Season 5, Episode 5: Atari (with Nolan Bushnell)

[0] We'll talk, you know, during the paid portion of this podcast where I advertise my game.

[1] Welcome to Season 5, Episode 5 of Acquired, the podcast about great technology companies and the stories behind them.

[2] I'm Ben Gilbert, and I'm the co -founder of Pioneer Square Labs, a startup studio and early stage venture fund in Seattle.

[3] And I'm David Rosenthal, and I'm a general partner at Wave Capital, an early stage venture firm, focused on marketplaces based in San Francisco.

[4] And we are your hosts.

[5] Today, we are talking about the company that invented the home video game industry, Atari.

[6] And we have someone with us who's got some pretty good stories about it, the founder of Atari, the father of the video game industry, Nolan Bushnell.

[7] Hello, Nolan.

[8] Great to be here.

[9] Good fun.

[10] Indeed.

[11] Thank you so much for joining us.

[12] As some of our listeners know, Nolan has started a swath of other businesses, One of which, awesomely, is Chucky Cheese, which we will get much, much deeper into later this episode.

[13] We dug up some photos of Young Ben last night.

[14] Yeah, Nolan, I should let you know.

[15] I'm going to turn my computer around right now.

[16] Chuckie Cheese was, like, by far and away, my favorite place in the world growing up.

[17] It was designed that way, you know.

[18] Here's some pictures of my third birthday at Chucky Cheese.

[19] And there's me with my favorite toy, which is a Chucky doll.

[20] How fun.

[21] Now, Nolan, this is fun timing for us and for our listeners since our last episode covered the early days of Sequoia Capitol and Don Valentine's career, which you had a lot to do with.

[22] Well, Don was really maybe the best board member I've ever had.

[23] He was also the most frustrating and infuriating.

[24] You know, he had this ability to ask me a question about my own company that I didn't know.

[25] but the minute he asked it, I knew I should have known then.

[26] And so I started to cram for board meetings saying, okay, Don's not going to catch me this time.

[27] And he always would.

[28] So I always believe that a proper, insightful question can be very instructed.

[29] Well, that was, as we covered on our last episode, you know, Don in the Socratic method, that was really the root of, you know, what he pioneered at Sequoia.

[30] Yeah.

[31] Well, listeners, our last limited partner, episode was a deep dive into marketplaces from an academic perspective.

[32] On this show, we often talk about the levers at play in marketplace businesses, and as you would suspect, there are experts who have spent their careers studying and categorizing things like take rate, search and discovery problem, and when to subsidize.

[33] One such expert is Ramesh Jahari, a professor at Stanford and advisor to wave along with Uber, Airbnb, Stitch Fix, and many other great marketplace businesses.

[34] So if you want to listen and become an acquired, limited partner, you can get started with a seven -day free trial and listen right here in the podcast player of your choice by clicking the link in the show notes or going to glow .fm slash acquired.

[35] Okay, listeners, now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[36] Yes, Service Now is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

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[40] I was at NVIDIA's GTC earlier this year and Jensen brought up ServiceNow and their partnership many times throughout the keynote.

[41] So why is Service Now so important to both NVIDIA and Microsoft companies we've explored deeply in the last year on the show?

[42] Well, AI in the real world is only as good as the bedrock platform it's built into.

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[45] For example, smarter self -service for changing 401K contributions, directly through AI -powered chat, or developers building apps faster with AI -powered code generation, or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

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[48] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to ServiceNow .com slash acquired.

[49] And when you get in touch, just tell them Ben and David sent you.

[50] Thanks, ServiceNow.

[51] And now, onto Atari.

[52] Yeah, let's do it.

[53] Nolan, you were born in Clearfield, Utah, right?

[54] Is that just outside Salt Lake City?

[55] It's about halfway between Salt Lake and Harkin.

[56] Okay, okay.

[57] We were talking a bit before the show about you're reflecting on.

[58] how you became an entrepreneur.

[59] It started pretty early, right, with strawberries.

[60] Can you tell us the story about your first business venture in Clearfield?

[61] Well, my mother over dinner table said, we've got too many strawberries.

[62] We always had a truck garden in the back of the house.

[63] And she said, we've got way too many strawberries.

[64] We're going to have to give them away.

[65] So happens the next day she took me to a grocery store.

[66] And I noticed in the produce section they had strawberries.

[67] in these baskets for 50 cents a basket.

[68] I thought to myself, sell, hey, there's a market.

[69] And I went home, I picked strawberries, filled the bath.

[70] We had a bunch of baskets sitting on the shelf in the garage, filled them up and marketed them door to door.

[71] At the end of the day, I mean, this is an hour and a half's work.

[72] In the end of the day, I had five bucks.

[73] This is in a world in which my allowance was 15 cents a week.

[74] Wow.

[75] And so all of a sudden, I said, What did your family think of this?

[76] Well, my mom was really, first of all, she said, well, you took that money from our neighbors.

[77] I said, no, but I provided a service.

[78] They didn't have to go all the way to the store.

[79] Yeah.

[80] You're like the good eggs of, I don't think good eggs is down in Southern California yet, but it's fresh farm -to -table groceries delivered to your door in San Francisco.

[81] It's wonderful.

[82] Jenny loves it.

[83] We use it all the time.

[84] Now, here's the question.

[85] I've often felt that that changed my brain to say, okay, delink pay for hours into get a good project.

[86] Yeah.

[87] Or did I have a brain that was different to begin to see that connection between strawberries and a marketplace?

[88] Yeah, nurture or nature.

[89] Nature or nurture.

[90] And I can't answer that.

[91] But you saw this yourself.

[92] I mean, your mom didn't tell you to go start selling strawberries.

[93] Yeah.

[94] You must have been younger than 10 at this point, right?

[95] I was 8.

[96] Wow.

[97] And then when you were about 10, you started a TV repair business.

[98] That's great.

[99] Yeah.

[100] And that would come in quite useful later, I would imagine.

[101] Well, I'd always been kind of a techie kid.

[102] I was always curious about how things worked and that sort of thing.

[103] And I watched a TV repairman that came to our house.

[104] TVs were big and bulky, and so it was all house calls.

[105] And this was the 1960s?

[106] No, no. This was 1953.

[107] Wow.

[108] I mean, you know.

[109] The TVs were like a piece of furniture.

[110] Yeah.

[111] And basically cost a month's salary.

[112] Wow.

[113] You know, so it was a different ballgame.

[114] And I noticed that all the guy did was change tubes.

[115] And so the next time our TV failed, I said, I'm going to give this a ago.

[116] And of course, I'm sure it went great the first time.

[117] Well, I got a shock and, you know, there were various things.

[118] I learned how to discharge the CRT because that, you know, it's popped up to 15 ,000 volts.

[119] You don't want to do that.

[120] Entrepreneurship comes with risk.

[121] Yeah.

[122] But, you know, in those days, the schematic on the back panel, one tube was a vertical oscillator, another one was the first IF.

[123] And so all of a sudden I could tell which was.

[124] So if you had a lot of role, that was the vertical oscillator and if it was that you know and so just by looking at the screen it was almost self -diagnostic and so I fixed it and in doing so I'd found a wholesale supplier of tubes these are all tubes this is four semiconductors I'm yeah I'm really old this is this is before fairtiled yeah yeah and so I said hey maybe there's a business here and so I started marketing my skills and at those days a house call was five bucks and so I spent all day selling strawberries or you could do one house call for the same amount no but I didn't believe that they're gonna let a 10 year old kid get into the back of their thing for five bucks so I decided to to charge 50 cents for a house call oh you undercut the market I undercut the market a long way and my theory was that I would monetize a different way through marking up the tubes And that worked swimmingly.

[125] It's almost like a cartier did a console business.

[126] And then, you know, a couple of months in, I started getting a reputation.

[127] So I went up to a bucket house call and two.

[128] So it was it was a thing of market entry price.

[129] You know, you'd give a discount.

[130] And I had a, I made a lot of money just repairing TV sets around the name.

[131] So this is pretty awesome.

[132] So, like, you're 10 years old, you have your experience at TVs and the technology going into televisions at the time.

[133] Then your next job, I believe, you get exposure to the game world.

[134] Was your next adventure at Lagoon Amusement Park?

[135] Actually not.

[136] My TV repair business turned into a full appliance repair business, and I became part of Barnell Furniture Company.

[137] And, you know, with that, I would go out.

[138] I'd repair washers and dryers and that sort of thing.

[139] and basically Barlow would be able to charge a lot more, and I'd get half.

[140] Pretty good for a 10 -year -old.

[141] Yeah.

[142] Well, this was 10, 11, 12, 13, 14, 15, 16.

[143] I continued that until I went to college at 18.

[144] And you started at Utah State, right?

[145] Correct.

[146] Got it.

[147] I was living at the fraternity house, and I started doing gigs.

[148] Like, you know, in those days, there was this thing.

[149] thing, and I always had money because I saved.

[150] You've been an entrepreneur.

[151] I was an entrepreneur.

[152] In those days, there was what they called 25 for 20.

[153] And that means that a lot of the kids would get the check from their parents at the end of the month, and they'd be out of money by the 15th.

[154] And so I'd lend them 20 bucks, but they had to give me 25.

[155] It's early longshed.

[156] 25 for 20.

[157] Yeah.

[158] What's the APR on 25 for 20?

[159] When did you need to collect it by?

[160] Oh, the fifth of the month.

[161] They have five days then to...

[162] Yeah.

[163] Wow.

[164] That's awesome.

[165] I can see how you got into the carnival business, right?

[166] Oh, yeah.

[167] I'm a carny.

[168] So you have these quite...

[169] I mean, at the time, they're quite lucrative, especially for a college student businesses going on.

[170] Well, I was driving a MGA sports car.

[171] And later on, I traded in for a Mercedes -1 -9.

[172] So were you getting any funny looks from people that are like, how are you getting all that money to buy cars like that?

[173] You know, nobody really thought about it that much.

[174] I said, but then I did a really good one, and this was called the Campus Company.

