Hot Tub Millionaire

Summary

The Times Tech Podcast: "Hot Tub Millionaire"

Date: September 24, 2024
Hosts: Danny Fortson (San Francisco) & Katie Prescott (London)

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Overview

The first episode of "Tales of Silicon Valley," titled "Hot Tub Millionaire", is a dynamic and colorful look at the wild early days of Silicon Valley, focusing especially on Nolan Bushnell, the enigmatic founder of Atari and a pivotal—if underappreciated—figure in the birth of modern tech culture. The episode unpacks the roots of Silicon Valley's anti-corporate ethos, the rise of the video game industry, and how the counterculture “screw the man” spirit fueled generations of tech innovators, including a young Steve Jobs.

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Key Discussion Points and Insights

1. Steve Jobs, Steve Wozniak, and Early Atari Days

• The episode opens with an anecdote about a teenage Steve Jobs at Atari, tackling an "impossible" programming task with help from Steve Wozniak.
• The narrative sets the stage for examining not just Jobs and Wozniak, but the environment that allowed such outsider brilliance to thrive.

Notable Quotes:

• Nolan Bushnell:
  "If I put him on the night shift, Woz would be there... I'd sort of have two Steves for the price of one." [00:26]
• Adam Fisher:
  "Steve lied about how much money he was making and gave Woz just kind of a pittance. You know, it's not the kind of thing you do to a friend. It's the kind of thing a capitalist would do to a subcontractor. And that's essentially the first glimmer of Steve Jobs' genius, slash, problem." [01:17]

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2. Nolan Bushnell: The Unsung Hero of Silicon Valley

• Bushnell, described as "the most important techie you’ve never heard of," is profiled in depth: his early penchant for entrepreneurship (TV repair at age 10), his time as a carnival barker, and his refusal to "work for the man."
• The show emphasizes Bushnell's relentless drive and creative leadership, as well as his personal quirks and hands-off (occasionally chaotic) management style.

Notable Quotes:

• Nolan Bushnell:
  "I was not going to work for the man. I was going to have my own gig." [05:08]
• Leslie Berlin:
  "The tech companies that were here were very gearhead to gearhead... predominantly chip companies... mostly going into defense uses." [06:43]

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3. The "Mother of All Demos" and Silicon Valley's Big Bang

• The episode provides a historical retelling of the 1968 “mother of all demos,” where Doug Engelbart previewed transformative computing concepts: the mouse, video conferencing, word processing, and early networking.
• The presence of Stewart Brand, a connector between hippie counterculture and tech, is highlighted as a crucial moment for Silicon Valley's emergence as a unique ecosystem.

Notable Quotes:

• Adam Fisher:
  "These don't have to be military war machines. These can really help people be smarter." [08:06]
• "The reason it happened in Silicon Valley, I believe, is because that hippie value system... fighting the man was in Silicon Valley and it wasn’t in Texas and it wasn’t in Massachusetts." [10:42]

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4. Atari's Wild Ride: Chaos, Innovation, and Counterculture

• Bushnell and partner Ted Dabney create Atari (originally called Syzygy), setting off the arcade game explosion. Their recruitment of Al Alcorn leads to the creation of Pong—a runaway hit.
• The company culture at Atari is depicted as rule-breaking, unconventional, and, at times, anarchic—meetings in hot tubs, pot-smoking on the job, bizarre internal newsletters.

Memorable Moments:

• Al Alcorn on Startup Chaos:
  "We had a lot of colorful people, shall we say?" [19:25]
• Leslie Berlin:
  "Atari was the company that taught people how to interact with their screen. Before Atari, screens were a one-way transmission..." [17:37]
• Adam Fisher:
  "There was a policy that you could smoke as much pot as you want in the factory, but you just had to meet your quota." [20:40]

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5. Business Challenges and Near-Collapse

• Despite their early success, Atari struggles with copycats, an unpredictable hits-driven business model, and leadership challenges.
• Bushnell’s management style is humorously critiqued by his early colleagues.

Notable Quotes:

• Al Alcorn:
  "Nolan has the attention span of a golden retriever... three or four shitty ones every week or so." [22:43]
• Ted Dabney:
  "He'd go into the engineering lab and see a project... and he'd get bored... My secretary... would page me and I'd undo whatever Nolan did." [23:08]

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6. Pivots, Home Consoles, and the Warner Acquisition

• Atari invents the home console (Home Pong) and then the groundbreaking Atari 2600, which introduces game cartridges (founding the software industry).
• Despite huge sales, internal culture clashes with new corporate parent Warner lead to Bushnell and other original team members’ exits.
• The episode frames these events as both the glory and cautionary tales of Silicon Valley entrepreneurship.

