The Founder Formula

Nolan Bushnell - Co-founder of Atari, Inc. Part 2

• Trace3 • Episode 26

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Last Episode we spoke with a man who has been called the Father of Video Games. Silicon Valley legend Nolan Bushnell. If you haven’t listened, make sure you go back and do so, because we talked all about his career up through his time at Atari, and ultimately the sale of Atari to Warner Media.

In part 2 of our interview with Nolan, we’re covering the second half of his career. With someone as storied and experienced as Nolan is, he wasn’t content to just sell Atari and fade into the background.

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

Nolan Bushnell:

There was never a harder work than jobs. I don't think he worked a 40-hour week in his life. I think it was an 80 to 100-hour week.

Intro:

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

Todd Gallina:

Hey everybody. Welcome back to the show. We so appreciate you listening to our podcast. My name is Todd Galina. And today we continue our two part interview with Silicon Valley legend, Nolan Bushnell. He's been called the father of video games in an episode 25, our previous episode, we covered his career through his time at Atari and ultimately to the sale of Atari to Warner media. From here on out, Sandy and I are going to be discussing his first adventure after leaving Atari and his fascinating relationship with the iconic Steve Jobs.

Sandy Salty:

I want to shift gears for a bit because Nolan has impacted really kind of the broader universe and sphere of entrepreneurship. You obviously pioneered the gaming industry, but you also got into the restaurant business at one point with Chuck E. Cheese. Was Chuck E. Cheese your concept and vision? We have a little bit of a difference in history on that one, Nolan. I was under the impression that Warner acquired Atari from you. And at one point, you acquired Chuck E. Cheese from Warner. But there's some history out there that actually suggests that you created Chuck E. Cheese from scratch and that it was your vision from the outset.

Nolan Bushnell:

Well, they're actually both true. I started Chuck E. Cheese Inside Atari, I set up a little division, hired a general manager for it, and sketched out what needed to be done. And it got open. But it was engineered by engineers. The guy who was running it figured out the pizza recipe and all that. And so I was the creator of the high concept. but they actually implemented the concept. Then one of the things I discovered is that big companies are stupid. And that they didn't see that I was just vertically integrating towards the market. We were selling coin-operated games at the time for about $2,000. But the coin drop in those machines would be $30,000 to $40,000. for the life of that product. So any idiot could see that we were on the wrong side of the equation, making a $500 margin on a $2,000 machine versus operating it and getting $30,000. So when you say I got into the restaurant business, I really got into the arcade business disguised as a pizza business. Yeah.

Sandy Salty:

Love that.

Todd Gallina:

So obviously hugely successful. At its peak, I think it was well over $250,000 locations. But then later down the road or right around the same time, you started an incubator called Catalyst. And I think this gave you the opportunity, if you don't mind me just guessing, gave you the opportunity to kind of pick and choose some companies that you wanted to help fund and then kind of keep your toe in the water while they were developing, have a small piece of those companies. Can you tell us a little bit about those incubator years? Why and what excited you about that time?

Nolan Bushnell:

Well, I was I felt that people, that every time you have a startup, you have a built-in inefficiency because people come in whole numbers. And so the first year, you maybe need 10% of an accountant. And you don't want your entrepreneurs to spend a week figuring out which Xerox machine to get and what health insurance and all that stuff. So I felt it. by automating that and sharing things like payroll and accounting and health insurance. And I called it funding the company with a key. And the key unlocks the door and the bank accounts all set up, the payroll's set up, the accounting books are all ready to go. There's already a shared Xerox machine, fax machine, what have you. And so the person, who's the entrepreneur, can really start working on their project that afternoon. And I felt that that was a very efficient way to found and run companies. It was also an outgrowth of the fact that a lot of the neat things that I had planned for Atari, Warnie didn't want to do. They wanted to be monofocused onto video games. And I love this story. We had developed the fastest modems in the world. with lowest latency. And the idea was that we were going to get a closet in every area code with a bunch of modems that you could call in and play games over the telephone lines. And it turns out that the IP stack that we were using in the communication protocol was almost identical to the IP stack for the internet. This was in 1976. And I think that there's a possibility that had I not sold Warner and continued to pursue that, that I could have owned the Internet.

Sandy Salty:

Amazing.

Nolan Bushnell:

It would have been a lot more fun. Well, it's a bit of a reach, but we would definitely had a network of connected computers all over the world.