[175] And the campus company was a student blotter that had a calendar of events in the center, and I'd sell advertising around the side and give it away free to the kids at the beginning of the quarter.

[176] Yep.

[177] And I'd sell $5 ,000 worth of advertising, and it cost me $500 to print it and give them away.

[178] The part that I didn't know is that once you did that, I'd do it for every quarter.

[179] Everybody would re -up, so I only had to sell a couple who would fall out.

[180] So it was like nothing.

[181] So I went from Utah State to the University of Utah to BYU to Weber State.

[182] And so all of a sudden I had, I had, you had all the colleges in the area, yeah.

[183] All the colleges in the area, 5 ,000 piece.

[184] And since I was doing the sales, when I'd go to a men's wear place, I'd say, you know, you can pay me, you know, 150 bucks or I'll take a suit.

[185] And I got a moped.

[186] I got all kinds of great stuff.

[187] Amazing.

[188] That's amazing.

[189] That's amazing.

[190] It's like the trading the paper clip for the house.

[191] Yeah.

[192] Wow.

[193] So the reason I bring up campus company, because that was actually the driver for me to get the job at the amusement park.

[194] Ah, okay.

[195] I was wondering why you needed the money and work at the amusement park.

[196] Well, it was a thing where I was putting myself through college, a relatively good lifestyle.

[197] I'll say.

[198] Let's put it this way.

[199] I am an undisciplined, disciplined person.

[200] That is, when it comes to short term, I'm somewhat undisciplined.

[201] That is a summer night in Utah going out with girls and things.

[202] You can spend a lot of money.

[203] And I decided that in order to remove harm's way, I'd get a fun job at the amusement park.

[204] It'd keep you off the streets.

[205] Get me off the streets.

[206] And that's why I say, I'm disciplined in terms of long -term strategy, but undisciplined when it comes to short -term.

[207] You'd to remove temptation.

[208] Exactly.

[209] It violated kind of one of my rules, which all of a sudden I was working for a paycheck for, for, uh, yeah, trade in time for dollars.

[210] Trading time for dollars.

[211] But then I discovered that in the games department, they paid commission when you did above that.

[212] And so all of a sudden, I could turn this dollar 25 cent an hour job into a $2 .50 an hour job, which was triple.

[213] Yeah, okay, you're making money that's worth it.

[214] Yeah.

[215] And then, because of the commission thing.

[216] Is this ski ball?

[217] Ski ball, guess your weight, knock the milk bottles down, you know, get the ball to stay in the basket.

[218] What did you make the most money on?

[219] Like, what were people just like, they just couldn't keep themselves away from?

[220] A game called Tip them over.

[221] And it was a softball, and it was a one throw.

[222] You always think that you can knock them over.

[223] Well, you kind of can, but it's really hard.

[224] but it's it's perfect for marketing strategy because the way the games worked is you were supposed to give away one dollar for every three dollars that you made so you were to run your your booth at a 33 and a third percent merchandise the way the bottles worked there were two heavies and two lights and the two heavies were on the bottom and the two lights were on the top unless you wanted to give an animal away then you'd put the heavies on the top and the lights on the bottom and then a small breeze would knock him down so we had a dance hall and a concert venue yeah and so people would come down with dates to go see the beach boys or what have you uh -huh the high school kids they'd come in clusters and there'd be the captain of the football team and the head cheerleader And then there'd be, you know, Nathan.

[225] Someone like us in high school.

[226] Yeah.

[227] Nathan, the water boy.

[228] I was captain of my high school football team.

[229] That's great.

[230] I was definitely not.

[231] I was at Chuckie Cheese.

[232] So anyway, what I'd do was when it came time for Nathan the water boy to throw, I'd set a stack.

[233] And he'd win one for marrying the librarian his state.

[234] Oh, we are so grateful for you.

[235] Yeah.

[236] And it would turn the worldview of the head of the football team upside down.

[237] And so I could extract all the money he had because he wasn't going to let the head cheerleader to go without a stuffed animal.

[238] That's spectacular.

[239] That is amazing.

[240] It was diabolical.

[241] I'm envisioning the Pong marketing strategy in the future in bars here.

[242] But was it after that, summer then that you transferred to the University of Utah?

[243] Yeah, what happened is once I got the job, there was actually a gap year where I went to work for Litton Industries in aerospace and in a clean room doing guidance systems and things like that.

[244] Because you were studying engineering at Utah State.

[245] Correct.

[246] And then when I was in the fraternity house, I decided the engineering took too much homework.

[247] And so I transferred over to philosophy, then to economics and then mathematics.

[248] And it was just really about being able to screw around and not do so much homework.

[249] I kind of got into it.

[250] I like the Kearney life.

[251] It does get into your bloodstream.

[252] Yeah, I bet.

[253] But when they made me manager of the department, because I was good at it, and one of the guys was the manager, was the manager, quit.

[254] And so I was chosen to be manager.

[255] I had 150 kids working for me and I'm 20 years old and had to train them and manage the labor percentages and set up things.

[256] And I started changing the games to increase their revenue.

[257] A lot of times when the park was packed, we were undergamed.

[258] The faster you could get a cycle time, the more money you could.

[259] Yeah, yeah.

[260] And so the lagoon had the highest per caps of any amusement park in the nation.

[261] So when I got ready to graduate from college, I actually had offers from all over.

[262] I had it from Great American things like that where I could have stayed in the amusement park game business at significantly more money than I could have gotten as an associate engineer.

[263] Wow.

[264] But I said, hey, I've got that legacy.

[265] Yeah.

[266] That's evergreen.

[267] my engineering degree is not going to be that way.

[268] I need some experience.

[269] I need to go what it is.

[270] So let's talk about that.

[271] When you get to the University of Utah, the University of Utah at this time is like an amazing place in pioneering computer science and in particular computer graphics, right?

[272] Exactly.

[273] Four places in the world.

[274] Stanford, Stanford AI project, MIT, Champaign Urbana, and the University of Utah, which doesn't belong.

[275] But it was really Dr. Evans, the guy who later founded Evans in Sutherland.

[276] Yep.

[277] And for listeners, too, I mean, some of the other people who were there around this time, Alan Kay was there, John Warnock who founded Adobe, Jim Clark, who had co -found Netflix with Mark Andreessen.

[278] Netscape.

[279] Not Netflix, yes, Netscape.

[280] And then, of course, Ed Catmull, I have to ask, was Ed there at the same time that you were?

[281] Wow.

[282] And I always thought that I was kind of the cheap and dirty guy, because I was.

[283] I was doing games.

[284] You were the entrepreneur.

[285] All these guys were doing great check.

[286] Wow.

[287] Did you know at that time?

[288] I mean, you say you were called the Utah guys.

[289] Did you have a sense at the time that this place and this group of people are sort of a special primordial soup of what would become the foundations of the technology industry?

[290] Or were you like, ah, these people seem smart.

[291] I feel smart, but kind of dirty and this carnie.

[292] Yeah, I know.

[293] No, I had no idea that it was going to be prescient.

[294] I mean, it's pretty amazing that you have this, you know, we spent all this time on you're growing up, but it's all three of these things.

[295] It's your entrepreneurial instincts.

[296] You learn management running the amusement park, and then this incredible engineering and graphics environment that you're in at Utah, and all of those kind of, we'll talk in a sec about what comes next.

[297] I've often said that my life has been a series of happy mistakes.

[298] You know, or serendipity.

[299] Because to add to that, when I went to California and worked for Ampex.

[300] And Ampex made recording equipment for, like, Hollywood and music industry.

[301] And so what I learned there was really polishing my digital skills and my video skills.

[302] So we had the big computers.

[303] I learned how to program.

[304] But the computers we were working on had a clock speed, it was 750 kilohertz.

[305] Oh, boy.

[306] And the screens that were on the computers were all vector graphic.

[307] Because Raster Scan wants 3 .58 megahertz of data.

[308] And so if your computers are going 750 now, they had a wide address space, 64 bits, you know, so you could do some serious calculations, but they weren't fast at all.

[309] The ball on the screen or the, you know, space invaders weren't going to move very fast.

[310] Well, what would happen is remember that the early video games were not von Neumann architecture.

[311] They were basically complex signal generators.

[312] And you had, you played Space War back at Utah, right?

[313] Correct.

[314] So Space Boer was the first game ever built for a computer, right?

[315] Absolutely.

[316] I mean, I stand on the shoulders of Steve Russell who did that as the MIT hobby rail.

[317] railroad division.

[318] And he did that on a PD.

[319] How did it get traded around and end up at Utah and other places around the country?

[320] I mean, it wasn't like you could just download it off the internet, right?

[321] It was, it was digital equipment.

[322] Basically thought it was a cool hack and just shipped it with every computer that they sold.

[323] Oh, wow.

[324] Cool.

[325] So every deck, uh, were these mini computers or were these different?

[326] The one that we'd used was a PDP 8 and a PDP 10.

[327] Okay.

[328] Utah, they never had a PDP1, which is what the original source code was.

[329] Wow.

[330] And so they shipped it.

[331] It was like the solitaire of, wow, with Space War.

[332] That's incredible.

[333] And so was it the first time that you saw Space War that you really realized what could be possible in creating this next generation of games?

[334] Managing the games department, I had a couple of arcades.

[335] So I knew intimately what a coin -operated game cost and what it had to earn.

[336] And I said, if I had this screen with a coin slot, it'd earn a lot of money.

[337] But those machines cost like a million dollars.

[338] Yeah, you know, 25 cents for three minutes into a half a million dollar or a million dollar computer.

[339] Right.

[340] And the math didn't work.

[341] You're never going to recover the cost of the machine itself.

[342] But I went through the math and I said maybe someday.

[343] Yeah.

[344] And then.

[345] So when you arrive at Ampex, this was shortly after like Fairchild had gotten set up and national Semiconductor, which we talked about on the Skoy episodes of National then pioneered outsourcing fabrication of chips to Asia, and that dropped the price of chips hugely, right?