Notable Quotes:

• Nolan Bushnell (on cashing out):
  "I was a farm boy from Utah, and all of a sudden I was going to have more money than I'd ever dreamed of... 26 million. In those days, 26 million is probably equivalent to a couple hundred million today." [27:57–28:14]
• Adam Fisher:
  "Atari was making more money than all of Hollywood combined. It was huge." [29:08]

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7. Silicon Valley’s Enduring Influence: Missed Opportunities and Legacies

• Post-Atari, Bushnell founds Chuck E. Cheese’s; makes millions more.
• Meanwhile, a young Steve Jobs, freshly returned from India, pitches Apple Computer to Bushnell and Alcorn—who both famously pass on being early investors.

Notable Quotes:

• Nolan Bushnell:
  "I had the opportunity of being the first investor in Apple, and I turned down a third of Apple computer for $50,000. I regret it." [32:46]

• Al Alcorn:
  "I regret I didn't buy this founder stock in Apple... but I'll take a free computer." [33:17]

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8. The Cultural Significance of Games

• The episode concludes by arguing that video games were Silicon Valley’s first real cultural export—a product of its wild, unruly beginnings.

Notable Quotes:

• Adam Fisher:
  "The video game will be remembered long after the personal computer is forgotten... it was the first cultural product that came out of Silicon Valley." [34:11]

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Timestamps for Major Segments

• Atari and the Two Steves: [00:00–01:45]
• Introduction to Nolan Bushnell & Early Career: [01:45–06:18]
• Silicon Valley's Cultural Fusion: [06:28–11:27]
• Founding of Atari & Pong: [12:32–18:51]
• Atari’s Insane Corporate Culture: [19:25–21:42]
• Atari’s Business Rollercoaster: [22:04–24:26]
• Birth of Home Pong and 2600: [24:33–26:06]
• Warner Acquisition & Wealth: [27:03–29:08]
• Steve Jobs, Apple, and Missed Fortunes: [30:59–33:34]
• Legacy and Wrap-Up: [34:11–End]

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Memorable Moments & Quotes

• "There was a policy that you could smoke as much pot as you want in the factory, but you just had to meet your quota." — Adam Fisher [20:40]
• "Nolan has the attention span of a golden retriever..." — Al Alcorn [22:43]
• "Atari was making more money than all of Hollywood combined." — Adam Fisher [29:08]
• "I had the opportunity of being the first investor in Apple, and I turned down a third of Apple computer for $50,000." — Nolan Bushnell [32:46]

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Summary Tone and Style

The episode is punchy, irreverent, and lively, channeling the anarchic spirit of California tech’s wild beginnings—complete with tales of pot-smoking engineers, hot tub meetings, and missed billions. It’s packed with personal recollections, wry humor, and a clear sense that this chaotic, countercultural era gave rise to tech giants that continue to shape our world.

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For Listeners Who Missed the Episode

“Hot Tub Millionaire” is both a celebration and cautionary tale—capturing the raw, unpredictable energy that made Silicon Valley a global powerhouse and offering vivid context for how today’s tech landscape took shape. If you’re wondering why Silicon Valley is the way it is, this episode is essential listening.

Transcript

[Danny Fortson]

Back when no one knew who he was, a teenage Steve Jobs worked at Atari. He was given an impossible task design Breakout, a video game that Atari's chief wanted but couldn't get any of his workers to make. Luckily, Jobs had a secret weapon. His best friend, Steve Wozniak, who didn't even work at Atari, but who would often show up to hang out on the graveyard shift.

[Nolan Bushnell]

I knew that if I put him on the night shift, that Woz would be there and he'd be playing games and helping. So I'd sort of have two Steves for the price of one.

[Narrator / Danny Fortson]

And that is exactly what happened. Over a few days, they created a working Breakout game, which was a superhuman

[Danny Fortson]

feat due almost entirely to Wozniak.

[Al Alcorn]

I go into engineering one morning and Jobs comes out, hey, look at this. Here's a finished video game that wasn't even on the schedule. Now, normally these things take three months and just have a game done without any interaction on my part whatsoever.

[Ted Dabney]

Was like, what?

[Al Alcorn]

And then Jobs says, I designed it.

[Ted Dabney]

No, that's not true. It's bullshit.

[Danny Fortson]

Jobs was paid $5,000 for breakout. He gave Wozniak 500.

[Adam Fisher]

Famously, Steve lied about how much money he was making and gave Woz just kind of a pittance. You know, it's not the kind of thing you do to a friend. It's the kind of thing a capitalist would do to a subcontractor. And that's essentially the first glimmer of Steve Jobs genius, slash, problem.

[Danny Fortson]

But the story I want to tell you today isn't about Steve Jobs or even the proto Steve Jobs. It's about the guy who first employed Steve Jobs. His name. His name is Nolan Bushnell. And he might be the most important techie you've never heard of. Bushnell founded Atari. He created the video game industry and provided a model for Jobs, Zuckerberg, and the rest of the Silicon Valley dreamers who thumbed their nose at convention and changed all of our lives.

[Nolan Bushnell]

Everybody else had us outgunned. They could build better, they could build efficiently. They could build cheaply. They had factories, they had processes and everything like that. But we could design new stuff.

