How I Built This with Guy Raz - Atari & Chuck E. Cheese's: Nolan Bushnell

Episode Date: February 27, 2017

Before he turned 40, Nolan Bushnell founded two brands that permanently shaped the way Americans amuse themselves: the iconic video game system Atari, and the frenetic family restaurant Chuck E. Cheese's. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with a place with a new space. all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. We started out essentially designing this little game-looking thing out of wood and painting it so that it looked like plastic, but it was really wood.

And our idea was to take it to the toy show in New York. And you show this at the toy convention and were people like, this is amazing, this is going to change the world. We sold zero. Brahmin PR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, how Nolan Bushnell took his love of arcade games

and built an industry to, industries, in fact, that shaped the childhoods of millions of Americans. If you grew up in the U.S. in the 1980s, then you were probably playing a little bit of this. And then, when your birthday rolled around,

maybe you celebrated, you know, like this. Okay, so these are two very iconic sounds. Chuckie Cheese, the pizza joint with the games that kept you distracted for hours, and an Atari video game, which could frankly distract you for a

lot longer, days perhaps. But what's incredible is that both of these childhood experiences were created by the same person, by the same guy, by Nolan Bushnell. He founded Atari just a few years out of college, and he started Chuck E. Cheese just a few years after that. And for Nolan, it all began when he was a kid in Utah in the 1950s, and he learned a very simple lesson about business. At dinner one night, mom said, boy, we've got so many strawberries. We're not going to be able to eat them all, maybe we'll give them away. I didn't think that much about it. The next day I happened to go to the grocery store with her, and I saw that in the store, in the grocery store, they were selling strawberries for 50 cents a basket. And I looked at that,

and I said, hmm, that's what the market is. So I went home, found all the extra little baskets that were around the house, went out, picked a bunch of strawberries, and went up and down the street selling the strawberries for a discount off of what the grocery store was selling. And I sold out in an hour. I mean, I don't even think I made it all the way to the end of the block. And all of a sudden, I had more money than I would make on allowance and mowing lawns for a year. Nice. A young entrepreneur.

Yeah. And I read that, like, later on, when you were in college, college, you worked at like carnivals? That's correct. I started out actually on the midway selling balls to knock down milk bottles and guessing people's ages, weights, and occupations, and, you know, being a carney. Like shouting at people like, come on down, throws them, yep. You got it. And I found out that I was kind of good at it. How do you get into arcade games? Does that that start at the carnival? Yes. That was sort of where I got indoctrinated because you end up, a lot of people don't realize how much coin operated games earn. It's actually quite surprising.

And so when you look at each of the coin operated games as a little business, typically you go to Joe's Cafe and say, can I put my machine in your location, and then I'll split the income with you. These locations would very often do $100 to $200 a week. And at that time, these are mainly like pinball machines, right? Pinball machines. There were mechanical games, but yeah. No video games at this time.

We're talking about the late 60s. Correct. Yeah. Then I was working summers at the museum park, winters, pursuant. an engineering degree at the University of Utah. And wow, one day I saw Steve Russell Space War. What's that? A guy named Steve Russell at MIT programmed this game called Space War, and I was mesmerized by it. Let me put a little more context. My fraternity brother says, I got to show you something that'll knock your socks off. He says, meet me at one o'clock at the Merrill Engineering Building.

I said one in the afternoon, and he said, no, no, at night. And so one o'clock, show up at the Merrill Engineering Building, and there was space war. He handed me a box that had four buttons on the top, rotate left, rotate right, fire, and hyperspace. Those were the controls, and we played until literally five in the morning. And I thought, wow, if I could put this game in my arm, arcade, it would make money. But then you divided 25 cents a play into a half a million dollar computer and the math didn't work. But I did think to myself, maybe someday the cost will come down and this would be cool. So you graduate college, I guess, in like the late 60s,

like 68, 69, something like that. Yeah. And what did you do? Did you, you're in Utah, did you start a business or did you decide to move? Like, where did you go? What happened? my wife's sister lived in Silicon Valley and I was a little bit of an anarchist at that time you called me a lapsed Mormon or failed Mormon or whatever and I kind of wanted to get out of Utah and see the world a little bit and so California seemed like a cool place to go so that Thanksgiving we drove to California stayed with my wife's sister and I papered the with my resume and got a job at Apex. And Apex was a like tape, right?