[346] Yeah, one day, I would remember sitting in my office at Ampex and glue chips, there was a thing called a 7 ,400 series from TI in the 9 ,300 series.

[347] They were basically glue parts, flip -flops and gates, ore -exclusive ore, all the Boolean constructs.

[348] And they went from $2 a chip to $0 .15 a chip.

[349] Wow.

[350] And so it was that precipitous, I mean, two orders of magnitude.

[351] And I said, maybe now is the time.

[352] Getting close.

[353] Yeah.

[354] Coincidentally, that Wednesday night, in the Bay Area, I became a Go player.

[355] Ooh.

[356] Yeah.

[357] And there was a. I knew we were going to get into Go in a minute.

[358] Well, there was a. Go being the game go.

[359] Yeah, the game go.

[360] And there was a Buddhist church in San Francisco that had a 24 -7 go parlor.

[361] Oh, wow.

[362] Wow.

[363] And so I could just go up there.

[364] And I would generally show up.

[365] This was 1970?

[366] This was 1968.

[367] Yeah.

[368] And so I would go up probably 8 o 'clock on a Sunday morning.

[369] I'd play until 3 or 4.

[370] And every weekend, that was kind of my go -to.

[371] But I was living in San Francisco.

[372] of Clara, California at the time.

[373] And additionally, Stanford had a Go club that met every Wednesday evening.

[374] And so I'd attend that.

[375] And I got playing with a couple of the Go players there.

[376] And one of the guys was named Jim Stein, who was a graduate student working at the Stanford AI lab.

[377] And after we played Go one time, he says, hey, do you want to play Space War?

[378] I said, holy shit, I haven't played it since I was in college.

[379] Let's do that.

[380] And so we left the Stanford Go Club probably 10 o 'clock.

[381] Yeah.

[382] And we played, we went up to the AI lab and played Space War probably until three or four.

[383] This is, I mean, my wife was not amused.

[384] I'm sure you've heard this many times.

[385] But like, when I was in college, Ben, I'm sure when you were in college, like, this is what you do.

[386] You know, like, it would be a night.

[387] like get back from dinner at the dining hall and be like, well, all right, we're going to play Mario Kart till four in the morning.

[388] Yeah, exactly.

[389] We're going to play Halo.

[390] Mine was Super Smash Brothers.

[391] You were the first generation that was doing this.

[392] Yeah.

[393] And so that was, I said, you know, those two situations, the drop in the chip price and my reacquaintance with Space War were concombinately the driver that said, let's do this now.

[394] For folks that know of Atari, They're probably imagining the $2 ,600, or they're imagining, at the very least, something they're playing at their homes.

[395] That's not how it started.

[396] No, it started as a coin -operated game business.

[397] Well, it started as Scissurgy, right?

[398] Correct.

[399] And...

[400] You can't correct Nolan, David.

[401] No, it's correct.

[402] I think he knows how it started.

[403] Well, I'm just putting it, it wasn't Atari yet.

[404] And so the original plan was that we were...

[405] were going to be a studio and we would design games for manufacturers and get a royalty.

[406] That was the original plan.

[407] We got some things moving around on the screen.

[408] I went to the dentist and told him about my project.

[409] He says, oh, you should call this guy, which was the head of marketing for Nutting Associates.

[410] I didn't even know they were in town.

[411] They were a coin -operated game manufacturer in Mountain View.

[412] And I went up and show them the game.

[413] And they said, yeah, I think we'd be willing to license this.

[414] They said, but, you know, we don't have a chief engineer now.

[415] And I don't think they, you know, the one we had would understand this technology.

[416] Are you available?

[417] And I said, I don't know.

[418] I'm pretty expensive.

[419] Of course you did.

[420] So I sound like such a carnie, don't I?

[421] this is great well also I mean this is like you were I had in my notes we didn't cover I mean the people that were starting companies that we talked about on part one of the Sequoia episode at this time like the Trader Assade and they're like these are hardcore scientist engineering types you know usually in their 40s usually in their 20s you were the first I think real like hacker type entrepreneur I think so yeah I've often said that I blazed the trail for both gates and jobs, you know, just proving that it could be done.

[422] Yeah, I mean, because they didn't look like, you know, Gordon Moore and Bob Noyes.

[423] It's kind of like the five -minute mile problem where people say, well, it can't be done, and then someone does it.

[424] And then suddenly there's this massive wave after them of people that are awoken to that.

[425] The world is accepting of young, brilliant, 20 -something CEOs, and boom, we have this wave of them.

[426] No question about it.

[427] Yeah.

[428] Oh, but I got to finish my.

[429] Yeah, yeah, please.

[430] So you had set up scissurgy engineering, right?

[431] Yeah.

[432] And then I went to nutting.

[433] I said, I'm pretty expensive.

[434] And they said, well, how much?

[435] I was making $850 a month at Ampex.

[436] I said $1 ,600.

[437] Yeah.

[438] They said yes too quickly.

[439] Whoa.

[440] Oh, so you left them on the table.

[441] And I said, and a company car.

[442] Yeah.

[443] So how did that turn into what would become Atari then?

[444] Silicon Valley has a couple of things going for it that are, I think, underappreciated.

[445] One is that almost everybody knows intimately somebody that went off, started something and made a gobsmack full of money.

[446] And they say, I know that guy or that girl and I'm smarter than they are and I'm sitting here doing 9 to 5 and they're out making a lot of money I can do it.

[447] You know, it's funny.

[448] I think I might have referred to this on the show before but I went to business school at Stanford many years after you were there but I think that was one of the most powerful things is like all these entrepreneurs would come talk to us, guest teach classes, be there for cases, do lunchtime events for us and you just realize they're just people too.

[449] Yeah.

[450] There's nothing special about, though.

[451] But then I had a real advantage with nutting because nutting put the first computer space in.

[452] And all of a sudden, you start noticing and saying, these guys are bozos.

[453] They're paying me $1 ,600 a month.

[454] I have a company car.

[455] What are they doing?

[456] Well, they fired the head of sales because he was making too much money on commission.

[457] Now, that is a real bozo mood.

[458] That's a really bozo move.

[459] And so when it came time for the next game, I said, I really don't want to hang my star with these guys.

[460] You know, because they will underproduce, they'll nickel and dime things.

[461] And my theory in life has always been go bigger, go home.

[462] Yeah, clearly.

[463] And so when it came time for that, I said, you know, I'm going to have to leave and I will design your game, but we'll do it under a contract.

[464] Little be known to them, I'd already gotten a contract from Midway and Bally.

[465] So I had two contracts based on.

[466] That's great.

[467] And so you were game designer.

[468] Were you also the sort of lead engineer on that first game with them?

[469] Yeah, I was a lead engineer.

[470] I basically did all the digital stuff.

[471] Computer space, which was a commercialized space war.

[472] Precisely.

[473] we come to the next chapter of total serendipity my first engineer in al -alcorn was actually my tech and he was in a work study program at berkeley and he'd do six months on and then six months at berkeley and then six months as my tech it turns out that steve bristow was his alternate and both of those guys like when attari came along bristow became head of engineering and Alcorn became a head of research.

[474] They were brilliant engineers.

[475] They were really good.

[476] But very different.

[477] Al was much more rigorous.

[478] That was his brilliance and his downfall.

[479] He would interview 30 people and not find one that was acceptable.

[480] Although, is he the one who brought Steve Jobs to you?

[481] Yeah.

[482] So he found one who was pretty good.

[483] Yeah.

[484] Although not an engineer, but we'll get there.

[485] But Bristol, if you said, okay, we need another 20 projects and we need it in the next 15 minutes.

[486] He'd go out, he'd hire a bunch of people, he'd fire some and what have you.

[487] I mean, he was a scrambler.

[488] It'd be messy, but it'd get done.

[489] It'd be messy, but it'd get done, exactly.

[490] But the first day that Al came to work for us.

[491] And us being now, this new company that was working on contract.

[492] Yeah.

[493] Was the same day that I'd heard about Magnavok showing a video game at a trade show up in Burling game.

[494] And so I went up and I saw this thing and it was an analog piece of crap and I said, gee, you know, there's no competition here.

[495] But I looked around and they were playing this ping pong game and it looked and they were having fun with it.

[496] And there was so many things wrong with it.

[497] There was no score.

[498] There was no sound.

[499] There's no score.

[500] Who's going to play that?

[501] Yeah.

[502] Not just that.

[503] After you hit the ball, you could change the dynamics of it by twisting a knob, you don't get to change the naked.

[504] Yeah, that's just wrong on so many levels.

[505] Yeah.

[506] So it was analog, though, like it was running on, like, vacuum tubes?

[507] No, there's RC time consonants.

[508] So basically, if you have a capacitor and a resistor, it'll change the voltage based on how vast it is, and that gives you a delta V. It's kind of incredible that early video games were actually analog.

[509] Yeah.

[510] Oh, yeah.

[511] I mean, Ralph Baer, with these designs, were really important.

[512] In fact, the very first game that predated Steve Russell's at MIT was an analog game played on an oscilloscope at the Brookhaven National Labs with a guy named Willie Higginbotham.

[513] Huh.

[514] In terms of full history of disclosure here.

[515] Always building on the shoulders of giants.

[516] Yeah.

[517] Okay, so you saw the Magnivox.

[518] You thought, things are a piece of crap.

[519] Yeah, but I said, you know, using our technology.

[520] Maybe this would be a fun game.

[521] But more than that, I needed a test project for Al because computer space was really complex.

[522] And I thought, you know, as a learning project, what you want to do is bite -size things down to get people to understand the tech.

[523] And so I described the game and I said, that's your first project.

[524] And no like design doc or spec.

[525] It was like, here's kind of how it's going to go.

[526] Yeah, this is a blackboard.

[527] Yeah.

[528] Before whiteboards had been doing it.

[529] And I said, you've got to get it done in a few weeks because I think I can sell it to General Electric.

[530] I might have told him I've got to deal with General Electric.

[531] And I'll be damned if in two weeks he didn't have a working Pong machine.