[Danny Fortson]

I'm Danny Fortson, the West coast correspondent for the Sunday Times, and this is Tales of Silicon Valley, an eight part

[Narrator / Danny Fortson]

documentary series full of surprising stories and

[Danny Fortson]

unsettling insights on the tech industry. My goal is that by the end of these eight episodes, you will understand this place better, which is important, vital, actually, because Silicon Valley is the most important place on the planet where every day new companies are cropping up that are changing the way we live, communicate, eat, travel, work, meet mate, even vote. How did we get here? Why, of all the places in the world, did this stretch of 50 miles between San Francisco and San Jose become the labor for the future? And what is being cooked up next? We'll cover it all, but this week, we're going back to where it all started, sort of. So stay with us. This is episode one, Hot Tub Millionaire.

[Commercial Voice / Advertiser]

Believe it or not.

[Al Alcorn]

I have no mail for you.

[Adam Fisher]

No mail.

[Ted Dabney]

No mail.

[Adam Fisher]

All right, that's been used.

[Narrator / Danny Fortson]

Thank you.

[Adam Fisher]

Thank you.

[Narrator / Danny Fortson]

Yeah, I'm here to see Nolan Bushnell.

[Receptionist]

You can check in form A. Hi. Checking for him right here at the iPad. Just press sign in and if you have your driver's license, scan it face down for me.

[Narrator / Danny Fortson]

Nolan Bushnell, the founding father of the video game industry, lives in Los Angeles. He's been there since the late 1990s, and at 75, he's still spry. He's tall, maybe 6 foot 4, with a white, closely shaved beard, a black shirt, baseball cap. These days, he works out of a shared office inside a glass tower in Burbank, just around the corner from the Disney soundstages.

[Danny Fortson]

Now, this is not a history podcast, but it's important to go back to the beginning. Here's Adam Fisher, author of Valley of Genius, an oral history of Silicon Valley.

[Adam Fisher]

They invented the video game. Atari quickly became the most important company in Silicon Valley because they were making so much money. And it was the first company to have, like, a young wild man as a CEO, a guy named Nolan Bushnell.

[Narrator / Danny Fortson]

Bushnell grew up in Clearfield, a rural town between the Great Salt Lake and the Wasatch Mountains in northern Utah. He was raised Mormon, but it didn't take. He was a restless Soul. At age 10, he started his first company, a TV repair business.

[Nolan Bushnell]

It was a way that I was making adult kind of revenue as a

[Narrator / Danny Fortson]

10 year old kid.

[Nolan Bushnell]

And what that did is it really insulated this idea that I was not going to work for the man. I was going to have my own gig.

[Narrator / Danny Fortson]

Bushnell studied electrical engineering at the University of Utah. But his summer job was where his real education took place. He was a carnival barker at the nearby Lagoon amusement park. You know, he was one of those guys saying, step right up, try your luck. He had a knack for convincing people to hand over their money, usually 25 cents again and again and again. They made him head of the entire games department.

[Nolan Bushnell]

I've always said that was my MBA.

[Narrator / Danny Fortson]

He hired 150 kids to work the different games. Things like tossing ping pong balls onto bottles and shooting water guns until balloons popped. But Bushnell did more than that. He redesigned games so that they went faster and importantly, made more money. Bushnell graduated last in his class, a fact he retells with pride. He was too busy scheming about businesses and about how to get out of Utah.

[Danny Fortson]

That, and doing one other thing, playing a game called Space War, which could only be found on expensive research computers at the university.

[Narrator / Danny Fortson]

As soon as he graduated, he packed up and headed to California. The term Silicon Valley would not even be coined for a few more years. What this place was was a collection of engineers working mostly on big defense contracts.

[Leslie Berlin]

The tech companies that were here were very gearhead to gearhead kinds of places. They were predominantly chip companies, so they sold the innards of machines to the people who would put them into machines. And the people who would put them into machines in the beginning had all been military. They were mostly going into defense uses.

[Narrator / Danny Fortson]

That's Leslie Berlin, a historian at Stanford's Silicon Valley archives and author of the book Troublemakers.

[Leslie Berlin]

We were not that far out of World War II. The notion that you were helping the defense of your country was absolutely inextricable from you are doing good for the world.

[Narrator / Danny Fortson]

It was 1968. Bushnell didn't know it at the time, but he was arriving at a pivotal moment. If you had to ascribe a big bang for what we today know as Silicon Valley, the creation event. It happened that year, on December 9, to be precise, at the San Francisco Civic Auditorium. A man named Doug Engelbart, who was an engineer at the Stanford Research Institute, had become convinced that the computer would make the world a better place for everyone. It was a radical idea.

[Adam Fisher]

Engelbart said, hey, you know, these don't have to be military war machines. These can really help people be smarter. They can augment human capacity to coordinate and to think and to work.

