to have

838
00:43:37,760 --> 00:43:40,840
Speaker 2: this sort of shambalic afterlife. As brands do, as companies do,

839
00:43:40,920 --> 00:43:44,640
Speaker 2: they get acquired and acquired and whatever. So let's go

840
00:43:44,800 --> 00:43:46,600
Speaker 2: back to the question we asked at the beginning and

841
00:43:46,680 --> 00:43:51,360
Speaker 2: try and answer it right. Like, Atari practically speaking, invented

842
00:43:51,440 --> 00:43:53,879
Speaker 2: video games. They changed culture, they changed business, They brought

843
00:43:53,880 --> 00:43:56,920
Speaker 2: the computer to the home. Video games continued to be

844
00:43:57,000 --> 00:44:01,600
Speaker 2: this giant thing. Atari disappeared. Why, Like why did that happen?

845
00:44:02,440 --> 00:44:04,560
Speaker 2: And I think there are a few answers that it's

846
00:44:04,600 --> 00:44:07,759
Speaker 2: worth going through right on. One is just timing. One

847
00:44:07,880 --> 00:44:11,400
Speaker 2: is just kind of bad luck, right, like the Crash

848
00:44:11,640 --> 00:44:13,920
Speaker 2: of eighty three. The video game crash of eighty three

849
00:44:14,680 --> 00:44:18,520
Speaker 2: was brutal, and it took out everybody, right, It took

850
00:44:18,560 --> 00:44:21,320
Speaker 2: out Atari, but it also took out Callco, which was

851
00:44:21,360 --> 00:44:23,800
Speaker 2: making Calleco Vision. It also took out you know, Mattel

852
00:44:23,880 --> 00:44:25,000
Speaker 2: gave up on intelevision.

853
00:44:25,239 --> 00:44:28,920
Speaker 3: And so as the incumbent Atari had more money invested

854
00:44:29,000 --> 00:44:31,520
Speaker 3: they had, they were further out over their skis when

855
00:44:31,600 --> 00:44:36,840
Speaker 3: the crash came. Yes, yes, and huge warehouses, employees, engineers, the.

856
00:44:36,880 --> 00:44:39,080
Speaker 2: Whole thing, hundreds of thousands of cartridges.

857
00:44:39,200 --> 00:44:41,719
Speaker 3: Yeah, and they have to keep, you know, putting out

858
00:44:41,719 --> 00:44:44,000
Speaker 3: these things to support their legacy systems. Right. It's a

859
00:44:44,080 --> 00:44:46,359
Speaker 3: classic classic incumbent proplem. Yeah.

860
00:44:46,400 --> 00:44:49,120
Speaker 2: And the glut goes on for a few years through

861
00:44:49,160 --> 00:44:52,239
Speaker 2: the mid eighties, and and you know, retailers themselves don't

862
00:44:52,280 --> 00:44:54,600
Speaker 2: want to stock video games anymore. They were left with them.

863
00:44:54,960 --> 00:44:58,640
Speaker 2: And in fact, when the next video game revival comes,

864
00:44:58,760 --> 00:45:01,960
Speaker 2: it's driven notably by a game that doesn't call itself

865
00:45:02,040 --> 00:45:05,800
Speaker 2: a video game, calls itself an entertainment system, the Nintendo

866
00:45:06,160 --> 00:45:10,360
Speaker 2: Entertainment System Classic. So you know, maybe anybody would have

867
00:45:10,440 --> 00:45:12,919
Speaker 2: got wiped out. Maybe there was nothing Tari could have done.

868
00:45:13,360 --> 00:45:16,960
Speaker 2: But I do wonder. You have to wonder, right, what

869
00:45:17,080 --> 00:45:19,960
Speaker 2: would have happened if Bushnell had managed to hold onto

870
00:45:20,000 --> 00:45:22,360
Speaker 2: the company, if he'd managed to say go public, to

871
00:45:22,520 --> 00:45:29,000
Speaker 2: not have to sell to Warner, Because clearly Bushnell was

872
00:45:29,120 --> 00:45:31,600
Speaker 2: the perfect guy to run a video game company, right.