Sandy Salty:

That's incredible. Let's talk a little bit more about Catalyst technology. So under this incubator, a company by the name of Cadabrascope came to life. Tell us what Cadabrascope is.

Nolan Bushnell:

Cadabrascope was actually in Chuck E. Cheese. And it was the core of computer animation. And we had a big Vax 780 and various other things. But rendering video... with the technology in those days was just slow. It would take that big computer almost 24 hours to render a single frame. And it was meant to make computer animation. And I spent a lot of time on it. And it turns out that the technology, I later sold it to Lucas, and it became the... bedrock of Pixar. And then later, of course, Jobs bought it. And I think that he bought it because he was fascinated because I showed him Cadaver Scope with Chucky when he was a younger guy. And he was really interested. And I said, but you don't do it until you can render a frame in less than three or four minutes. And what he realized is that he It was when render farms were just starting. In fact, I'd never heard the term render farm. And Steve knew it, and that was one of the things that made him pursue the purchase of Pixar, ultimately.

Todd Gallina:

That's crazy. So, yeah, you were this close to the Internet, this close to Pixar in some ways. Sandy and I have a lot of questions about Steve Jobs, so we're going to stick a pin in there. I know you just mentioned him. But we know that... As we kind of get to pass the catalyst part of the history, and we know that you are now part of Verse 6, we're very excited about hearing what happens with that. What excites you about the future? What's next, Nolan? What are the things that you think about? Obviously, a lot of different things. For those of you who can't see Nolan, we are speaking with him from his workshop. What can I assume is his garage, but this guy is working away even as we speak. But what has you excited about the future, Nolan?

Nolan Bushnell:

I'm very fascinated by bioimplants and quantum computing. And bioimplants, I think, can do some wonderful things. Also nanobots, the whole idea that you can create these micro machines that can float in your bloodstream and repair your arteries and do various things, you know, have enough smarts to be able to detect a coronavirus and pluck it out. I think that nanobots, nanotechnology, is going to be very, very important for healthcare in the future. I mean, there's all ways you can postulate how you can program a little machine to maybe differentiate between a malignant cell and a regular cell. And then the whole area of bioimplants, where we become the cyborg a little bit. We don't look that bad, but... We're basically getting there when you wear an Apple Watch or a heart rate monitor or a lot of the other things. So I'd like to make the comparison that when you're playing a game, it's very often you see the little hearts up on the side of how much health you have. Well, I think in the future you're going to have a readout on your phone that tells you how much health you have. And And it will advise you that the things you're doing right now are not helping or the things that you're doing right now are helping to increase your health. So this feedback system, I think, will be very interesting to the people of the future.

Sandy Salty:

Perhaps the next invention by Nolan Bushnell. You heard it here first.

Todd Gallina:

During this discussion, you mentioned that at times you are a bit further out than you thought the market was. would be ready for. To hear you talk about this, do you have a better sense of when you think this would be a reality?

Nolan Bushnell:

Not a clue. I mean, the thing about nanotechnology is really primitive right now. And not even... Well, they've got little swimming nanobots and things that are really clever, but they're not... they don't have the power to be truly useful now. But that's a, you know, because one of the questions you have is how do you power a nanobot? And there has to be a sort of a dynamic little energy generator that fuels the nanobot kind of the same way that the metabolism in a muscle cell fuels it. And there's some work being done there, but it's It's really primitive. So if you can't see something actually working in the lab, it's more than 10 years out, usually. If it's working in the lab, then it's five years out.

Todd Gallina:

Yeah, this is not working in the lab. That's my best guess. Sandy, do you have anything else for Nolan before we move into the Steve Jobs?

Sandy Salty:

I do, and I think we skipped over one monumental point in in sort of Nolan's innovation history, which is, he mentioned that he, you know, really, CadaverScope was the bedrock of what is Pixar today. One area we did not cover is, and Nolan, correct me if I'm saying this wrong, but ETAC?

Nolan Bushnell:

ETAC,

Sandy Salty:

yeah.

Nolan Bushnell:

ETAC. ETAC was actually the company that was founded at four in the morning in the middle of the Pacific Ocean, halfway between Hawaii and Long Beach. over a chart table because we were doing navigation and and said to ourselves hey this would be really easy if we didn't have all this squishy stuff under us we were on a sailboat running racing in the trans pack and uh and i said you know we should do that and we got through the race we won the race instantly congrats self pat on the back and then um we founded the company and it became massively successful. In fact, if you use Google Maps or any of the mapping apps right now, they're all using pieces of the database that we created.