[532] Wow.

[533] But it had some problems.

[534] For example, it had on the paddles angle, incidence, angle reflection, you know?

[535] Yeah.

[536] I read something that this was sort of Al's idea.

[537] after what you sort of drew and described, that he thought, well, it would be way more fun if we cut the paddle up into eight segments, and then each segment, depending on how far away from the middle it was, actually affected the sort of angle that it bounced off of the paddle.

[538] Now, that's very interesting because the way I remember it, I came up with that idea.

[539] I'm willing to give it to, Al, I don't care.

[540] Well, who came up with speeding the ball up as the play went on?

[541] again I think I did but I'm not going to opine to it which is another great mechanic because it means number one you don't really get bored of it because you can't just keep it going forever constantly raming up the difficulty and two if you're collecting coin drop then that's going to speed up those games and you're getting more people flowing through precisely so okay so before we get into what happened with this prototype the name of the company can you tell us how it became Atari which of course is a term from go.

[542] In those days, everything was snail mail.

[543] And so if you wanted to incorporate, the standard way to do it was to put five company names in case the first one wasn't available.

[544] Atari was actually number three.

[545] Oh, wow.

[546] So was one scissurgy?

[547] One was scissigy, which was owned by a candle company in Mendocino.

[548] And so this is with like, the state of California.

[549] And to this day, I don't remember what number two was.

[550] But then number three came back Atari.

[551] What an amazing name, by the, I mean, starts with A, which is great.

[552] You know, it's funny, when we first got it back, we weren't sure we liked it.

[553] And Atari is like the equivalent of Czech or Check Made in Go.

[554] Correct.

[555] Yeah, Czech is probably a good thing.

[556] Close enough.

[557] So you didn't like it at first, or you weren't sure?

[558] We weren't sure.

[559] Which is really funny because, you know, I really believe that, like Shakespeare says, you know, arose by another other name.

[560] Yeah.

[561] Over and over again, I've named a company that has not sounded right.

[562] Two weeks in, it's the best name in the world.

[563] Yep.

[564] Yep.

[565] It's like how Phil Knight hated both calling the Nike swoosh the swoosh and the swoosh itself.

[566] and now it's one of the top five most valuable brands in the world.

[567] Yeah, exactly.

[568] Well, and this comes together with Pong, right?

[569] Because the amazing Atari logo, which we'll link to in the show notes, if you don't have it etched into your memory as a child, is wonderful.

[570] And, you know, forms the A and the Pong paddles and the...

[571] Yeah, how did you come up with the logo?

[572] How'd that come to be?

[573] That was done by George Opperman, who was a brilliant, brilliant graphic designer.

[574] And I said, we need a good bug for the company.

[575] He came up with 10, and I said that one.

[576] Wow.

[577] And I mean, truly today, one of the most iconic brands ever created.

[578] Really?

[579] T -shirts everywhere and hats.

[580] I mean, you can't go a week without seeing the Atari saw somewhere in your life.

[581] It's pretty, and it's optimistic.

[582] It's kind of, you know, upward driving.

[583] And it was the paddles from Pong that inspired it, right?

[584] No. Oh, no. That's Revisionous history.

[585] Revisionist history.

[586] Here we have it.

[587] From the man himself.

[588] So, okay, so you had this prototype of Al -Alcorn's demo, you know, prove -himself project.

[589] And it turns out it's pretty fun, right?

[590] Yeah.

[591] So I thought to myself, you know, my carniness, I said.

[592] Your Carney instincts kicked in.

[593] Maybe I...

[594] Let's rebrand Carney as incredibly entrepreneurial.

[595] Like, we can keep saying Carney on the show, but like, we shouldn't deprecate this.

[596] This is like a core, you know, personality trait of wildly driven, scrappy entrepreneurs.

[597] Yeah.

[598] Well, I thought to myself, so maybe I can get Bally to take this game and complete our contract six months in advance.

[599] Because you weren't planning on this being the next game.

[600] No, this was just a test project.

[601] Yeah.

[602] But if they're impressed and say, here's the game.

[603] Maybe let's see what they think.

[604] So we built up to, and these were.

[605] in wire wraps, they were going to put one on location and I got on the airplane with the other one under my arm with a modulator so I could hook it up to a local TV.

[606] And I went to Valley and Midway and they were not impressed.

[607] And because in the coin up business, there had not been a single successful two -player only game.

[608] Yeah.

[609] There was no AI driving the other paddle at this point.

[610] So if there was just one person who wanted to play the game at the bar, like it was going to be a non -starter.

[611] which in 2020 hindsight turned out to be brilliant because it gave a woman an ability to choose who she played with.

[612] The equivalent of, I assume at that time, women weren't like buying drinks per men, but a woman could be like buy a game of Pong.

[613] Yeah, you know, I want to play Pong, but I need a partner, so she pulled somebody off a bar stool.

[614] Wow.

[615] So, I mean, it introduced a completely, new environment variable into the bar.

[616] And it was also co -combinant with the hippie, female empowerment.

[617] You know, women are as good as men.

[618] This is 1972, right?

[619] This was 1972.

[620] So when Bally and Mibway reject this.

[621] Correct.

[622] But you see the potential.

[623] Would you call it a wire rig?

[624] Wire wrap.

[625] Wire wrap.

[626] And so I'd imagine that's no cabinet.

[627] It's just the electronics, the, you know, however many boards are in there.

[628] wires, and then you hook it up to whatever TV you can.

[629] Correct.

[630] Well, in the early days when you were prototyping, there was a technology called wire wrap, which you'd had these pins sticking up, and you had this machine that would really wrap a copper wire around it very tightly.

[631] So it was a very good prototyping system.

[632] I don't think they use it anymore.

[633] I'm not sure.

[634] So basically you wouldn't have to solder, but you could ensure that the wires were going to be where you thought they were going to be on the chips.

[635] Precisely.

[636] Got it.

[637] But when you looked at it, it's like a rassness.

[638] And what happened is that when I presented to Bally, they were tepid.

[639] They said, let me think about it.

[640] And when I called back to the plan, they told me about the earnings that it was making at the local bar.

[641] So you had put a prototype in.

[642] Yeah.

[643] When I heard how much it was, I called up Bally.

[644] I said, Midway doesn't want it.

[645] You mean how much money it was making at that bar?

[646] At anti -caps.

[647] Yeah, wow.

[648] Put it in context.

[649] The game was making over $300 a week.

[650] That's like 3X what a normal game would make, right?

[651] Oh, yeah.

[652] And the bill of materials on the machine was $325.

[653] Wow.

[654] So I said to myself, there's a business here.

[655] There's a six -day payback on this, assuming you get to keep.

[656] Is it 50 -50 with the bar?

[657] How does the revenue split work?

[658] It's 50 -50 in the United States.

[659] In two weeks, you're making your money back.

[660] Now, did you charge the bars up front?

[661] Did they have to pay for part of the machine up front, or was it just a revenue split?

[662] You got to put it there.

[663] Got to put it there.

[664] And I said to myself, hey, if I can't sell these things, I can operate them and be okay.

[665] Yeah.

[666] So I took all the money that we had in the bank, and it was enough to build like a dozen of them.

[667] And then from there, we got the money.

[668] And we sold some because people started hearing that this game was doing well.

[669] And so we went up to the San Francisco distributor and he ordered 10 and the guy from Los Angeles ordered 10.

[670] I'm curious, what would the Bally and Midway deals have given you?

[671] It was, I mean, obviously they take care of manufacturing because they would make the actual cabinets and hook it all up.

[672] Do they also take care of distribution?

[673] Absolutely.

[674] They did everything.

[675] So you're then saying, you know what, we're so confident in this.

[676] this thing.

[677] We're going to tell these guys that in a nice way and in a clever way that we're going to do this ourselves and that we don't, you know.

[678] No, I didn't say that we're going to do it ourselves.

[679] I said, we'll go ahead and finish the project, the driving game that you wanted.

[680] Oh, I see.

[681] Which, there's another chapter to this.

[682] Four months in, Bally came back to and said, we'd like to do Pong.

[683] Huh.

[684] And you already knew what a golden goose you had at that point.

[685] And so I said, oh, of course.

[686] At this time, there were, 20 companies that were copying us because, you know, we had a garage shop.

[687] The more than that's changed.

[688] Anybody that had a garage shop could knock these puppies out.

[689] We hadn't, you know, in those days, it took four years to get a patent.

[690] We'd applied for it, but we didn't have it.

[691] And so, you know, it was a wild west.

[692] And so, Bally was really noble by saying, hey, instead of just knocking us off, they took a license and paid us 5 % royalty.

[693] Wow.

[694] Wow.

[695] Stand -up business practice right there.

[696] Stand -up business and completed our contract.

[697] Wow.

[698] Was it around this time that you started your experimental distribution channel of your own of Pizza Time Theater within the company?

[699] No. You're talking about key games, not Chuckie Cheese.

[700] Well, either.

[701] Well, there was kind of the ball and paddle phase.

[702] then we went into what I call the game innovation phase of the company.

[703] I realized that in those days, the coin op distribution network, there tended to be two, sometimes three in every major city.

[704] And it was normal to have an exclusive relationship.

[705] So I could pick all the best distributors.

[706] The ones didn't have an Atari deal.

[707] They were looking for any.

[708] that they could put into business to compete with us.

[709] And I thought that's perilous.

[710] So I decided to create my own competition.

[711] So I took the number two marketing guy and the number two engineering guy and the number two manufacturing guys and I had them leave in mass, set up a company across the street or down, it was actually another place.

[712] And it was just before a trade show and they had a game, which was the next in the line that we were going to produce.

[713] We let them put their name on it.

[714] We went to the trade show, and they assigned their distribution contract with all the guys that we didn't have.

[715] So we had the world nailed.

[716] Wow.

[717] And that was key games.

[718] That was key games.

[719] And in those days, you know, there wasn't the internet and all that, but we knew that you couldn't keep it secret forever.