[Narrator / Danny Fortson]

Engelbart needed to show the world that his idea wasn't crazy. So he took money from a Pentagon research grant and did just that. He threw together a Frankenstein's monster of disparate hardware to create what we would recognize today in function, if not form as a personal computer. He unveiled his creation at a big annual computer conference in San Francisco in what has since come to be known as the mother of all demos.

[Doug Engelbart]

As it moves up or down or sideways, so does the tracking spot, and the way the tracking spot moves in conjunction with movements of that mouse. I don't know why we call It a mouse sometimes. I apologize. It started that way and we never did change it.

[Narrator / Danny Fortson]

Looking back on it 50 years later, it's amazing what he had kludged together. He had an early version of a word processor, a mouse, there were hyperlinks, Skype style, video conferencing, and he even gave a hat tip to arpanet, a soon to be launched Pentagon project that would become the first few nodes of the Internet.

[Adam Fisher]

Fisher called it the kind of aha moment that turned every researcher's head around and said, oh my God, this is the way forward for computers. This is what the future is going to look like.

[Narrator / Danny Fortson]

The mother of all demos was pivotal for one other reason. Because in the crowd that day, as the official filmographer of the event, was a radical intellectual named Stuart Brand. Brand's presence was critical. He was a former army officer who, after graduating from Stanford, fell in with the hippie movement centered in Northern California. He quickly became one of its most important figures. He drove a tie dye bus around the country filled with hippies who called themselves the Merry Pranksters. The thing about Brand is that he was one of those people. He swam in a lot of different circles. Crucially, he bridged a schism that had been opened up by the Vietnam War. On one side, there were the engineers in their skinny ties and shirt sleeves. On the other, the anti establishment hippies. Brand, who was what one biographer called a human super connector, was the man in the middle, linking those two worlds. He held hacker conferences that brought together environmentalists and writers and commune dwellers and technologists. In short, he ensured that the screw the man ethos that was rife in California was infused deeply into this new industry. Computers.

[Adam Fisher]

It is my belief that the reason Silicon Valley became so powerful in the center of the technological universe. Instead of Route 128 in Boston, where MIT and a lot of the early computer companies were, or in Texas, where Texas Instruments were and a lot of the early action calculator companies were. The reason it happened in Silicon Valley, I believe, is because that hibbe value system about thinking different and DIY and fighting, the man was in Silicon Valley and it wasn't in Texas and it wasn't in Massachusetts.

[Narrator / Danny Fortson]

Bushnell, the farm boy from Utah, was drawn to that sense of purposeful rebellion. Underneath his unkempt hair and shaggy beard, it was incubating. But first he had to get a job. He landed a position at Ampex, a pioneer in digital audio and video recording.

[Danny Fortson]

And one night, fortune intervened to change the course of Bushnell's life. A PhD student invited him to campus to play a game that was only available on Stanford's research computers. Space War, the game he played in Utah back when he should have been studying.

[Narrator / Danny Fortson]

Bushnell was giddy, and not just because he could play his beloved game again. A couple things had changed. One, the price of microchips had plummeted by nearly 95%. And two, a project at Ampex had required him to build a very basic computer using them. When he stumbled upon Spacewar again, a light bulb went off. It took him back to the Lagoon amusement park in Clearfield.

[Nolan Bushnell]

As manager of the games department, I knew that if I put a coin slot on the screen of Spacewar that it would make money, big money.

[Narrator / Danny Fortson]

Bushnell and Ted Dabney, his Ampex office mate, soon left the company. Their plan to be video game designers.

[Nolan Bushnell]

We each put in $250 each.

[Narrator / Danny Fortson]

So 500 big ones total.

[Nolan Bushnell]

500 big ones. We capitalized the company well, and two weeks later we had a rocket ship flying on a screen.

[Narrator / Danny Fortson]

Al Alcorn, a 23 year old engineer at Ampex who had recently graduated from Berkeley, looked on with interest.

[Ted Dabney]

And those are the last of the days where you worked for the big corporation, you had a career, you, you retired there, got a gold watch, a hearty handshake and a pension. That was the plan. But Nolan had this fire in the belly to go be an entrepreneur.

[Narrator / Danny Fortson]

It was an interesting idea, except for the fact that video games didn't exist. Pinball machines were king. Bushnell and Dabney quickly struck their first deal with a consultancy called Nutting Associates. It was the only coin operated game maker west of the Mississippi. Nutting agreed to license their version of Spacewar, which they called Computer Space. It was one of the first ever arcade games.

[Nolan Bushnell]

The company was called Nutting Associates. And after working for them for a year, I realized that they were a bunch of bozos, that they could screw up anything and that I didn't want to really hang my hat with them, which is actually one of the drivers of Silicon Valley. Almost everybody has worked next to somebody who was a bozo who has made a lot of money.

[Narrator / Danny Fortson]

They engineered an exit and agreed to develop another arcade game for Nutting. But they were now free to design games for other people. That was when Bushnell heard about Odyssey, a new game developed by Magnavox.