They made like electric, like... They invented the videotape machine and the instant replay. I worked there for two years, but about 18 months in, I discovered a computer that looked like it was fast enough to do a video game. So you're thinking, I'm going to start something? It started out a little bit as a research project, and then I said, yeah, I'm going to start something. And in fact, it was almost prescient that when I was driving down the Sierra's towards Silicon Valley, I told my wife, I said, you know, in two years, I'm going to start my own company.

I just knew that that was kind of on my trajectory. I didn't know at that time it was going to be a video game company. I just thought I'd do it, you know, and in the back of my mind, and I always kind of had this entrepreneurial it. I think I've always had it. since eight. So how did you start this computer company, this like game company? My office mate was a guy named Ted Dabney. This was at Ampex, and I said, I'm going to start a company that's a form of partnership.

We had this computer, and the computer was mind-numbingly slow. And in order to make the economics work, the computer cost like 5,000. The coin operator games at the time needed to be less than $5,000. $1,500. So the way I was going to do it is I was going to timeshare that one computer across three screens with three coin slots. And I felt that I could get to the $1,500 that way. So you were trying to design basically what would become an arcade machine, like a giant machine that would be installed somewhere and people would put in a quarter and they could play a game. Exactly. Were you trying to do like a knockoff of space war?

Yeah. And where did you install this arcade game? Where was it? We put it in a bar called the Dutch goose. It was in Menlo Park. It was right next to Stanford University. The game was a smash hit at the Dutch goose. I licensed the game to a company called Nutty Associates

and realized that it did really well in college campus. So, I mean, it sold a couple of million dollars in units, which was to me a big hit, but to the industry was kind of a mediocre flop. But I had a 5% royalty, and so that was, you know, $100,000, which was a massive amount of money. Put this in context, I came to work at Ampex for $825 a month as an associate engineer. So how did you fund the company from the beginning? Did you have to go to outside investors and ask them for money? No. This was also at the time when venture capital was just getting started. And so Ted put in $250, I put in $250 and that's all the money that went into Atari.

Wow, $500 to start Atari. And your first game was a flop. So how did you guys, how'd you guys go on to do the next thing? Well, then came Al-Walkorn, which was our first technical employee, because we were growing and we needed to get some more talent. And I gave him a simplest game I could think of, which was a ping pong type game. When you think you're going to be in the coin operator video game, you write down every sport you can think of, every construct. And ping pong was one of them. And he went off and he basically had the thing. working in one or two weeks. I mean, it was really quick. And we are talking about what, of course, became Pong, which was just like two lines with a

ball bouncing around a screen between those lines. Correct. And it turned out to be, I thought it was going to be a throwaway. Yeah. There was just a training program. And it just turned out to be fun. We were staying after work to play the damn game. And then I get the idea. Ah, maybe Bally wants this game. Bally, who's also a big coin-operated game player out of Chicago. And so I get in the airplane, fly to Chicago.

I have a little mock-up that I can, a portable unit, and I show it to them, and they don't like it. Because it's a two-player game. And the coin-operated world doesn't allow for a two-player game if there's not a one-player game at that time. That was sort of written in stone somewhere in the annals of coin-op worlds. And I'm kind of dejected. On the way to get on the airplane to come back to California, I get a call from Alcorn, who was the engineer. And they had a service call because they had put a basic pawn game in a cabinet

and put it in a bar. And the game became so popular that it filled up. up the coin box so it couldn't take any more quarters. So I think to myself, maybe I don't want Bally to have this because the math were so outstanding that the machines could literally pay for themselves. I mean, the game was earning almost $300 a week. Wow. And the total cost that we had was about $300.

So you're thinking maybe we should just make these machines and license them ourselves. Exactly. So is that what you did? So that's exactly what we did. I looked at all the cash we had, and we had enough cash to build like 12 units. You know, the minute I got off the airplane, I submitted the order for the parts, and we were off to the races. I get on the phone. I have literally orders coming in from all over the nation.

And, of course, I mean, we think about Pong today, and it's such a basic, you know, rudimentary, game, but in the context of the early 70s, this must have been revolutionary. Absolutely. To put it in context, people would come to me and say, how does the TV station know that I turned the knob? And clearly their construct was that if there's something on a TV screen, it came from a studio somewhere. Yeah. And so that was kind of the construct that we were dealing with. But, you know, there's actually some very interesting psychology looking back on it. And one of the reasons that I think Pong was such a massive success is that it fed into the narrative of what was going on at the time.