873
00:45:32,000 --> 00:45:35,759
Speaker 2: He was the amusement park carnee genius, who knew what

874
00:45:35,920 --> 00:45:38,040
Speaker 2: fun was, who knew what games were, who was also

875
00:45:38,120 --> 00:45:42,279
Speaker 2: an engineer, who also created this culture where engineers could

876
00:45:42,280 --> 00:45:45,800
Speaker 2: come and play and be creative. And when he sold,

877
00:45:46,400 --> 00:45:51,040
Speaker 2: he sold to an entertainment company. It's not about the

878
00:45:51,080 --> 00:45:54,080
Speaker 2: engineering for them, which is why they sent a shirt

879
00:45:54,200 --> 00:45:55,640
Speaker 2: guy to run Atari.

880
00:45:55,840 --> 00:45:58,359
Speaker 3: Right. He knew logistics, he knew selling, he knew how

881
00:45:58,360 --> 00:45:59,360
Speaker 3: to get things into stores.

882
00:45:59,480 --> 00:46:02,160
Speaker 2: Sure, but it does seem like he thought the engineers

883
00:46:02,200 --> 00:46:05,800
Speaker 2: were just employees on an assembly line. And that was

884
00:46:07,000 --> 00:46:09,480
Speaker 2: a key mistake. And there's one story that I want

885
00:46:09,520 --> 00:46:12,239
Speaker 2: to end with and I think really reveals this what

886
00:46:12,320 --> 00:46:16,240
Speaker 2: a mistake that was. And that's this. Not long after

887
00:46:16,520 --> 00:46:20,400
Speaker 2: Kazar took over a few of the engineers, the game designers,

888
00:46:20,440 --> 00:46:24,560
Speaker 2: the guys actually creating these games, realized that they had

889
00:46:24,640 --> 00:46:27,640
Speaker 2: created games that were making the company millions of dollars

890
00:46:28,280 --> 00:46:32,480
Speaker 2: and they were, you know, staff employees making like twenty

891
00:46:32,520 --> 00:46:35,640
Speaker 2: thousand dollars a year or something. And so they went

892
00:46:35,680 --> 00:46:37,920
Speaker 2: to Gazar to ask for a better deal. They're like, look,

893
00:46:37,960 --> 00:46:40,279
Speaker 2: we're making these games, they're making all this money, give

894
00:46:40,360 --> 00:46:42,719
Speaker 2: us a better deal. And because I said no, he's like,

895
00:46:42,840 --> 00:46:44,640
Speaker 2: anybody can do that, you know, you guys are just

896
00:46:44,880 --> 00:46:48,640
Speaker 2: cranking out these things. And so these game designers left

897
00:46:49,280 --> 00:46:52,360
Speaker 2: and they started their own video game company, not to

898
00:46:52,440 --> 00:46:55,520
Speaker 2: make hardware, just to make games, which was not a

899
00:46:55,640 --> 00:47:00,120
Speaker 2: thing yet. Right, They are inventing the standalone video game company,

900
00:47:00,239 --> 00:47:05,040
Speaker 2: and they create a company called Activision, and Activision survives

901
00:47:05,120 --> 00:47:07,279
Speaker 2: the crash of eighty three and goes on to become

902
00:47:07,320 --> 00:47:10,880
Speaker 2: one of the biggest video game companies in the world.

903
00:47:11,080 --> 00:47:15,160
Speaker 2: They create Call of Duty, this gigantic franchise. They eventually

904
00:47:15,320 --> 00:47:19,680
Speaker 2: merge with another company called Blizzard, and in twenty twenty two,

905
00:47:19,920 --> 00:47:28,480
Speaker 2: Activision Blizzard gets bought by Microsoft for sixty nine billion dollars. Nice. So, so,

906
00:47:29,200 --> 00:47:31,440
Speaker 2: you know, when you look at the video game industry

907
00:47:31,560 --> 00:47:35,240
Speaker 2: over the long arc, what you see is the companies

908
00:47:35,280 --> 00:47:42,160
Speaker 2: that wind up dominating it are not media companies, right. Basically, Nintendo, Sony, Microsoft,

909
00:47:42,840 --> 00:47:47,359
Speaker 2: These are all companies with very deep roots in electronics.

910
00:47:47,400 --> 00:47:51,120
Speaker 2: They are all at some level technology companies, and once

911
00:47:51,239 --> 00:47:55,440
Speaker 2: Bushnell left Atari, I think at a deep level it

912
00:47:55,640 --> 00:47:59,600
Speaker 2: wasn't fundamentally run like a technology company anymore, and that

913
00:47:59,960 --> 00:48:01,920
Speaker 2: is why Atari failed.

