It’s not often that I get to interview someone who was a driving force behind the formation of an industry, so I was honored to have the opportunity to do just that when I spoke with Nolan Bushnell. One of the founding fathers of video games, Nolan created the iconic and enduring company, Atari. He also founded Chuck E. Cheese, yet another revolutionary business that influenced millions of people. Today, Nolan is focused on fixing education with his newest entrepreneurial endeavor, lernip. It was an honor and pleasure to speak with such an intelligent, influential, and insightful maverick. I hope you enjoy our discussion.
You’re an extremely smart person. Tell me about your educational background.
I started out at Utah State University, and I studied engineering there. Then I transferred to the University of Utah, where I studied engineering, and then I changed my major to business. And then I changed my major to mathematics. Then I changed it back to engineering and got a bachelor’s in social work. I also went to Stanford for one semester, on a work study program.
I loved my time in college, both as an undergraduate and graduate student. What are your thoughts on your time in college?
I loved it. I mean, I loved it so much that, in fact, I was thinking at one time of becoming a college professor because I liked the environment and everything. I joined a fraternity, and I lived at the house for a couple of years. And you know, that is always a much better formula for a business major than for an engineer because the double work is so much more. (laughs) That being said, I always had a pretty significant job. My second year, I was manager of the games department of a local amusement park. That was perfect because it was a summer job. And college was a pleasure. But I had to get the park open spring quarter. And so my spring quarters were just constantly a disaster because I’d have to miss a lot of classes and things like that. That was always stressful.
I read online that you got into a debate with a professor about the Bible, and then it caused you to stop practicing your faith. I found that really intriguing. Can you tell me about that experience and the influence it had on you?
Well, yeah, it was a thing where I was born and raised Mormon. I’ve always had one foot in the sciences. I read lots of science fiction and, pretty much, looked at the history, and everything was science. And Mormonism has what they call lay ministries, that is the bishop of the local ward ran the gas station. (laughs) There’s no, what I would call, paid clergy. Except when it comes to the institute of religions, which are an adjunct to universities in Utah. I think There’s several other places in the world but mostly Utah.
To understand me a little bit, I am somewhat intellectually arrogant. (laughs) Okay. So, as a young man, you know, in high school and that sort of thing, I had some discussions with the people in the church, and I, sort of, took what they had with a grain of salt because I felt that none of them were as well read as I was, you know. I feel intellectually arrogant, at least in the sciences. That was my domain. And I had constructed a world that the precepts of Mormonism and science was not in conflict. I didn’t take the book of Genesis as this literal: God created the Earth in seven days, and, you know, all that stuff. There were a lot of other things that bothered me about Mormons. And one of those is that if you’re African American, you couldn’t hold the priesthood. And I kind of felt that wasn’t the way God would work. And, you know, there were just some other things that started to sort of work on me, but one night at an institute of religion — they call them a fireside — I got into it with a professor of Mormon studies, who was a paid expert in Mormon doctrine. And I could back him into a corner every time where he’d say, “Well, there’s some things you just have to take on faith.” And one of the precepts in Mormonism was that you’re a person of reason and that you should use reason to determine the truth, as much a faith. So anyway, I just I said, “Okay, what was that? Is that exactly what the doctrine is?” He said, “Yes, absolutely.” I said, “Well, then I guess I’m not a Mormon” (laughs) and walked out and never returned.
After you were done college, where did you go from there? And how did that lead to the creation of Atari?
I think that it actually has to start sooner, if you want to know about the creation of Atari — in some ways, the the creation of Atari came about because I played a game called Space War on the big computer while I was manager of the games department of an amusement park. I knew the economics of the coin-operated game business because that’s what we had in the arcades. I knew how much they cost and how much they had to earn. You know, I just knew the economics. And I thought to myself, if I had a coin slot on this monitor, it would make a lot of money but divide 25 cents in three minutes into a half-a-million-dollar computer and the math doesn’t work. (laughs) But I thought to myself, every day the cost of computers dropped. I mean, the university computer was probably a computer that cost a million dollars. And then, two years later, they got another one that was a half a million dollars. So, I could see the progression, and I just thought, hey, someday. Fast forward, I graduated from college, went to Ampex in Silicon Valley, where I was in video file. And as a result, I actually honed my video skills. And then one day, I went across and played Space War at the Stanford AI lab. And subsequent to that, a computer came across my desk that you could buy for five thousand bucks. And I thought, we’re getting really close. So, I started working on designs that day. That was the genesis of Atari.
How did you choose the name Atari?