[720] So we floated the rumor that these guys had stolen trade secrets and that we were suing them.

[721] Okay.

[722] And then a couple of months later, we floated the idea that we settled and that now we owned a piece of key games.

[723] And did you own the entire thing from the get -go?

[724] The entire thing.

[725] Oh, that's great.

[726] And then we decided that we were going to merge the companies together.

[727] Take a nice photo, shake hands.

[728] You're welcome to...

[729] Yeah.

[730] And then there was a question.

[731] Distributors, what do you want?

[732] Yeah.

[733] Should we take the thing away or should we give you both lines?

[734] And at that time.

[735] So you changed the business practices in the industry because they didn't want to give this up, right?

[736] Yeah.

[737] So now we gave both lines to both distributors.

[738] Wow.

[739] So you didn't have to have exclusivity with a distributor anymore.

[740] Bingo.

[741] Amazing.

[742] Oh, that's so great.

[743] You know, it's one of those things that in the coin up business in 1975, we had an 80 % market share.

[744] Wow.

[745] Amazing.

[746] And so going from nowhere.

[747] You know, we were undercapitalized and all that.

[748] Give us a sense of how many cabinets you'd then manufactured from, what, 71 to 75?

[749] Probably 300 ,000.

[750] Wow.

[751] And each of those earning roughly a couple hundred bucks a week.

[752] Correct.

[753] How'd you capitalize that?

[754] Or did you manage to get pre -orders and, have sort of a nice working capital cycle.

[755] Actually, the business model I'm more proud of than the technology because I built this company on each, my partner and I put in $250 each.

[756] That's the only capital that went into the company until Dawn Valentine in 1975.

[757] 75, yeah.

[758] And so what we did, I figured out just in time inventory.

[759] So all the cost was in the cash.

[760] cabinet, the TV set, the coin mech, and the power transformer.

[761] The glue parts for the computer and all that, it was a lot of numbers, but not a lot of that value.

[762] So we could actually, from the time a cabinet came on the floor, we'd have the TV set and all the other pieces come in all at the same time.

[763] And so we were turning inventory 28 times a year.

[764] Oh, wow.

[765] That's like Amazon levels.

[766] Exactly.

[767] So we were able to essentially sell a product and have 60 days to pay for the merchandise.

[768] Because you had terms from your suppliers.

[769] So the company operated in positive cash flow.

[770] Wow.

[771] And what were the payment terms when you would deliver one of the units to?

[772] 30 days.

[773] Okay.

[774] But we'd give a 10 % discount for five days.

[775] but then we found this factoring company that would buy our receivables and so I'd get immediate cash.

[776] Wow.

[777] So you grew to millions of dollars a year on no capital.

[778] No capital.

[779] Wow.

[780] Had you spoken with Don Valentine or any other investors and to foreshadow...

[781] The capital hadn't really been invented yet.

[782] Don invented it in a lot of ways.

[783] And from what I read, the sentiment around the time sort of associated coin drop with mafia activity and gambling.

[784] People didn't want to be involved in investing in this sort of mob controlled or mob perception in industry.

[785] Yeah.

[786] Well, it was true.

[787] During the prohibition, the mob provided illegal booze, illegal gambling, loan sharking, and prostitution.

[788] when prohibition was repealed they still had their three trochia and then the games modified you know in the speakeas they had roulette and slot machines and the whole nine yards but when all of a sudden the speakees emerged from underground they could easily identify the slot machines and so they started disguising them as pinball machines but they were payout machines they were gray area So that's why pinball had such a negative stigma, not because of pinball, but because a lot of them were actually slot machines.

[789] They were disguised slot machines.

[790] Fascinating.

[791] Wow.

[792] The proto venture capital industry that we talked to, you know, the Arthur Rocks and the, you know, the folks that were the Tommy Davis's, they weren't going to.

[793] I'm sure, did you even talk to them?

[794] I didn't know.

[795] I hadn't heard of venture capital.

[796] I, you know, it was just.

[797] Wow.

[798] So how did you?

[799] I was just young and dumb.

[800] How did you and Don intersect then?

[801] He came to visit me. He found me. I didn't find him.

[802] And at that point in time, we were in six buildings, and we were up about $30 million in sales.

[803] This is like 74, early 75, somewhere in there.

[804] And so we were kind of getting to be big shits in the valley.

[805] Wow.

[806] And he had just set up Sequoia Capital, taking an independent from Capital Group.

[807] Now, you get this.

[808] He says, can I see your business plan?

[809] Oh, listeners, I wish you could see the face Nolan just made.

[810] Business plan.

[811] We had no business plan.

[812] I'd been running this thing by the seat of my pants.

[813] He says, well, I'll set you up with a guy that can write your business plan for you because I need it for an investment because I like your business.

[814] So I spent a few hours a day for several days with this guy named Don Yost, who wrote the business plan for Atari, the very first one we ever had.

[815] Wow.

[816] When you're already doing 30 million in sales.

[817] Yeah, I know.

[818] Wild.

[819] Different world.

[820] When Don first approached you, was it called Sequoia Capital at that point yet?

[821] Yes.

[822] Okay.

[823] So he had fully spun out from Capital Group.

[824] Correct.

[825] And how did a deal get done?

[826] What did he offer?

[827] Did you, how did you broach the conversation between the two of you of accepting capital to a business that had never had capital?

[828] before well to get the right patina on this we had the summer of discontent and i told you how we operated in positive cash flow that's all fine and good until you fill up your production line with products that you can't sell because there's a part that's missing uh -oh what happened there we almost went out of business because don may or may not have withheld the part there was a chip that we needed to get and it was on backlog for three months and so one month in we were way behind on our payments we got sued and three months in all of a sudden we we didn't defend ourselves because we owed the money and so we had these judgments against us and so there were sheriffs on the front door you know coming to collect yeah collect assets What they really want to do is collect your from your bank account.

[829] Right.

[830] They didn't want your chairs and tables and stuff.

[831] And so what we did is we opened up bank accounts all over the nation.

[832] And so we would just go every week.

[833] We'd use a different checking account to pay our people.

[834] Wow.

[835] Oh, my goodness.

[836] Wow.

[837] Because you're trying to keep the doors open.

[838] You're trying to stay in business.

[839] You think this will get resolved and you want to keep your great people around and pay them.

[840] Yeah.

[841] So was it in this really tumultuous time when, you're trying to stay in this.

[842] you did the deal with Don then?

[843] Really cool.

[844] Yeah.

[845] We were damaged.

[846] And I did a reorganization with all my creditors.

[847] And basically I gave them, I said, if you want 100 cents on the dollar, you've got to give me six months.

[848] If you want 50 cents on the dollar, I'll pay you in two months.

[849] If you want cash right now, I'll give you 10 cents on the dollar.

[850] And then I said, and if you sue me, get another video game you'll never get an order for me again wow in our life and then to get the line going again i went to jerry sanders from amd and i said we've just been cut off because a credit hold i said but i laid out what what the option to and i said i need a 50 ,000 dollar credit line for your parts and if you give that to me you'll be my preferred vendor from now on.

[851] Who were using for chips before?

[852] Were you using...

[853] Fairchild.

[854] And T .I. And they were just jerks.

[855] And Jerry said, okay.

[856] Wow.

[857] It probably was worth $50 million to AMD to be the prime supplier for Atari.

[858] Yeah.

[859] Pretty good okay.

[860] Very good okay.

[861] So then...

[862] We've been good friends since.

[863] Oh, that's great.

[864] So my understanding from doing a little but our research before was that you effectively came to terms on what the investment would be from Sequoia during the time of tumult and before the AMD agreement.

[865] But, of course, you hadn't closed yet.

[866] And, you know, you're maybe a month or a few more months goes by and you're getting ready to close the deal.

[867] And we've gotten much healthier.

[868] We, you know, all the things that we'd done, we've fixed up things that we were shipping, and all of a sudden we weren't under stress again.

[869] And so it became time to close.

[870] And that night I said to Joe, the president, I said, I can't do this.

[871] This is not the right deal.

[872] Don had champagne iced up in his trunk and came out.

[873] And I said, sorry, the price isn't right.

[874] And I said, this is the condition when I agreed to this, this is the condition.

[875] Now the price is double.

[876] Double.

[877] double.

[878] How did he react?

[879] Oh, he was pissed.

[880] But I was willing to walk away.

[881] Wait, because you didn't need the capital anymore.

[882] I didn't need the capital anymore.

[883] Two days later, he came back and he said, okay.

[884] Wow.

[885] Wow.

[886] What a story for the first investment?

[887] Well, it was, my relationship with Don was always a little bit love, hate.

[888] I could see that.

[889] You know, and because you don't, you don't dick with Don Valentine that way.

[890] Oh, man. Well, I've heard then that board meetings could take place in hot tubs.

[891] You know, can you describe the Atari culture at this point?

[892] We talked about you as the first hacker archetype as a CEO.

[893] I don't know if you called yourself a CEO, president, founder.

[894] I was a CEO.

[895] Okay.

[896] What was the company like and how is it different than other companies?

[897] I think to understand that clearly, you need to understand what was going to.

[898] on at the time and we all had our hippie costumes that we dress up in our bell bottoms and our tie -dye shirts and go up to san francisco and and be posers because you guys were engineers and we were engineers but you know sometimes it was kind of fun totally and to go up there and so there was this ethic the the summer of love and all that that and you know don't trust anyone over 30 and you know smash the state and and all that but what really was it was a an idea that should treat everyone fairly not based on history not based on legacy not based on you know who you were and what what you came but but what your soul was what your capabilities were and so we actually created this company manifesto or constitution and And so we encapsulated equal pay for equal work, very first one in Silicon Valley.

[899] So we felt, and we had some amazing women that worked for us that were, just loved the whole idea that we had this manifesto.

[900] Speaking of the culture at the time, I mean, this must have been right around the time when this guy shows up at your office, right?

[901] Yeah, jobs.

[902] Yeah.

[903] Unkempt, dirty.

[904] He just walked in one day and said he's not going to leave until he got a job.