[Danny Fortson]

Magnavox presents Odyssey, the electronic game of the future.

[Narrator / Danny Fortson]

They had put one in the lobby of a Marriott hotel in Burlingame, a bedroom community just south of San Francisco.

[Nolan Bushnell]

I wanted to see it and I thought it was shit.

[Narrator / Danny Fortson]

The thing was, Bushnell was not the best engineer, nor was Dabney. But they knew someone who was. Al Alcorn.

[Danny Fortson]

In 1972, they took Alcorn out to lunch and pitched him on their new company, Syzygy, which they would soon rename Atari.

[Ted Dabney]

And Nolan offered me $1,000 a month salary, which was. I was making $1,200 a month at Ampex, but what the hell? And 10% of the stock, which I thought was worthless because Stock, what's that? So I started at Syzygy, and Syzygy was me, Ted Nolan, and then Ted's brother and Cynthia Nolan's babysitter that acted as our part time receptionist.

[Narrator / Danny Fortson]

Alcorn joined in June 1972. His job was to make Syzygy's first game. It was astoundingly simple. On either side of the screen was a little white strip, a paddle maybe an inch long, which he could move up and down, hitting a ball back and forth. Video ping Pong, hence the name Pong. It was Odyssey, but better. Alcorn added a scoreboard and remove the ability to change the ball's flight after you hit it. He even added sounds.

[Ted Dabney]

Ted said, I want to hear boos and hisses. Well, I did not know how to create either one of those effects with digital circuits, so I said, I'll tell. Okay, I'll go right back. And I just poked around in the circuit sync generator for tones that were already there and pulled out the sounds. And I said, there it is. There's your sounds.

[Narrator / Danny Fortson]

It took Alcorn about three months to build the first prototype. Over the weekend, Dabney knocked together a crude cabinet and the three of them took it over to a local bar, andicapp's Tavern in Sunnyvale. They poured themselves a couple drinks and watched.

[Danny Fortson]

Did you walk out of there feeling

[Narrator / Danny Fortson]

like, ah, we're onto something? No, no, no.

[Ted Dabney]

I walked out of there saying, I wonder how long this is going to work before it breaks.

[Narrator / Danny Fortson]

It turns out not very long. Within a couple weeks, the owner of Andy Capps called. The machine was broken.

[Ted Dabney]

So I went out there after work to go fix it. It had a Laundromat coin box on the side. So I opened that up. What you would do is open up the coin box and flick the micro switch and give yourself a free game to see why it, you know, see what was going on. And the thing worked fine. The problem was open the coin box up and all these coins fell out because it was completely overloaded with coins. So I did the Split, took our share, back to work the next day and dropped upon Nolan's desk. I said, here's the problem. The goddamn thing's making too much money. Nolan goes, really?

[Narrator / Danny Fortson]

Pong was a hit, and it was the start of something big.

[Leslie Berlin]

Atari, in some ways, was the company that taught people how to interact with their school. Before Atari, screens were a one way transmission. People would sit in their houses, they'd watch the tv. There was nothing they could do to change the TV except turn the dial, literally to change the channel.

[Narrator / Danny Fortson]

Bushnell decided that rather than license this out to somebody else, they would do it themselves. Mind you, they had zero manufacturing experience. Alcorn and Dabney objected, but Bushnell overruled them.

[Nolan Bushnell]

Well, we found a cabinet maker that would do our cabinets. He was doing kitchen cabinets and pong machines. And so he shipped down the cabinets. We'd put a TV set. We bought TVs wholesale from a distributor in San Francisco. Take the back off, modify them, hook them up, and then we created a circuit board, had people stuff them and then test them, put them in together and ship them out. We sold Pong games for nine hundred ten bucks.

[Narrator / Danny Fortson]

For a big stand up machine.

[Nolan Bushnell]

For a big stand up machine. And in their lifetime in coin drop, they'd make 20 to 50,000 bucks.

[Danny Fortson]

What?

[Nolan Bushnell]

Yeah.

[Narrator / Danny Fortson]

Atari was off to the races. The thousand square foot headquarters they had rented quickly became too small. They moved into an abandoned roller rink where managers would skate around to check up on progress. They were churning out 100 pong machines a day, and it still wasn't enough. And what's more, they were doing it with a ragtag workforce that no one else would dream of hiring.

[Ted Dabney]

We had a lot of colorful people, shall we say?

[Narrator / Danny Fortson]

The idea that video games could be the start of something was gaining traction. Which brings us back to the human super connector, Stewart brand. In December 1972, just a month after people began pumping quarters into the first Pong machine, Brand wrote a story for Rolling Stone magazine. The title, spacewar. The piece lifted the lid on a raggedy bunch of programmers and hackers. He called them computer bums who spent their days scheming about how to change the world with computers and spent their nights blowing each other to smithereens in space war. It's a fascinating time capsule that captures the earliest days of the industry. Here's how it opens. Ready or not, computers are coming.