You know, just after the Summer of Love, the hippie movement, women's liberation was starting to rear its head. and Pong by its structure made it lady's choice because it became very acceptable for a woman to tap a guy sitting at the bar on the shoulder and say, I want to play Pong, would you like to play? I'll buy. Who knew Pong's role in the history of women's liberation? Exactly. So, Nolan, where companies just calling you or establishment is just calling you saying, we want a machine. and we want a machine. Is that what was going on? It was. And so

our big problem then is we had no factory, we had no systems, we had no procedures, we had no employees. I mean, we had, there were four of us. And you guys were all in your like mid to late 20s? Correct. Okay. And in fact, Al, I think, was 23. He just graduated from Berkeley. Wow. And we had a thousand square foot roll-up,

which we thought was huge for the six of us. This was in what town was it? This was in Santa Clara, California. Okay. Then we found out that we had a real problem. We could build these games literally in two days. Like literally by hand, not in a factory? Yeah.

But we had neglected to buy shipping cartons. So we couldn't ship them on common carrier. And so to solve that problem, we bought an old furniture truck and started making deliveries without cartons to Los Angeles. You were driving down the 101 or something? Yeah, yeah. But slowly we were able to get procedures in place. We were able to get systems.

And how we financed the company was we would sell for cash, the machines. We had 30-day terms. Most of our parts, we had 60-day terms. So we'd get the cash literally 60 days before we had to pay for the parts for that. Yeah. And how many, at its height, you know, how many of these arcade pong machines were out there in the country? About 150,000. Only of which, Atari only did about 35,000 of them. We got massively copied. Wait, you couldn't prevent these companies from basically stealing your idea and copying you? I didn't have patents yet. In those days, patents were just slowboat for China.

So basically, you could do nothing about these copycats. Nothing. Wow. And when we were copied, we knew we didn't have as efficient of manufacturing. Yeah. We knew we didn't have as much money. We knew we didn't have as good a relationship with the distributor chain that the competitors that had been dealing with them for 20 years had. And so I felt that my only tool was innovation and understanding of the technology because copying the technology and creating the technology was different.

So you were still not really profitable. You were just kind of breaking even. Cash was always our limitation. And I tried to get, you know, investors, but everybody thought that video games were kind of flaky. They thought, who's going to pay for this thing? Yeah, exactly. So how did you even come up with the idea that maybe we should sell this to people and they could do it at home? One day we figured out that there was a new semiconductor technology called N-channel M-OS. And these chips, once they were designed, you could buy them for five bucks. It occurred to us that we could put Pong on a single chip and hit a price point that would sell to the consumer. And how did you even begin to think of ways to do this? Because, I mean, you're talking about, like, building a cabinet for a giant arcade.

system, like how do you then shrink that down into something that would fit in someone's house? Well, once you had it on a single chip, then it was just a matter of putting two knobs on a piece of plastic. We started out essentially designing this little game-looking thing out of wood and painting it so that it looked like plastic, but it was really wood. And our idea was to take it to the toy show in New York. This is a toy convention in like 74 or 75?

Yeah, it's 1975 spring. And you show this at the toy convention and were people like, this is amazing, this is going to change the world. We sold zero. What? And it was a great demo and everything. But what we didn't know is that the toy business at that point in time did not sell anything that was more than $35.

And how much were you selling this Atari console for? 79. Which in 1975, that must have been like fortune. It was a lot. And so we thought, boy, you know, we spent all this money to get this thing developed. But all our neighbors wanted one. And they were happy to spend $79. Did you leave that toy show feeling dejected?