[905] And was it this like, I mean, you guys have become pretty big in the valley.

[906] You were well -known at this point.

[907] Was it like, this is Steve Jobs, of course.

[908] Did he want to work at Atari because he'd heard about Atari and heard about the culture?

[909] Yeah, absolutely.

[910] And, you know, he liked the idea that we were doing something that wasn't bombs, wasn't, you know, military.

[911] And by being in the game business, we actually had a real advantage because a lot of the businesses had some military outlook.

[912] And so if you were a foreign national, a lot of times you couldn't work for those companies.

[913] So we had our pick of the crop in terms of, you know, the Brits at the time had just wonderful engineers and Germans and what have you from all over the world.

[914] Wow.

[915] Yeah, and you had that unique recruiting advantage.

[916] Well, not to mention, you're in the Bay Area.

[917] The Vietnam had probably just ended at this point.

[918] Yeah, pretty much.

[919] I'm sure there are a lot of people in the Bay Area at this moment in history who are none too keen to be working for companies that we're selling to militaries.

[920] Yeah.

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[941] I'm sure you've you've spoken many times about your experience with Steve Jobs and Steve Wozniak.

[942] You are one of the very few people in the world that were ever either of their boss.

[943] Right.

[944] How did that go?

[945] How were they as sort of young, budding talent?

[946] And what are some of the things that they did together at Atari?

[947] So I want to clear up this.

[948] Wasnack never worked for me. He was always working at HP.

[949] Yeah.

[950] And I put Steve Jobs on the nightship because I knew Was would hang out with him.

[951] Ever the entrepreneurial instincts.

[952] Well, I called it getting two steves for the price of one.

[953] And you got an advisor.

[954] And Was was an advisor.

[955] And was, is and was a true.

[956] true savant.

[957] I think actually Waz doesn't get enough credit for the success of Apple because he could design discrete logic chips.

[958] I mean, he did the Apple 2 as a design construct was brilliant.

[959] It was the most efficient articulation that you could probably did.

[960] Waz did it all night or two nights in a row, developed the drivers and the hardware to interface this floppy disk drive to the Apple 2 took Atari seven months Wow and we had some smart people Wow Wow wow So those sorts of things For me just gives me tremendous respect For the man's capability We had a deal where the engineers at Atari could bid on the projects We'd give them a game list And since we'd give a little bit of royalty to the engineers, they only wanted to work on ones that they liked.

[961] And I came up with this game called Breakout.

[962] And nobody wanted it.

[963] Quiet success out in the world Breakout.

[964] Well, the perception was that ball and paddle games were over.

[965] And this was a ball and paddle game, but with a twist.

[966] What year was that?

[967] 74.

[968] Okay, so we're two, three years after the amazing success of Pong.

[969] Right.

[970] Got it.

[971] Might have been 75.

[972] I'm not sure.

[973] But there'd never been a single -player pong.

[974] No. And it turns out that breakout was actually the game that launched the Japanese market.

[975] For video games at all?

[976] Yeah.

[977] And so at this point, in 74 -75, Atari had just started shipping home consoles.

[978] You had...

[979] 75.

[980] 75, 70, got it.

[981] The VCS that became the 2 ,600, right?

[982] So many of us had.

[983] My understanding was you were the sort of game designer and kind of visionary behind breakout.

[984] This was a game that you'd sort of really come up with a concept for.

[985] And so you put it on this list for different people to bid on.

[986] How does it go from there?

[987] They didn't want to do it.

[988] And so I put Steve on the night shift and signed it to him.

[989] This is Jobs, because he's the only one that works for you.

[990] And I knew that he wouldn't do it, but Wazwood.

[991] Amazing.

[992] Was is not an employee of Atari.

[993] He's just hanging out with jobs at night.

[994] How's the IP work on that?

[995] It was a different area.

[996] They were employees.

[997] Who knew?

[998] Wow.

[999] And so, was does all the technical design of breakout.

[1000] Yeah.

[1001] Now, I did a deal where they got a bonus based on how few of chips they could use.

[1002] Yeah.

[1003] So I read something about this, that the cabinets typically had 75 plus boards in them, but it would save Atari like $100 ,000 if you could remove each chip.

[1004] Yeah.

[1005] And that's absolutely true.

[1006] And so the Waz's design was like 40 chips.

[1007] I mean, it was unheard of.

[1008] But it had sort of feedback systems that made it really hard to test.

[1009] And so once the game was done and everybody could see that it was fun.

[1010] They did a re -hack, but I paid the bonus based on the number of chips that came back, which was $5 ,000.

[1011] And that was a lot of money in those days.

[1012] Subsequently, Waz was over to the house and we were talking about breakout and what have you.

[1013] And I said, what did you do with your half of the money?

[1014] He says, oh, I went out to dinner.

[1015] And I said, that's some dinner.

[1016] That's some dinner.

[1017] And he said, what do you mean?

[1018] I said, well, you know, I figured you probably ended up with $2 ,500.

[1019] He shook you, he said, he says, Jobs did it to me again.

[1020] Oh.

[1021] Jobs told him it was $500, and he got $250.

[1022] Wow.

[1023] And this is before they started Apple together.

[1024] Oh, no, no. This is after.

[1025] Okay.

[1026] This is a long time after.

[1027] Ah.

[1028] And, you know, Waz said, you know, I really don't care.

[1029] He said, because of jobs, I've made a lot.

[1030] of money much more than I ever thought I would at that.

[1031] And I said, and he must have had a better need for it than I did.

[1032] Wow.

[1033] Wow.

[1034] What a feeling guy.

[1035] Yeah.

[1036] Did Jobs come and tell you that he was going to leave Atari and go start Apple?

[1037] Like, how did that happen?

[1038] Well, he asked me to be his first investor, $50 ,000 for a third of Apple, and I just said no, which I've kind of regretted.

[1039] and but that's okay don made a mistake with apple too so well it was really a thing where I actually think if I said yes the world maybe have been a slightly different place because Mike Markler who did the first investment was also a very hands -on mentor and he basically turned jobs into an actually acceptable CEO that I probably wouldn't have done yeah I think I've heard you refer to him as a ho Chi men looking guy.

[1040] And remember, Markela was the first president of Apple.

[1041] Yeah.

[1042] Markola had worked for Don Valentine, right?

[1043] Yep.

[1044] And the story is that Don sent Markola over to talk to Steve.

[1045] I sent Steve to John.

[1046] Don sent Steve to Markle.

[1047] Wow.

[1048] David, can you just catch us up on the timeline moving through the mid -70s, sort of what happens in 75, 76, and let's get to, what the next financing would look like for Atari as a company.

[1049] So Sequoia and Don invested in 75.

[1050] Then in 76, you end up selling the company.

[1051] How did that happen?

[1052] We were far down the design path of the 2 ,600.

[1053] We knew that we had to, one, build a new factory, two, that it was going to be a highly driven by fourth quarter sales.

[1054] And we just knew that we didn't have a new factory.

[1055] of capital.

[1056] And so we started down the path of taking Atari public.

[1057] And we had an S -1 drafted up and everything that.

[1058] And then the market kind of did a hiccup.

[1059] You know, he said, maybe not.

[1060] So we went down.

[1061] So we said, okay, we'll see if we can get a corporate partner.

[1062] When we started down that path, Dawn says, hey, why don't you go talk to Warner people?

[1063] and the Warner people came out and said that's kind of interesting and what have you and maybe what we can do is we can do a structure where we buy it and you guys make all the money and do all the stuff and you know it was you know we were young and dumb I had a lot of hay coming out of my shirt what have you and so they send the Warner corporate jet to pick us up at the San Jose airport and we climb on board And, of course, just to really do starstruck, they stopped in Sun Valley and picked up Clint Eastwood and Sondra Locke.

[1064] What?

[1065] On the jet?

[1066] On the jet.

[1067] Wow.

[1068] And so we're flying to New York on the Warner jet with Clinton and his girlfriend.

[1069] Wow.

[1070] That didn't come up in any of the research.

[1071] Oh, really?

[1072] No. No, yeah.

[1073] Well, and then we get picked.

[1074] up at the airport and the limo drops us off at the Walder of Astoria's side entrance.

[1075] That's where the VIPs go.

[1076] The VIPs go.

[1077] We go up and we're in a suite of rooms that has a library and a pool room and a kitchen.

[1078] And I mean, it's basically a 5 ,000 square foot apartment that we're in, you know, and, you know.

[1079] And it's the Warner Corporate apartment.

[1080] Yeah, and there are three of us, Joe, Gene Lipkin, and my house.

[1081] and we're there.

[1082] And you realize you're being played a little bit, but you don't mind it because it's kind of cool.

[1083] Yeah.

[1084] There is something very nice about getting sold to by someone who is an excellent salesperson.

[1085] Exactly.

[1086] So next morning, we meet for breakfast and go into Warner's conference room and we start talking about deals and deal structures and what have you.

[1087] And can you give us a sense for the size of Atari's business at this point, revenue or profit or anything you can recall.

[1088] It's probably close to $40 ,000, $45.

[1089] Mm -hmm.

[1090] In revenue?

[1091] In revenue.

[1092] But this is all in the arcade business, right?

[1093] And you're about to enter...

[1094] No, we were doing home pong.

[1095] Oh, okay.

[1096] You're doing home pong, but not the $2 ,600 yet.

[1097] Got it.

[1098] I didn't realize, actually, that you had marketed home single game consoles.

[1099] Oh, yeah.

[1100] There were two big dials, right?

[1101] You could sort of grab and each player would twist them to move the panel.

[1102] Yeah.

[1103] So anyway, we'd gotten to a few sticking points, what have you, hadn't quite shaken hands.

[1104] We were invited over to Steve Ross's for dinner.

[1105] He has a 5th Avenue apartment on the top floor, top three floors.

[1106] And, of course, there was a screening of Outlaw Josie Whales for Clint and Sandra in us.

[1107] Amazing.

[1108] Wow.

[1109] Talk about being sold to.