[Danny Fortson]

To the people.

[Narrator / Danny Fortson]

That's good news. Maybe the best since psychedelics at Atari. The computer bombs were just beginning to stretch their wings.

[Danny Fortson]

It was a wild place Bushnell had Coors on tap in his office and

[Narrator / Danny Fortson]

held meetings in his hot tub.

[Adam Fisher]

There was a policy that you could smoke as much pot as you want in the factory, but you just had to meet your quota. And then there'd be big parties. It was wild and free, freewheeling. And he really, really tried to, you know, be the UN Corporation and succeeded for a while.

[Narrator / Danny Fortson]

And then there was Dr. Wolfgang Tittleboob.

[Leslie Berlin]

The craziest thing was a little short story in the Atari company newsletter. The protagonist of this story was the famed Swedish breast ologist, Dr. Wolfgang Tittleboob. And Dr. Wolfgang Tittleboob had built a machine that grew women's breasts to the sizes of various fruits, according to the author of this short story. And the women would stay with this machine until it sucked them into it and killed them.

[Narrator / Danny Fortson]

For better or worse, Bushnell's laissez faire approach became a model that Silicon Valley adopted. And for a time, it seemed to be working.

[Al Alcorn]

Yeah, there were parties and people had fun. But I point out that we did do some cutting edge engineering, and we made some pretty impressive products.

[Ted Dabney]

We couldn't have been partying all the time. We couldn't have been too drug addled, you know.

[Narrator / Danny Fortson]

Behind the curtain, however, Atari was an utter chaos. It was a couple years into the Pong revolution and the game was running out of steam. They'd already made Pong doubles, Super Pong, Quadra Pong. The ball and paddle genre was also drowning in copycats. For every Pong that Atari sold, another five knockoffs were shifted. It was very easy to reverse engineer. Video games are also a hits business. In Atari's case, the pressure was always on to come up with the next game that would keep people dropping quarters into their machines. It turns out this was really, really hard. And Bushnell's management style wasn't helping.

[Al Alcorn]

Nolan has the attention span of a golden retriever.

[Ted Dabney]

God bless him.

[Al Alcorn]

You know, he's got a great new idea and three or four shitty ones,

[Ted Dabney]

you know, every week or so.

[Al Alcorn]

And so he would go into the engineering. This is back in 73. He'd go into the engineering lab and see a project going. There'd be a team of one or two engineers and a tech, and he would get bored with that. Oh, stop that.

[Ted Dabney]

Do this.

[Al Alcorn]

My secretary. I got a pager. And the minute Nolan walked into the engineering lab, I'd get paged. So I'd go into the engineering behind him, and I'd undo whatever Nolan did.

[Narrator / Danny Fortson]

Bushnell admits he didn't know what he was Doing it was feast or famine.

[Leslie Berlin]

The paychecks would be cut on a Friday and people would run to the bank because they just wanted to make sure they would actually go ahead and be able to deposit them. And Atari's business was just very up and down, up and down, up and down.

[Danny Fortson]

By late 1974, just two years after starting the company, Atari was in deep trouble. Bushnell had fired Dabney, and Alcorn had taken a leave of absence to take care of his mother, who was very ill. He brought in a new team of executives who he hoped would professionalize the company.

[Ted Dabney]

Nolan hired some players out, of my opinion, B team players out of Hewlett Packard. A manufacturing guy, a marketing guy, and he got an engineer out of Ampex. The short of it was they just ran the company to the ground. They screwed up in every aspect. The banks stopped loaning us money. I remember Nolan at one point was in tears. So the company was going to fail. It was dying. It was going to die because these guys had ruined our accounts. They had made a machine we couldn't sell. We were out of production.

[Danny Fortson]

Alcorn came back from sabbatical and helped right the ship. The executives that Bushnell parachuted in were ejected.

[Narrator / Danny Fortson]

And it wasn't long before Bushnell had his next big home Pong. A gaming console that you could plug into your tv. Alcorn, the man charged with turning that dream into reality, thought it was impossible. Basically, he'd have to miniaturize the stand up arcade game into a shoebox. He worked on it for months, tinkering with the design of a powerful new chip to make it work.

[Ted Dabney]

And I remember when that chip came back and we put it in the prototype circuit to see if it was going to work, and it pretty much worked. It was like. That was a weird feeling. It was felt like a dog chasing a car. What do you do when you catch it? We had no plan beyond that.

[Danny Fortson]

They struck a deal with Sears, America's biggest department store, and made it into their 1975 Christmas catalog, which was a very big deal.

[Narrator / Danny Fortson]

Home pong sold like hotcakes. But they had been down this road before. The need for a new hit was already beckoning. And every new game meant that they had to custom build a new chip. It was an arduous, months long, risky

[Danny Fortson]

process, which paved the way for an even bigger idea. Bushnell wanted to put an entire arcade in your living room.