Like you would this. Failure. It was abject failure. You must have been pretty depressed, I guess, after putting all this money into this thing. You don't, I'm not easily. impressed, but I'm very easily challenged. And I said, you know, there's something not right here. You know, we just haven't found the right guys yet. What do you mean you hadn't found the right guys? The right distribution channel. So basically you're thinking these guys are wrong. I know this is

going to work. Exactly. Exactly. I said, these guys are missing a wonderful opportunity. And so we were thinking Radio Shack. I was thinking TV dealerships. I was thinking all kinds of stuff. And then Then my head of sales thought about Sears sporting goods. And the previous year, Sears Sporting Goods really focuses on the inclement weather family room. Okay. And they sell pool tables and ping pong tables and things like that. Ah. The year before, they had made a consumer pinball machine for $200.

dollars and they sold out. So my sales guy said, maybe these guys. And so he calls up the buyer at Sears sporting goods. He says, oh, that's kind of interesting. The next day, he was on our doorstep. And they were based in Chicago at the time? They were based in Chicago. So Sears buyer comes to, flies out, comes and says, I want to see what you're talking about. Exactly. And we actually had to scramble because we didn't realize he was coming. He didn't say, hey, I'm showing up tomorrow. He just showed up. Wow. And so we were in the conference room after that. He says, okay, yeah, I think we're going to do that.

How many can you build? We didn't have a clue. Right. Because we were building coin operated games, you know, where a big run was $5,000. Right. We kind of do a huddle. And I said, let me check on that. And so we did a huddle outside the conference room.

And I had my manufacturing guy there. And he says, well, you can probably do $25,000. And so not wanting to be sold. sourced. I said, we can do about 75,000. You go back to the Sears guy and say we can do 75,000. After your own guy tells you, we could do 25, yeah. Okay. Yeah, I'm a Carney. I'm well trained. Exactly. Right. Okay. He gives us an order for 150,000. Wow. And he wants them delivered by Christmas by, you know, October, November. Well, you've got basically six months to... To build a factory, to train the person. Snell to sort out the technology, none of which we'd done before.

All right. So is anybody in Atari freaking out at this point? Everybody is. Nolan Bishnell, founder of Atari, when we come back, after the freak out, the real work begins. Plus, a side hustle that brought together pizza, games, and a rat. I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz.

So it's 1975. Nolan and his partners have gotten a huge order from Sears to make a consumer version of Pong. And so they need to figure out how to build a manufacturing chain virtually overnight. We sit down and we say, okay, if we were to build 150,000, how would we do it? And then the big question, how much money are we going to make after we spend all this money on the factory? and we realized that we didn't earn enough. And so I call it the serious buyer and say, I hate to do this to you, but I'm going to have to up the price.

What was the price that he wanted to pay? We were quoting a retail price of 59, and we decided that we needed an extra 20 bucks per unit. And he said, that's okay. I can do that. Then I went through the math, and there was no way that I had enough capital to put in the conveyor belts,

to rent the extra facility, to buy the parts. And I calling them, and I said, you know, I really appreciate the order, but I said, I can't fund this. He says, oh, don't worry, I'll introduce you to Sears Bank. And so Sears Bank set up a bonded warehouse at the end of the conveyor line. And so as soon as a consumer pong dropped off the assembly line, they would advance us 80% of the contract price with Sears. and all of a sudden it worked. I mean, the Atari console that you were building only played Pong, right? Correct.

And did you get it to them in time, 150,000 consoles by Christmas? We did. And in fact, I think that year we sold almost 180,000, and they took them all. Wow. I mean, at this point, I guess you guys invent the home computer game phenomenon. Exactly. And then how did you go from making work? one console that played one game to a like a home video game system that played a bunch of games.

Well, we realized at that time when we were doing the one game $70 that this was an unsustainable business. And then a magical thing happened. A semiconductor company in Silicon Valley came up with the microprocessor that they were willing to sell us for $8. And all of a sudden, our eyes were opened and we said, we can do Von Neumann architecture program-based, put cartridges with ROMs in it, and we can have a program game. That microchip allowed you guys to basically create a cartridge system that most of us came to know, right? Exactly. You know, it was just a magic time for technology. Silicon Valley at the time, you know, you.

you were as likely to learn about a new technology standing on the sidelines of your kids' little league team as you were at any other time. And several times I'd be talking about a technical problem we were having with one of the other parents. And they'd say, oh, yeah, we've got a chip like that in development. Would you like a prototype? It's not going to be really on the market for six months. And I'd say, yeah, we don't need production quantities for six months. You're not going to get that if you're a technology company in Oshkosh. Were, I mean, were there many companies in Silicon Valley at the time that we're focusing on entertainment?