Well, the reality is that the the name Atari was my second choice. We actually named company Syzygy, which was a horrible name. I was more sophisticated, technically, than I was in business. (laughs) I mean, you couldn’t pronounce it. It was a horrible name, but somebody else had already used it when we went to incorporate. And so in those days, when you were incorporating snail mail, you had to make a list of alternative names, your first pick was not available. And since our first pick was not available, we went to our second pick, which was Atari. It was a word from the game Go that my partner and I played and loved. And so we were constantly, kind of, reminded that that was good, and then ended up loving the name.
What kind of culture did you set out to create with Atari?
Well, I think it was, when it really started out, we didn’t have any lofty goals. It was just a matter of, how do you keep the lights on and people paid? It was a struggle. (laughs) It just seemed like there were 50 tasks and each one would take a week, but we had to do all of them in one afternoon. (laughs) It seemed like almost an insurmountable task, but, at the same time, it was really fun. I mean, it was. As we got on a little bit, I really wanted to create a company that would be, I don’t know, I guess you’d call it the new kind of company. Socially what was going on? It was the San Francisco: Haight Ashbury was sort of the center of the hippie movement. That was, don’t trust anybody over 30. And (laughs) we were all in our 20s. And it just seemed like that was a good, long trip. And so I think what we first tried to do is to really focus on outcomes. It’s not process because so many companies are process oriented, you know; they play recipes. We decided we wanted to be totally focused on outcomes. We actually, to my knowledge, were one of the first companies that had a formal, equal pay for equal work policy for men and women. And there were several things, looking back on it, that were revolutionary for their time, which I’m very proud of. But it came from that, sort of, hippie ethic of building a new, better kind of company.
Tell me about the creation of Pong. How did that come to be?
Pong really came about as a training program for my first engineering hire: Al Alcorn. I wanted to do the simplest game I could think of, and I had just seen the Magnavox Odyssey. And it reminded me that that was a very simple game, and people were, kind of, having fun playing it. And, yet, it was very bad technology compared to Pong. (laughs) It was fuzzy, had no support, had no sound. I wanted to give Al something that would be praised. We didn’t think that it was going to be commercially viable. But then it turned out to be very, very fun. So, we decided to put it out into the market. And the rest is history, as they say.
What are some of your other favorite Atari games?
Asteroids, Breakout, Tempest, Centipede, Bank Heist.
What was the development of the Atari VCS like?
The VCS was really enabled by the microprocessor. And it couldn’t have been done without a certain type of microprocessor, which is a 6502. It is very streamlined, very good for the sorts of graphics we wanted to do as a video game business. So once that microprocessor became available, all we had to do was design what we call the interface. The codename was Stella, and we were off to the races.
Back then, when people didn’t regularly upgrade home consoles every few years, were you really trying to figure out, how much should we charge for this thing to make sure we actually can sell it?
Oh, yeah. In fact, we felt that it had to be less than $200. I’m not sure that was actually correct. We made a lot of compromises to get it down to that price point where we could manufacture it for under $100 and sell it for the initial list price of $179, which were razor-thin margins.
What kind of challenges did Atari face when it came to arcade games versus home console games? And how did you overcome them?
Actually, it wasn’t much of a problem, really. Arcade games had much better graphics and they were better articulated. Yes, I mean, with it’s quarter inch pixels, it was quite limited. So the technologies, couldn’t compete. The biggest problem Atari always had is we didn’t have enough money. We didn’t have enough capital. We were just always hand-to-mouth. Because we got no venture capital until we were a pretty good size. It was hard. And even that amount of venture capital wasn’t really enough to sustain our growth.
Steve Jobs worked for Atari. Tell me about that.
We were hiring every technician we could find. Technicians were, sort of, this scarce commodity. And he was a very good technician but not a full engineer. We knew he hung out with Steve Wozniak, who was a full engineer and a savant, in a lot of ways. So, I’d say that he had an abrasive personality, but he was extremely talented and an extremely hard worker. I mean, an extremely hard worker.
At one point, Steve Jobs and Steve Wozniak came to you about investing in their project. Tell me about that.
They wanted to come up with this . . . the Apple I, they called it. And they wanted me to invest $50,000 for a third of Apple, and I felt that it was a conflict of interest. But I had the money, and I should have done it (laughs) — hindsight is 20/20.
Yeah, it’s a pretty incredible what-if scenario. So what led to the deal between Warner Communications and Atari?
Well, we needed more money to get the VCS launched. There was just, you know, we didn’t have enough cash to set up the whole backend. It was more of an inventory problem than anything. It was a big, big project. And we thought we could fund it by going public, but the market was not good at the time. And, so, we looked for . . . originally, we were looking for a corporate partner or corporate investors. And we thought the entertainment field would be good. And so Warner Communications was on the shortlist. And they said they wanted to buy the whole company and they gave us an offer we couldn’t refuse, so we didn’t refuse it. And it made me a rich man. I was a farm boy from Utah, and it put me in the fast lane.