Sandy Salty:

It's amazing when you think about, I mean, that's a technology we basically use every day to get from point A to point B. And again, Nolan is the source of that innovation.

Todd Gallina:

Crazy. Okay, so Nolan, before we move on to basically the, we had some Steve Jobs questions. Is there anything else you would want to impart on founders and entrepreneurs who might be listening to the show? Well, I tell

Nolan Bushnell:

entrepreneurs that they can't just go to college or they can't just drop out of college and think they're good for entrepreneurship. You've got to have a lot of experience. You've got to have, you know, I think you need to, fill your brain full of all kinds of weird things because good entrepreneurship is a synergy. And if you don't have enough raw material to put together, you're not going to get as good as stuff. The other thing I talk to entrepreneurs about is they said, remember, this isn't about your idea. When you're in front of a VC, they're asking whether they should hire you as a CEO. And that when you say, well, you know, I, They ask you a financial question. They say, well, my CFO will take care of that. Wrong. You've got to be the profit architect of your company. That means you can't really be an entrepreneur unless you can speak accounting. And I think a lot of people get over-focused on their idea, not focused enough on the infrastructure, which is their own skill set.

Todd Gallina:

Yeah. They're investing in a whole person, right? Not just the idea. That's amazing.

Nolan Bushnell:

Well, and a lot of times it's team because you're judged by the company you keep. And if you have a good team that all sort of vet out, that's also a good thing. An advisory board and a board of directors, all that helps.

Todd Gallina:

Yeah, you find yourself currently on a couple of boards, people and mentoring people, which I imagine is just a tremendous value to those companies.

Sandy Salty:

Yeah, I was going to ask you, you know, well, to that point exactly, Todd. So you've been on many, many boards. I could name a dozen. Describe what it's like to be an advisor versus the founder. Do you see things more clearly when it's not your baby?

Nolan Bushnell:

No, you don't see more clearly. You see a different perspective. But you don't have time to get down into the nitty-gritty of what their actual problems are. But you can look at global problems of their strategy. And that's kind of the help. I also think that being, that when I'm on the board, I'm responsible for providing a little bit of stand-up comedy. Because I firmly believe that people who And companies that take themselves too seriously will fail. They have to walk this line between work hard, play hard, and be responsible or be silly. And I believe that that balance, that you have to balance all those factors.

Sandy Salty:

Be responsible or be silly. That one's going to go in the books. I love that.

Todd Gallina:

Okay, perfect. So you ready to move on to the Steve Jobs part with the few minutes we have left? Do you want to take the first one?

Sandy Salty:

Sure. So, Were you the one that hired Steve Jobs?

Todd Gallina:

No, Al was. Okay, okay. So just going through some of the history, which I found just borderline comical. So he's at Atari, and one of the first things– I don't know the chronological order, but we do know that he's part of the team, and eventually he wants to go on a sabbatical to India. And Atari, to help him with this, sends him to Germany– to fix a coin-op game called Tank that had been experiencing a bunch of glitches. They sent him there to fix them, and then he was off to his sabbatical. Is that fact or fiction?

Nolan Bushnell:

Absolute fact. But here's the funny part. The Germans were always the squeaky wheel, and I thought that if I sent Jobs that he'd be cantankerous enough that they wouldn't want us to help them ever again. Oh,

Todd Gallina:

my gosh. Okay, can I take the next one? Yeah, of course. All right, another famous story around him being at the company is that, you know, I mentioned earlier in the conversation, we were talking about breakout of being your second game. And one of the things that needed to be addressed before it was brought to market is it had 75 chips and that chip number needed to be reduced tremendously. And the company had a contest to all engineers, hey, who can reduce the amount of chips and by how much? And Steve had submitted an entry to the contest that had the chips that go from 75 to 25 But in reality, the work had been done by his buddy, Steve Wozniak. Fact or fiction?

Nolan Bushnell:

Part fiction, part fact. The real story is that we had a bidding process where engineers could decide which games they wanted to do because they got a kind of royalty if they did a good game. And none of them wanted to do Breakout. And Steve had just come back from his sabbatical. And he was on the night shift, primarily so that he could hang out with the Waz. I looked at it as having two Steves for the price of one. And I assigned Jobs the project, and it was a thing where I gave them a bonus program for which, if they reduced the chip count, they'd get more money. They'd get a bonus. And so... And that's where getting a really, really tight design was good. Now, the bad part of that story is that several years later, I was sitting around the dinner table with Wozniak, and I asked him, I said, what did you do with your half of the bonus for breakout? And he says, I went out to dinner. I said, well, that must have been an expensive dinner. And Jobs had told Watts that he got a $500 bonus when, in fact, he got a $5,000 bonus. And Watts says, damn it, he did it to me again then.