I can't think of another one. Wow. We kind of always felt like we were the sleazy company who had focusing on fun instead of all this, you know, how many more megabytes can we get on a hard drive. I mean, where, like the serious companies, were they, would they look down on you? We liked our rebel status. And we were a rebel in several ways. First of all, we were all young. I was the youngest CEO, and people didn't know what to think about a CEO in their 20s.

I mean, that was just off the radar. And I actually feel like I paved the way for gates and jobs and some of the idea that you can be young and still a serious businessman. But more than that, we got known as a real party culture because instead of bonuses, since all our employees were in their early 20s, we'd have a beer bust on the back dock. And you'd get, you know, $100 with a pizza and two kegs, and you had a party. And that was totally unheard of. And, of course, we had a game room and we had ping pong table, stuff that Silicon Valley kind thinks is dear rigor and necessary now.

Yeah. It was very, very different. And then we didn't have a dress code, and we didn't have time clocks. We had this attitude that everybody knew what they needed to do, and they were adults, and they could wear what they want, and they could come and go when they want, and we weren't big brother. So we tried to make this meritocracy in which outcome was the only thing. thing we counted. As a young CEO, do you think you did a good job? Were you, you know,

were you, were you a good manager of people at the time? So, so. I think I was a good manager of people. I think that I always had a little bit of an inferiority complex in that because of my age, I felt a little bit like a poser, which was okay with me on some level because of my carnival background. But at the same time, I always felt that I didn't know what the hell I was doing. And what I didn't realize is most of the big companies don't know what the hell they're doing either. Right, right. I wasn't mature enough to understand that all companies are somewhat screwed up. But you, I mean, you clearly, like, had an eye for, you clearly had an eye for hiring interesting people. I mean, I think anyone who knows a little bit about the story knows that Steve Jobs and Steve Wozniak worked for you.

Steve Jobs worked for me, and he was a technician in quality control, and he was really good at it. I can remember him coming in and saying, Nolan, if you allow these kinds of solder joints, you're going to have failures in the field that will ruin your reputation. Could you already tell like that we think of him as a sort of mercurial kind of impetuous leader? Was he like that even as a, you know, 20-something kid? He was opinionated, but he was never wrong. in his opinions. You didn't have to worry if you empowered Steve to do something. It happened.

I mean, Steve had one speed. It was full on. And so he got the Apple going and he came to me and says, I want to start this company. And I'm going to be leaving. Do you want to be my first investor? And I'll give you a third of the company for $50,000. And you said, of course. Yeah, I did not say that.

And I've regretted it. But, you know, anyway, it was fun times. You know what? What's a few billion? Exactly. It doesn't matter. It doesn't matter. It would have ruined my life.

It would have made you totally insufferable. Yeah, and I was already insufferable. So thank goodness you did not take that deal. Exactly. So, all right. So you're running Atari. It's doing really well. And then what?

You decide to sell it, I guess, right? So I felt that we had to take the company public to raise. $15 million, which seems paltry now, but that was all the money in the world to us at the time. And the market hiccuped, and they said, there's just no way we're going to do it. This is the late 70s, right? This was the summer, summer of 76. Right. And all of a sudden we had Christmas coming and I knew I didn't have enough money, even with Sears,

to be able to get this new massively wonderful product into the, the marketplace. This is the Atari console with the cartridges, right? Yeah, that's correct. So without an ability to do that, I said maybe it's time to get a corporate partner. And so I started dialing for dollars from corporate partner. Warner Communications showed up and said, we'll not only put up the money, but we'd like to buy you. And we'll pay you money and we'll put money into the company and you'll get this big royalty stream and we understand creatives and we're going to link arms and march into the sunset. And what was it?

How much were they offering you? 28 million bucks. Which is, I must have been a huge amount of money at that time. Yeah. I mean, you know, I was a farm boy from Utah all of a sudden. I mean, you could buy a lear jet in those days for a million dollars. So you took the money? Took the money.

Yeah. Yeah. And so what happened? So you continued to work for Atari at that point? Correct. After the sale, I was not as rigorous as I had been. I started taking care of my personal life instead of my business life. Right.

And I found that there were a lot of decisions that were being made that were really pretty toxic, I thought. Decisions about where to take the company? Yeah. And slowly, we brought in a... president of consumer who had all the hierarchy, you know, reserve parking places and executive dining rooms and all the things that were anathema to me. I thought that... Yeah, you're going from keg parties on your loading dock to an executive dining room.