[1110] Yeah, exactly.

[1111] We kind of like this life.

[1112] So at the end of the day, we kind of shook hands on a proposed deal.

[1113] Wow.

[1114] And so that, if I read correctly, was a $28 million all -cash offer to the shareholders of Atari.

[1115] It wasn't all cash.

[1116] There were some debentures involved.

[1117] And that was done as much for tax reasons as anything because, you know, you wouldn't have to pay tax on it all at once.

[1118] got it right cheaper but in addition of that there was a huge payout like there was a 10 % bonus pool so we personally we'd get a big taste of the success of Vatari oh like a like an earnout correct oh wow yeah huh which this was before startups learned that big companies always structured the earnouts in their favor oh yeah do they ever you wrote the playbook in so many ways.

[1119] Which of those ended up being more meaningful for you, the bonus pools or the actual one -time transaction?

[1120] That's actually hard to say because what I ended up doing is I hypothesated the bonus pool to get additional capital for Chuckie Cheese.

[1121] So this is an excellent lead -in to, okay, a few of us who had like looked into this before knew that you are also the founder of Chuck E. Cheese, which the first time you learned that, you know, your mind's blown and you get Tweety Bird spinning around your head.

[1122] The thing that I didn't know until really diving in is you started Chuckie Cheese as a part of Atari and then bought it from Warner's to spin it back out.

[1123] Correct.

[1124] Take us through that.

[1125] Okay.

[1126] The idea, before Warner was there, as I felt, we were selling these coin -operated games, for $2 ,000 ,000, and in their life, they'd do $30 ,000 to $50 ,000 in coin drop.

[1127] It didn't take rocket science, say I'm on the wrong side of this transaction.

[1128] But I didn't want to compete with the operators that were putting them in bars and restaurants, and I didn't want to compete for locations, for arcades and malls and what have you.

[1129] So I said, I'm going to have to create my own location.

[1130] And so I said, okay, if I'm going to be building a big arcade, what's my best draw and I said well we've got to have food and what the food needs to be is pizza because there's a wait time ideal time for that then the most successful ideal time to go play the games while you're waiting for the pizza yeah yeah the most successful pizza parlor in the bay area was a thing called pizza and pipes where they had a deconstructed worlitzer the organ all over the place and so there'd be an organist you'd see the drums going and they put lights on the various things so that it was kind of a show.

[1131] Yeah.

[1132] And I thought to myself, okay.

[1133] I've seen this before.

[1134] I can do something like this.

[1135] It turns out that I was going to take my daughters to Disneyland.

[1136] I was trying to get some ideas about what I could do that wasn't a word of theater organ, but had the same marketing.

[1137] And we went to the Tiki room and I said, oh, my.

[1138] engineers can do this and we can replicate it till the cows come home yeah and so that became the working prototype for chucky cheese and you know in terms of concept and and we literally opened the first one three weeks after we closed the warner deal wow was it in san Jose it was in san brokerage house It was 5 ,000 square feet And the day we opened, we knew it was too small.

[1139] You know, the typical pizza parlor was 500 square feet, maybe a thousand, you know.

[1140] And this was 5 ,000, and yet it was way too small.

[1141] Wow.

[1142] And did the first one have, I mean, my memories of checky cheese are The whole elaborate system with the tickets and the prizes And all the different games, The show every half hour.

[1143] Was that all there in the beginning?

[1144] Most of it.

[1145] Most of it.

[1146] I always felt that the right way to market it was we would survey the cost of a large pizza.

[1147] We'd then up that by 15 % and then give tokens that if valued at 25 cents would look like we were 15 to 20 % cheaper.

[1148] So you would just bundle in effectively some starter gameplay with the pizza.

[1149] Exactly.

[1150] Oh, man. Was Atari creating the games that were in Chucky Cheese then?

[1151] Partially.

[1152] We would buy from anybody.

[1153] Yeah.

[1154] Like we bought ski balls and things like that from others.

[1155] Huh.

[1156] But it was off to the races.

[1157] Okay.

[1158] You want me to tell you the deal I got from Warner?

[1159] Desperately, yeah.

[1160] They said, you know, I was talking about expanding it at a budget meeting.

[1161] And they said, I don't think we want that.

[1162] And I said, really?

[1163] It's really good business.

[1164] I said, I'll buy it.

[1165] They said, how much you want to pay?

[1166] I said, I don't know.

[1167] I said, I'm going to really have to work at this.

[1168] The carne whales are turning.

[1169] So I got it for half a million bucks.

[1170] How many locations?

[1171] $1 ,000 a year for five years.

[1172] Oh, they let you pay it over five years.

[1173] No interest.

[1174] No interest.

[1175] Wow.

[1176] And how many locations did you have at that point?

[1177] Just the one.

[1178] Oh, just the one.

[1179] But that one threw off $700 ,000 of cash flow annually.

[1180] I assume the corporate finance department at Warner didn't give this a once -over.

[1181] I mean, they clearly just didn't believe in it.

[1182] I mean, they didn't believe in it.

[1183] Also, you were just the king of payback period.

[1184] and cash flows.

[1185] Well, that's, when you don't have cash, you gotta think that way.

[1186] What year is this that you, you buy it for 500K?

[1187] 77.

[1188] 77.

[1189] Or at least, it's the year that you start five payments of 100K.

[1190] So that's in 77.

[1191] Over the next, I don't know, decade, decade and a half, Chuckie Cheese has close to 300 locations that you've opened?

[1192] 250.

[1193] 250.

[1194] 25 company stores, hundred and 25 franchises and I sold it to Brock Hotel.

[1195] To who?

[1196] Brock Hotel.

[1197] Brock Hotel.

[1198] What did that transaction look like?

[1199] It was a bad deal for me. I'd taken the company public.

[1200] I made more money on Chuckie Cheese than I did on Atari.

[1201] But I did it through selling of stock going on.

[1202] But the company, 1983 was when the video games kind of did.

[1203] And Chucky Cheese was hit by that a little bit.

[1204] And so I had hired a new president of Chucky Cheese and started really seriously campaigning a sailboat, i .e. screwing off.

[1205] And I might add, in 1977 I got married again.

[1206] And, you know, once I had sold the company to Atari, it took a little bit of the fire out of my belly.

[1207] So sold Atari to Warner.

[1208] Yeah.

[1209] And so I got married.

[1210] I was spending a lot of time wooing and wedding my bride.

[1211] And then we'd hang out and, you know, it was, you know, got the big house and did a remodel.

[1212] And, you know, all the stuff you do when you have a lot of cash.

[1213] When I was campaigning the sailboat, I won the Transpac, Newport to.

[1214] Hawaii in 1983.

[1215] That's a big sailboat race.

[1216] You're talking to someone who doesn't, I'm not a big, uh, yeah, this is like a very well -known cell boat race.

[1217] It's, it's basically longer running the America's Cup.

[1218] Huh.

[1219] But it's considered to be not quite America's Cup because it's mostly downhill.

[1220] What is it?

[1221] The wind is always at your back or something.

[1222] Yeah, exactly.

[1223] So, so you want a boat that is.

[1224] very flat -bottomed.

[1225] They can get up and surf.

[1226] You fly spinnickers all day long.

[1227] But it doesn't point upwind at all.

[1228] You know, and the America's Cup, you have to be an all -around boat.

[1229] I see.

[1230] And instead of what they call, transpect competitors are called sleds.

[1231] That's great.

[1232] But anyway, I won it in 1983.

[1233] Congratulations.

[1234] And the minute I hit land, I get this call.

[1235] we're going to miss our projections and lose money in the third quarter.

[1236] And you're a public company at this point.

[1237] We're a public company.

[1238] You know, what happens is, you know, when you lose money, I had a couple of, you know, lines of credit out there, and that violates covenants, and it just starts to create a shitstorm.

[1239] So get out of that, I ended up sewing.

[1240] Wow.

[1241] Not for a lot of money, but it's okay.

[1242] There was another company.

[1243] I mean, you've started so many companies in the years since and continued to, but there was one more company we want to talk about before we move on to acquisition category here that came out of Chuck E. Cheese that you ended up selling to George Lucas.

[1244] Can you tell us a little bit about that?

[1245] Yeah, I had a project called Cadabroscope.

[1246] And what I wanted to do is to create computerated animation.

[1247] And I felt that doing tweens and things like that, that the technology was good enough.

[1248] And we created some pretty good software, but the computers were so crappy in those days.

[1249] I mean, it was taking 48 hours to render a complete frame.

[1250] I mean, you know, and half the time the computer had bombed before it finished.

[1251] So, you know, if you got one frame a week, you were really rocking.

[1252] And this was with a VAC 780, which was the goal.

[1253] fast scientific computer at the time.

[1254] And these frames are 640 by 480 or less?

[1255] No, they were, they were, no, they were, they were 640 by 480.

[1256] Hmm.

[1257] Yeah.

[1258] One a week.

[1259] One a week.

[1260] And there's not a business.

[1261] Imagine Toy Story in one frame a week.

[1262] Well, I'll imagine it in like 2065.

[1263] Yeah.

[1264] So I ended up selling my software to George Lucas when, when Chucky got into trouble.

[1265] Mm -hmm.

[1266] Scambling for cash.

[1267] And so in some ways, I like to joke and say, I founded Pixar technically.

[1268] But George Lucas took it and did it.

[1269] And while I, while at Cadabroscope, I should, the name of the technology that you guys.

[1270] I showed Steve Jobs.

[1271] He came over and he was very fascinated.

[1272] Wow.

[1273] And I told him about some of the problems we were having.

[1274] And so he came to me when he was offered Pixar.

[1275] and I said from George Lucas yeah and I said the big key is render time if you can solve the render time problem it's a good deal and what I hadn't realized is he'd figured out how to do a render farm so where you where you basically atomize the problem and get a whole bunch of different computers to work on it that was the first render farm that ever existed wow wow anyway that's so cool.

[1276] There's fun acquired history, too, because Pixar was our first, our first episode.