[Narrator / Danny Fortson]

A new console called the Atari 2600 or the Atari VCS would take cartridges so that instead of one game you could play as many as you wanted. It sounds basic today, but back then, it was a bold idea. Instead of creating a new chip for every new game, the guts of the machine stayed the same.

[Adam Fisher]

You just went and bought cartridges every time you wanted a new game. And that was the first software industry in Silicon Valley.

[Nolan Bushnell]

Atari presents its newest star vanguard.

[Commercial Voice / Advertiser]

Just like the Arcade Sick Zone. Let me show them the mountain zone. Just last night, I was lost in the jungle with Pitfall Harry, surrounded by giant scorpions and man eating crocodiles.

[Narrator / Danny Fortson]

Back home to his lily pad, the

[Commercial Voice / Advertiser]

new Frogger home video game. Bring it back to your pad.

[Narrator / Danny Fortson]

Having created one industry in video games, Atari was about to do it again in software. This was going to be very expensive. Atari would need help. And Bushnell was burning out. His marriage fell apart. He was exhausted. He went in search of investors and was introduced to Warner, the New York media conglomerate. Discussions of a cash injection quickly turned into takeover talks. They culminated in 1976. Warner sent out the corporate jet to California to pick up Bushnell.

[Leslie Berlin]

They knew how to work with consumers. They knew how to get into people's minds and into their homes. And that's just not something that Atari ever could have done on their own.

[Al Alcorn]

We had a staff meeting in the

[Ted Dabney]

middle of the day, called really quickly at the hot tub. Okay, I'm happy. I'll go along with that.

[Al Alcorn]

And Nolan and Joe had just come back from Warner, and they announced that

[Ted Dabney]

Warner was going to buy us for $28 million or so. And all of a sudden I'm going because I'm waiting for the company to fail. Every year we're rolling the whole company and it's going to blow at some point.

[Al Alcorn]

And all of a sud. There's actual value in this thing.

[Ted Dabney]

And I'm starting to do the little math.

[Al Alcorn]

How much stock do I have?

[Ted Dabney]

And like, oh, my God, I'm going

[Al Alcorn]

to be a capitalist.

[Narrator / Danny Fortson]

Alcorn stood to cash in almost $2 million. Bushnell was in line for much, much more.

[Nolan Bushnell]

I was a farm boy from Utah, and all of a sudden I was going to have more money than I'd ever dreamed of.

[Danny Fortson]

How much money are we going to have?

[Nolan Bushnell]

26 million. Which sounds like nothing now, but I

[Narrator / Danny Fortson]

mean, it's kind of.

[Danny Fortson]

It sounds like nothing, but still, in

[Nolan Bushnell]

those days, 26 million is probably equivalent to a couple hundred million today.

[Danny Fortson]

Yeah.

[Narrator / Danny Fortson]

Wow.

[Danny Fortson]

And you're what, 30, 32? What's not to like?

[Nolan Bushnell]

What's not to like? Exactly.

[Narrator / Danny Fortson]

Bushnell indulged in the good life. He bought a Learjet, a Condo in Aspen, a 41 foot sailboat. And Alcorn bought a ranch style home in Portola Valley with views all the way to the bay where he still lives today. He bought a Cessna and a vintage Shelby Cobra sports car. The Warner executives were bemused by this band of shaggy Californians, but they couldn't argue with their creation. It worked its marketing Magic and the 2600 went on to become a raging success. We had one in my house. I spent hours playing Donkey Kong with my brothers and begged my parents for the newest games as they came out.

[Adam Fisher]

Atari was making more money than all of Hollywood combined. It was huge.

[Narrator / Danny Fortson]

While the 2600 was an unquestioned success, Bushnell, Alcorn and the rest of the Atarians chafed under their new owners. Rivals caught up coming up with their own consoles. Atari, meanwhile, branched into computers, attempting to sell its own PC, which included software for games and even tax preparation. The Atari magic was dying.

[Danny Fortson]

In 1978, Bushnell clashed with Warner's board. They forced him out, replacing him with Ray Cassar, a textile executive with a penchant for tailored suits and tight financial controls.

[Al Alcorn]

And he had a Rolls Royce chauffeur driven Rolls with his own parking spot. We don't have private parking spots in Silicon Valley, you know.

[Danny Fortson]

Alcorn lasted a few years before he too left.

[Narrator / Danny Fortson]

The culture clash was immense. In a later episode, we'll cover another story where Warner got the worst end of such a deal. And no, it's not aol.

[Danny Fortson]

Bushnell was quickly on to his next company, Chuck E. Cheese.

[Commercial Voice / Advertiser]

When my mom asked me where to go for my birthday, I said Chuck E. Cheese's.

[Narrator / Danny Fortson]

And it was basically an indoor amusement park. It had ball games like the ones Bushnell used to tinker with. But it also had arcade games, lots of them. For Bushnell, the founding father of the video game, the idea was very simple. Making games was hard. Collecting the cash that they generate, that was easy.