914
00:48:02,120 --> 00:48:06,040
Speaker 3: I disagree. I think Bushnell had his moment, he changed

915
00:48:06,080 --> 00:48:09,200
Speaker 3: the world, but as we often see with technology companies,

916
00:48:09,400 --> 00:48:11,520
Speaker 3: the person who founded the company might not be the

917
00:48:11,560 --> 00:48:13,560
Speaker 3: person to take it all the way. You know, he

918
00:48:13,800 --> 00:48:16,560
Speaker 3: was using it as a game company, and it would

919
00:48:16,600 --> 00:48:20,320
Speaker 3: eventually become a multi media you know, essentially movies in

920
00:48:20,400 --> 00:48:23,600
Speaker 3: a box, a huge technological innovation that I'm not sure

921
00:48:23,719 --> 00:48:27,400
Speaker 3: he could have done. And we see this across other industries. Right,

922
00:48:27,480 --> 00:48:32,399
Speaker 3: the first mover advantage is usually not an advantage, right,

923
00:48:32,600 --> 00:48:35,200
Speaker 3: because you have to spend all this money solving problems

924
00:48:35,560 --> 00:48:37,719
Speaker 3: that other people can come and just take from you.

925
00:48:38,040 --> 00:48:42,719
Speaker 3: But also you have a certain arrogance, right you are

926
00:48:43,560 --> 00:48:47,560
Speaker 3: the successful leader. Everyone wants an Atari, Everyone has an

927
00:48:47,600 --> 00:48:50,239
Speaker 3: Atari system, so you don't really have to innovate to

928
00:48:50,280 --> 00:48:52,319
Speaker 3: make a better Atari system. You just have to get

929
00:48:52,360 --> 00:48:55,560
Speaker 3: him to just keep buying cartridges. And yes, Atari did

930
00:48:55,719 --> 00:48:58,040
Speaker 3: try and come up with a new system, and it

931
00:48:58,160 --> 00:49:01,960
Speaker 3: was okay, right, it just didn't work that well because

932
00:49:02,040 --> 00:49:05,960
Speaker 3: I think they were like, the world will always have Atari,

933
00:49:06,040 --> 00:49:09,040
Speaker 3: Atari will always be number one. You can't conceive of

934
00:49:09,120 --> 00:49:11,800
Speaker 3: a world without Atari, and then it happened.

935
00:49:13,120 --> 00:49:16,040
Speaker 2: We live in a world without Aitari. If you were

936
00:49:16,080 --> 00:49:18,440
Speaker 2: into video games, there's a good chance you have thoughts

937
00:49:18,719 --> 00:49:20,879
Speaker 2: about the things we got wrong on today's show.

938
00:49:20,960 --> 00:49:22,960
Speaker 3: And I don't take it to Reddit. Take it to

939
00:49:23,120 --> 00:49:24,280
Speaker 3: the email systems.

940
00:49:24,480 --> 00:49:27,279
Speaker 2: Write to us at business History at pushkin dot fm,

941
00:49:27,360 --> 00:49:29,440
Speaker 2: or leave us a comment. I will read all the

942
00:49:29,480 --> 00:49:31,320
Speaker 2: emails in the comments, because frankly, we don't get that

943
00:49:31,400 --> 00:49:33,279
Speaker 2: many yet, and I want to get more and I

944
00:49:33,360 --> 00:49:35,440
Speaker 2: want to make the show better. Tell us if you

945
00:49:35,480 --> 00:49:37,160
Speaker 2: listen to the show, if you watch the show, what

946
00:49:37,239 --> 00:49:38,600
Speaker 2: do you want to hear? What do you want to see?

947
00:49:38,640 --> 00:49:40,120
Speaker 2: We want to make shows that you like. We're very

948
00:49:40,120 --> 00:49:43,160
Speaker 2: grateful that you're listening. And tell a friend if you

949
00:49:43,320 --> 00:49:46,839
Speaker 2: like it. Today's show was produced by Gabriel Hunter Chang,

950
00:49:47,080 --> 00:49:50,520
Speaker 2: It was engineered by Sarah Bruguerer, and it was edited

951
00:49:50,800 --> 00:49:53,560
Speaker 2: by our showrunner, Ryan Dilley, who told me that if

952
00:49:53,600 --> 00:49:55,800
Speaker 2: you had told him in nineteen eighty two that he

953
00:49:55,840 --> 00:49:58,840
Speaker 2: could play et at home and have a coca cola.

954
00:49:59,160 --> 00:50:01,200
Speaker 2: He would have thought it was the greatest thing in

955
00:50:01,280 --> 00:50:01,680
Speaker 2: the world.