Nolan Bushnell, Founder of Atari
Today, my guest is Nolan Bushnell, a technology pioneer, entrepreneur and engineer who is best known as the founder of Atari Corporation and Chuck E. Cheese’s Pizza Time Theater.
Over the past four decades, he has founded numerous companies, including Catalyst Technologies, the first technology incubator; Etak, the first digital navigation system; ByVideo, the first online ordering system; and uWink, the first touchscreen menu ordering and entertainment system.
His newest company is Brainrush, where he is devoting his talents to enhancing and improving the educational process by integrating the latest in brain science.
In this candid conversation, Nolan shared the real stories behind the birth of Atari, the strategic creation of Chuck-E-Cheese, and his biggest regrets about selling his iconic company.
1. The Amusement Park Epiphany. Nolan revealed that his journey into video games started when he put himself through the University of Utah's engineering program by working at an amusement park. Understanding the massive economics of the arcade business, he realized that if computers became cheap enough, he could build a highly profitable business by putting games on arcade displays. He designed his first game, Computer Space, to emulate an MIT computer game, but found the controls were simply too complex for the average person in a bar to understand. However, it still generated enough royalties for him to open his own shop, hire a developer named Al, and eventually launch the wildly successful game Pong.
2. A Polite Warning. When discussing the origins of his iconic company, Nolan explained that the name "Atari" actually comes from the Japanese board game Go. In the game, saying "Atari" serves as a polite warning to an opponent that they are about to lose a bunch of their stones. Despite eventually becoming the father of the video game industry, Nolan faced immense struggles keeping the business alive in the early days; he started Atari with a mere $250 and remarkably operated without a single penny of venture capital until the company reached $30 to $40 million in sales.
3. The Economics of Chuck-E-Cheese. Nolan realized he was on the wrong side of the arcade business equation when he saw that Atari was selling machines for $1,500, only for operators to rake in $30,000 to $40,000 in coin drops from those exact same machines. Because he didn't want to directly compete with his own customers for existing arcade space, he decided to create his own proprietary location, which birthed Chuck-E-Cheese entirely inside of Atari. Interestingly, when he sold Atari to Warner Communications, Warner didn't want the restaurant concept, so Nolan happily took the Chuck-E-Cheese franchise to run for himself.
4. Harvesters vs. Planters. Looking back at his storied career, Nolan admitted his biggest regret was selling Atari to Warner Communications. Because Warner viewed themselves strictly as a record company, they completely failed to understand that Atari was a technology company that desperately needed to evolve its hardware, famously refusing to upgrade the console's tiny 128 bytes of memory even as memory prices plummeted. Nolan noted that Warner was an "excellent harvesting machine" that coasted on his existing products to nearly $2 billion in sales, but they were terrible "planters" who failed to release a single new product that wasn't already in the lab before he left. Today, he channels his vast experience into running the Snap Institute in Las Vegas, an entrepreneurial school that utilizes the city's massive trade shows to teach students about the diverse breadth of global industries.