[1277] I think we dove into the research, and, you know, we were excited to find out that Steve Jobs, Pixar came from George Lucas at Lucasfilm, and what a cool story that was.

[1278] And here we are 100 episodes later.

[1279] Getting the, you know, even deeper origin story.

[1280] It's just really cool.

[1281] Yeah.

[1282] Wow.

[1283] Super cool.

[1284] All right.

[1285] Let's go into our section after History and Facts.

[1286] And this is an illustrious amazing history and facts.

[1287] What we tend to talk about now is what would have happened otherwise.

[1288] And the way that I want to frame this on this episode is, what if Atari was never started?

[1289] How do you think this crazy, enormous video game industry that we have today?

[1290] I'm sure you've thought about this before.

[1291] Like, there's one view of it that's, it wouldn't exist at all.

[1292] And that, you know, probably not true.

[1293] There's another view that is, it would be no different than it is today, which is also probably not true.

[1294] So what do you think is the middle there?

[1295] I think that there's a 90 % probability that there would have been a video game post the 6502 microprocessor.

[1296] I think that the technology had progressed point where it was pretty simple.

[1297] The secret sauce that I provided is to figure out how to do it with state machine technology, which isn't an obvious thing to most engineers, you know, and I think that was my unique contribution that is far enough out of the mainstream that it may never have happened, or it made it.

[1298] You just never know.

[1299] Yeah.

[1300] There's a lot of, I would say that we were running down the hallway of a hotel and you're checking all the doors, and sometimes, you know, there's a broom closet, and most of the time it's a regular room but every once in a while there's a ballroom and you're not there alone there are many people running down those same streets yeah and uh i think it's extremely arrogant to think that uh you were definitive in something i read somewhere i don't know if it's true i think this was after you left atari after the acquisition that there was potentially a deal on the table for Atari to be the U .S. manufacturer and distributor for the Nintendo Entertainment System for the Famicom.

[1301] Can you say, do you know anything about how that?

[1302] I just know that that was an opportunity and it was turned down.

[1303] Wow.

[1304] That would have been a very different history.

[1305] Very different.

[1306] I want to add one thing about the Transpect, because another important thing happened, And over the chart table, four in the morning, we did the rough for ETAC, which was the foundation for navigation systems.

[1307] You know, if you have a mapping system in your car or on your iPhone, it's all based on the technology we created.

[1308] Wow.

[1309] And I think I remember reading in the research that at ETAC, which is one of the companies you created that did navigation technologies, you had an arrow based on the space invaders.

[1310] That's correct.

[1311] For the car.

[1312] And still, to this day, any navigation, you know, Google Maps, whatever, like, you're an arrow if you're the car.

[1313] And it's because of that, right?

[1314] Yeah.

[1315] It's kind of fun stuff.

[1316] That's awesome.

[1317] Pretty cool.

[1318] What happened to ETAC?

[1319] Sold it to News Corp. Who sold it to Sony, who sold it to...

[1320] Tele Atlas or NapTet?

[1321] Yeah.

[1322] Wow.

[1323] Oh, how these things find their way throughout history.

[1324] earlier this season.

[1325] So it all comes back around.

[1326] One other question before moving on is Atari pioneered video games in so many senses, but is not relevant today.

[1327] How could Atari have traversed the waves that came over the next few decades and been what Nintendo became, especially in the United States?

[1328] It all comes down to manage.

[1329] The company never had a strong sense of self.

[1330] In fact, I think Atari is maybe the only company in the world in which the market leader abandon its market.

[1331] Can you imagine that?

[1332] But it did.

[1333] And the sale to Jack Trammell, you know, it was just a total cluster.

[1334] This is Warner sold it off?

[1335] Yeah.

[1336] Huh.

[1337] They just didn't have a feeling.

[1338] for it.

[1339] I mean, the executives they put into Atari were all record guys.

[1340] They didn't realize they were record player guys as well.

[1341] And so they were...

[1342] Well, they were in East Coast company.

[1343] I mean, like, we covered in our last episode, it was just like Fairchild, like an East Coast corporation running a West Coast technology firm in that day and age, it just didn't work.

[1344] It just didn't work.

[1345] And they, and Rekasar totally screwed up the corporate culture.

[1346] Like, we went from not allowing executives to have reserve parking spots because I felt that, hey, having the workers pass an empty slot with, you know, vice president was just an us versus them trope.

[1347] Totally.

[1348] And I said, I want this, I want us to be as egalitarian as possible.

[1349] And yeah, I'm going to make a little bit more money, but, you know, I've got more responsibility.

[1350] and, you know, da -da -da -da -da -da.

[1351] But we all are in the same cafeteria.

[1352] We're all hanging out together.

[1353] You know, when we have a beer bust on the back dock, we're all there, you know.

[1354] And we went from that to a private, executive dining room by a four -star chef to, you know, limos and reserve parking spots and all kinds of us versus them tropes that was just not a tardy.

[1355] The irony is now in Silicon Valley, there's a private dining room with four -star Michelin chefs for everybody, and everybody takes Uber Blacks to work.

[1356] And the company pays for all of it.

[1357] That's as it should be.

[1358] Well, our next segment that we typically do is acquisition category.

[1359] So we decide, you know, and there's very clear cut in easy episodes where, you know, the company bought it either.

[1360] It was a people acquisition, technology, product, business line.

[1361] It was for an asset.

[1362] In this case, I think what's coming out is Warner didn't really know why they bought it, and then that led to some of the kind of falling apart later.

[1363] How would you characterize why they bought the company and what it was for?

[1364] I've often thought that Steve Ross, who was suffering from prostate cancer, very long one, had a very clear idea of what Atari was.

[1365] when he got sick, I think the record guys didn't, you know, in a very significant way.

[1366] And that's where it kind of came off the rails.

[1367] Mm -hmm.

[1368] Hmm.

[1369] All right.

[1370] Well, normally here after category, we would go into grading.

[1371] Nolan, we will take your color on everything so far, both on Warner buying Atari and you buying Chuck Echee cheese back from Atari and growing that into what it was.

[1372] We will take your color there as our grades.

[1373] and finish up here.

[1374] Nolan, thank you so much.

[1375] You know, before we close up, I got to tell you what I'm doing now.

[1376] Please.

[1377] AI -driven board games.

[1378] I did a deep dive on the Amazon Echo and the Google Home system.

[1379] And the AI under it and the speech recognition and everything and became mesmerized.

[1380] And I thought to myself, this is a game platform that nobody knows about.

[1381] And so, let me do some board games that you can talk to and that we'll answer.

[1382] And so now we have St. Noir, which you can go into at Amazon right now, by the board game, then download the St. Noir app from your Amazon Echo.

[1383] We're not on Google Home.

[1384] We will be after the first of the year.

[1385] And you can play a murder mystery in which you're in the creepy town of St. noir and there are 12 creepy people one of which is a murder oh that's fun and the townspeople have to tell the truth oh it's like mafia or werewolf kind of yeah and but but the perpetrator lies and so the game is interviewing everybody and finding out where they were on the night of the murder and who they saw and what they did and various things and find out who's...

[1386] Is it multi -player or single -player or both?

[1387] I always play with three or four people, and we decide and talk about things, but there's the board game, and it's gorgeous.

[1388] And I suggest that everybody that's listening to this should buy six or seven, particularly for Christmas.

[1389] Absolutely.

[1390] Well, if only you could figure out how to put a quarter slot on the echo, then that would be perfect.

[1391] Well, you know, when you sell a bunch of paper for 40 bucks, that's...

[1392] It's almost as good.

[1393] Maybe even better.

[1394] Well, there's one other trend here that you're on that I think is brilliant.

[1395] I mean, of course, AI -driven is interesting.

[1396] Next -generation gaming is interesting.

[1397] But the most popular emerging podcast category is true crime.

[1398] And this notion that sort of like you could have interactive, gamified true crime is really cool.

[1399] We're actually working on one of those.

[1400] Oh, awesome.

[1401] Cool.

[1402] doubt to mention board games.

[1403] I'll accept when you say true crime, I'm not sure that it's going to be true.

[1404] Yeah.

[1405] Nolan, thank you so much.

[1406] My pleasure.

[1407] It was fun.

[1408] This has been a true honor.

[1409] We're so glad you joined us.

[1410] And what a great moment in Acquired's history, too, to bring a full circle with Pixar, our very first episode to be talking about the origins of Silicon Valley.

[1411] And, you know, you guys played such an incredible part in that.

[1412] So thank you so much for sharing the story.

[1413] with us.

[1414] Well, I appreciate it.

[1415] Our sponsor for this episode is a brand new one for us.

[1416] Statsig.

[1417] So many of you reached out to them after hearing their CEO, Vij, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[1418] Yeah.

[1419] For those of you who haven't listened, Vijay's story is amazing.

[1420] Before founding Statsig, Vijay spent 10 years at Facebook, where he led the development of their mobile app ad product, which, as you all know, went on to become a huge.

[1421] part of their business.

[1422] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[1423] Yep.

[1424] So now Statsig is the modern version of that promise and available to all companies building great products.

[1425] Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A -B testing, and see the impact every feature is having on the core business metrics.

[1426] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[1427] So what does that actually mean?

[1428] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[1429] It's super cool.

[1430] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world and get statistically accurate reporting on the impact.

[1431] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[1432] There are like so many more that we could name.

[1433] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[1434] They like literally have hundreds of customers now.

[1435] Also, Statsig is a great platform for rolling out and testing AI product features.

[1436] So for anyone who's used Notion's awesome, generative AI feature, and watched how fast that product has evolved, all of that was managed with Statsing.

[1437] Yep.

[1438] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[1439] They can now ingest data from data warehouses.

[1440] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[1441] You don't even have to migrate from any current solution you might have.

[1442] We're pumped to be working with them.

[1443] You can click the link in the show notes or go on over to stat sig .com to get started.

[1444] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[1445] Listeners, if you aren't subscribed and you like what you hear, you totally should.

[1446] And listeners, we will see you next time.

[1447] We'll see you next time.