Sandy Salty:

Well, for those of you that don't know, Steve Jobs was hired into Atari as employee number 40. Nolan, can you describe your relationship with... Jobs throughout the years.

Nolan Bushnell:

He said that I was his mentor, but I liked Steve's mind a lot. And one of the threads of our conversations was determinism versus free will. And sort of the Hegelian Kant model of philosophy, you know, Heidegger, Locke, what have you, versus the Eastern, Buddha, Confucius. And that was always really fun to sort of mash up against this because Steve didn't know that much about Western philosophy and I didn't know much about Eastern philosophy. And we sort of tugged and pulled and taught each other on that, which I find very, very nice. Did you guys

Todd Gallina:

have any further interactions business-wise when he was at Atari? Did you guys still communicate with one another? Oh,

Nolan Bushnell:

yeah. But then when he left to start Apple, he came to me for a third of Apple computer for $50,000, and I turned him down, which I really regret it. But in some ways, I'm not sure. The person he got to invest instead of me was a guy named Markala, and he was sort of adult supervision in the early years of Apple. And I wouldn't have been able to do that. And I think that Apple may not have succeeded if it hadn't been for Markkula. So I think that at least I tell myself that when I'm not crying.

Sandy Salty:

Why did you decline Jobs' offer to invest in Apple?

Nolan Bushnell:

I didn't think he could be a good CEO. He was just barely a tolerable engineer. I mean, he was a good technician and a pretty good person. but he was not personable. He didn't have what I considered the skills to be a team builder. You just described the

Todd Gallina:

skills of someone you would expect a Silicon Valley VC firm to invest in, and it doesn't sound like he had much of that. So at the time, it was probably a very sound decision. I'll never know. Well, there was always two Steve Jobs. There was the Steve Jobs, the first half before he left Apple. And then there was the second one, which is the one that most people, I think, remember is more the second coming. But OK,

Nolan Bushnell:

one last thing regarding something I can say, though, that people should understand is there was never a harder work than jobs. I mean, I don't think he worked to. 40-hour week in his life. I think it was an 80- to 100-hour week. And I've often thought that when he came back to Apple, Apple was just a mess. Gil Emilio and Scully had just basically knocked the wheels off his beloved company. And when he came back, I heard people saying that he basically was there all the time. And I think that that can affect your health after time, and I think it ultimately killed him. Wow.

Sandy Salty:

I've heard you say before that the true entrepreneur is a doer, and it sounds like Steve Jobs was indeed a doer.

Nolan Bushnell:

Yeah, no question about

Todd Gallina:

it. Well, Nolan, I think that's everything from us. I know we took a full hour with you here. Before we let you go, is there anything else you want to share with the audience? We definitely heard you loud and clear about Verse 6. Sandy and I are going to spread the word quickly hopping in here. To do that, We'd love for you to go to versix.games. So basically that's www.virsix.games. There you'll see an opportunity to get involved with them through Kickstarter. I'm also going to give you guys the direct Kickstarter link as part of the podcast notes. So please check that out and get involved if you can. Again, that's virsix.games.

Nolan Bushnell:

and I just encourage people to take a look at it. It's truly remarkable.

Todd Gallina:

Wow, Sandy, what a treat, huh?

Sandy Salty:

This was the highlight of my year, probably. Thank you so much, Nolan. It was such a pleasure speaking with you, and we appreciate all the wisdom.

Nolan Bushnell:

Well, I want to be appreciated for my humor.

Sandy Salty:

The levity definitely kicks in, and we appreciate that. Thank you so much.

Todd Gallina:

Okay, thanks a lot, you guys. You're welcome. See you, Nolan. Thanks a ton. Okay, bye now.

Outro:

Trace3 is hyper-focused on helping IT leaders deliver business outcomes by providing a wide variety of data center solutions and consulting services. If you're looking for emerging technology to solve tried and true business problems, Trace3 is here to help. We believe all possibilities live in technology. You can learn more at trace3.com slash podcast. That's trace the number three dot com slash podcast.

Intro:

Until next time.