[Nolan Bushnell]

I actually made more money personally in Chuck E. Cheese than I did. Yeah, really, I was smarter. And they sold $15 million worth of my personal stock.

[Narrator / Danny Fortson]

You might be wondering what happened to Steve Jobs in this story. Not long after he started at Atari, Jobs disappeared to India. He told Alcorn he was off to meet his guru. Atari helped him on his way. They paid for a one way ticket to Germany in exchange for Jobs handling an issue with one of their suppliers. From there, it was a shorter trip to the subcontinent. When Jobs came back, he was ready to change the world.

[Al Alcorn]

About three months later, Ron Wayne comes in and Says, hey, Stevie's back. And I go, steve who?

[Ted Dabney]

Steve Jobs.

[Al Alcorn]

Oh, yeah, I remember him. Yeah, bring him in. And Steve, I wish I had a camera.

[Ted Dabney]

I was an amateur photographer, but I never thought any of this stuff would

[Al Alcorn]

be of any interest. He comes in wearing a saffron robe, shaved head, barefoot like a Hare Krishna,

[Ted Dabney]

and gives me a Baba Rama Dos book, be here now. And says, can I have my job back? And I go, sure, yeah, why not?

[Al Alcorn]

And that's when he and Woz had

[Ted Dabney]

this stupid idea for a home computer. God damn it.

[Narrator / Danny Fortson]

He and Wozniak had been inspired by their little success with breakout, but they wanted to take it a step further.

[Adam Fisher]

Woz wanted a personal computer because he wanted to do breakout again. But he didn't want to make breakout in hardware. He wanted to make it in software. That is, he wanted a general purpose machine where he could write a program that simulated breakout instead of a single purpose arcade game.

[Narrator / Danny Fortson]

That's right, the kernel of what would eventually become Apple started with that few marathon days at Atari. So it was only fitting that the first people Jobs and Woz went to looking for cash for their little startup were Bushnell and Alcorn.

[Nolan Bushnell]

In fact, I had the opportunity of being the first investor in Apple, and I turned down a third of apple computer for $50,000. I regret it.

[Danny Fortson]

Yeah, yeah, of course, of course.

[Narrator / Danny Fortson]

Do you remember why?

[Nolan Bushnell]

I didn't think that Steve was a good chief executive at that time, and I think that he wasn't.

[Narrator / Danny Fortson]

I think. I mean, you were proven right in that sense.

[Nolan Bushnell]

Yeah.

[Narrator / Danny Fortson]

Alcorn passed, too.

[Ted Dabney]

Yeah.

[Al Alcorn]

I regret I didn't buy this founder stock in Apple.

[Ted Dabney]

Steve Jobs offered me. I said, I got enough wallpaper, but I'll take a free computer.

[Al Alcorn]

So I still have the computer if

[Ted Dabney]

you'd like to see it. But I could have bought a lot more stuff with the. Imagine, you know, founders stock in Apple, in the Valley.

[Narrator / Danny Fortson]

Virtually everyone has a story like this, how they passed up an opportunity to invest in the next Google or Facebook or Microsoft. But neither Bushnell nor Alcorn are ones to rue missed opportunities. Bushnell has, by his own estimation, lived a fabulous life. He has eight kids made and lost millions. And he's never stopped tinkering. He invented a personal robot called Bob, short for brains on board. He and Alcorn invented a driver navigation system called ETAC in 1980, five, years before GPS. But none of these have made a dent like Atari did.

[Adam Fisher]

The video game will be remembered long after the personal computer is forgotten and made, and long after Even the what we know as the cell phone is forgotten. And it was really the first cultural product that came out of Silicon Valley. And it was the first company to have like a young wild man as a CEO.

[Danny Fortson]

Before Jobs, before Zuckerberg, it was Bushnell, the carnival barker from Utah who turned war machines into games and changed Silicon Valley forever. Next week on Tales of Silicon Valley,

[Narrator / Danny Fortson]

we'll travel up the road to San

[Danny Fortson]

Francisco to tell a different story.

[Narrator / Danny Fortson]

It's a tale of a couple who, like Bushnell and Alcorn, came along with an idea at the right place and the right time. They caught lightning in a bottle, failed, but still walked away with the GDP of a small nation.

[Tom]

We had a call from MySpace. I remember this weird conversation with Tom Tom from MySpace. They made a decent offer. I think they offered half a million in MySpace stock and half a million in cash. Back then, when there was two people working in 120 square foot office, it felt decent.

[Narrator / Danny Fortson]

Tales of Silicon Valley was written and narrated by me, Danny Fortson, with production by Chica Ayres at Rethink Audio. Matt hall is the executive producer for Wireless Studios. It was a Wireless Studios production for Times Newspapers. And one more thing. If you enjoy this series, head over to my other podcast, Danny in the Valley, where you can hear interviews with everyone from Bill Gates and Marc Andreessen to the anonymous startup founder working on what they hope will be the next big thing. That's Danny in the Valley. Wherever you get your podcasts. Sam.