They paid you $15 million, right?
That’s pretty hard to turn down.
When you did that, did you retain any percentage of ownership in Atari?
No, I sold 100%. I had a bonus plan — an earn-out based on profits.
What are your thoughts on your successor at Atari, Ray Kassar. And why did you wind up leaving Atari in 1979?
Well, because, basically, they were going in directions that I thought weren’t right for the company, and Ray Kassar really wanted me out. Just because I had to remind him every day of what the hell he was doing. He didn’t like that very much. (laughs)
I read in a book about the history of video games that Ray was the antithesis of Atari’s culture. Is that correct?
Totally! And he thought that being all buttoned up was the way to do it. It was just the antithesis of what a good engineer wants.
Not only is it not reflective of the audience you’re selling to, but it’s also not inclusive of the people you have working for you.
And Ray had a lot of disdain for them. He’d call them, you know, technical prima donnas. Of course, the engineers got some t-shirts made up that said, “I’m just a technical prima donna.” (laughs)
A lot of the engineers thought that I betrayed them when I left.
Why did they think that?
I understood engineering and all that. And they felt comfortable with that. And they felt increasingly uncomfortable with what was going on. And, of course, it ultimately led to a bunch of the best engineers leaving.
I also assume you didn’t give many of the engineers a heads up that you were leaving, so they probably found out when they found out.
You’re referred to very often as one of the founding fathers of video games. What are your thoughts on that?
You know, I try not to live my life in a rear view mirror. I love projects. I’m doing projects right now that I’m as fascinated by as anything. And so, I guess, to me, the real issue is are you having fun in life and making a contribution? I’ve got an educational software company, now, that I think might be more important than video game design.
I watched your presentation that you gave at Google, where you talked about the importance of procreation. Tell me about that.
I just think that one of the interesting obligations of being a human is to pass on the legacy of smart kids, well trained kids. And I’ve always felt that it’s the father’s duty to be the primary teacher of his children. And I have eight kids, which some people think is a lot. And I like to joke and say it came from intellectual arrogance, because I thought all the dumb people were having too many children. I wanted to balance it out a little bit by having a bunch of smart ones. (laughs) And they’re all doing well. You know, they are highly successful kids, and I’m very proud of that.
In that same presentation, you also talked about the issue of relying on consensus decision making. What are your thoughts on that? And why is it an issue?
I believe it’s a horror show. I think consensus decision making leads to mediocrity every time. The more revolutionary the idea is, the less likely you are to have any kind of consensus. In fact, my advice to Steve Jobs was, you’re in a room with 50 people, and you’re the only one that believes in something which you believe in very strongly — that’s what you should follow. (laughs) Don’t follow the 50 yahoos because they don’t have the clarity of vision. And there’s not a lot of innovators that are also good communicators. So you can have a very good idea and not be able to communicate it to the other people. And so consensus really requires those communication skills.
You founded Chuck E. Cheese. Tell me about that experience.
What you really want to know is that, at Atari, we were selling coin-op machines for around $1,000 to $1,500. And in their lifetime, they would earn $30,000 to $50,000. So it didn’t take rocket science to say, “Hey, I’m on the wrong side of this equation.” And that’s really the genesis of Chuck E. Cheese. And what I really wanted to do, primarily, was to create a chain of arcades that were not competitive with my standard market. Secondarily, I knew that kids like to play video games but had few opportunities to do so. Kids couldn’t go to bars, and video games, at that time, were really not in pizza parlors and restaurants. And bowling alleys were kind of a rough environment. I knew that there was going to be a young kid market, as well as an arcade market. So, I just aimed like a laser to that marketplace.
You have a connection to the children’s light game, Simon. Tell me about that.
Oh, yeah. We built a game called Touch Me. And we created the environment in a coin-op machine. But what we didn’t see was the opportunity to do it as a home game. And Ralph Baer was in our office, because he was suing us on a patent thing, saying that we copied him. But he was in the process of copying us to create Simon. (laughs)
And are you still on the board of Atari?
I’m an advisor. I’m not on the board per se, but I was on the board for a while.
Atari recently brought back the VCS. Do you have any thoughts on it?
Yeah. I think it’s a cool product. In fact, I’m going to be getting one on Monday.
Any exciting projects you’re working on currently that you’d like to share?
I want to encourage people to go to lernip.com and become part of our crusade to fix education.