Yeah, and I just thought that was so wrong on so many levels because I don't think you need to arbitrarily create an us versus them mentality in your company, you know? And one of the things that happens when you're owned by a New York company, they think that your laid-back style is that you're not working as hard. And they think that people that come in at 10 should be fired. And so all of a sudden there was this clash of cultures that got to be really ugly. And ultimately, they got tired of me and I got tired of them and I was fired. Wow. So between the time that they bought you and the time that you were ousted, how long was that?

About 20 months. Wow, that must have been a tough period for you. Actually not. I kind of view business a little bit like a game of chess. Yeah. You play the game. You play hard. Sometimes you win.

Sometimes you lose. And then you set up the pieces and you do it again. And you don't have angst. Oh, my God. that game of chess, what am I going to do? What was me? And what that allows you to do is to view a little bit as an outsider from yourself, things that happen to you. So when something doesn't work out that well, you can say, gee, that was horrible, but it was an interesting experience. Okay, let me just stop here for a sec, because this episode could end here and we could say, okay, that's Nolan Bushnell, visionary who found an Atari. We are now going to talk about the second company you found it. Which is Chuckie Cheese. Yeah.

How did that happen? How do you even come up with this concept? Well, the math is very simple. Before I sold Warner, we were selling games. These are coin-operated games, remember. We were selling them for about $1,500. During their lifetime, in Coin Drop, they'd earn $30,000 to $50,000. Hmm.

So it didn't take rocket science to say I'm on the wrong side of this equation. I need to be operating these things to a bigger extent. But I didn't want to compete with the guys I was selling to, so I decided I had to create my own location. I thought to myself, why are people going to come to this freestanding arcade? And I decided that adding food would be a benefit because then families could come, and that indicated pizza because there was wait time, and that would be good game playing time. While I was still mulling this whole concept around, I went to Disneyland. and went to the teaking room.

Oh, yeah. And I said, huh, my guys can do this. You mean my guys can make these little creatures? Yeah. We can animate things. Okay. And then I realized that I really wanted to have a branded mascot and that I wanted it to be a longer form entertainment.

I figured kids are going to be wanting to play the games. Parents are going to be bored. The more I can entertain them, less they're going to be bugging their kids to leave. So I said, let's do some animated skits. The whole idea was to roll this out, make it seamless, not have labor costs, just make it happen. Right. So anyway, I went to an amusement trade show, bought a costume.

Like a costume that a human would wear, like a full-size adult. And your guys would just turn it into an animated robot. Exactly. And this was the famous Chucky Cheese. That was the famous Chucky Cheese. Which was a rat. Right. What restaurant is going to pick a rat as their mascot and think that's going to work?

Well, to understand, when I bought the costume, I thought I was buying a coyote. Okay. The code name was coyote pizza. And my guys, I said, how's the coyote coming? He said, what coyote? And I said, well, the costume I sent you. He says, oh, you mean the rat? So all of a sudden we had a problem.

So I said, okay, we'll just change the name. It won't be coyote people. anymore. It's going to be Rick Rats Pizza. Rick Rats Pizza. That was going to be the name of Trague's. Who was going to eat pizza at a place called Rick Rats Pizza? That's exactly what my marketing department said. And they said, they said, there's no way, Bush and that's the stupidest idea I've ever heard. They said, we couldn't even, you know, they'd be on the guard and we wouldn't get our health license. And I said, okay, you name it. I don't care, but it has

be a happy name. Right. And so they came back all smiles the next week. And they said, we've got the name. It's a three-smile name. And I said, what is it? And he said, Chuck E. Cheese. So what happened? You opened up your first location in Silicon Valley? Yeah, it was basically in San Jose. We took over a old Dean Winter office, and it was like 5,000 square feet. And that was huge compared to pizza bars at the time. We knew. We knew. knew the day we opened that we'd made a huge mistake and it was too small. Wow. You mean it was that popular?

Massive. I mean, lines out the door on a Monday. Were your customers little kids? Who was coming? Everybody. But then we sold the company and Warner didn't want to be in the restaurant business. Right. So just to clarify, you sold Atari to Warner and I guess Chuck E. Cheese was kind of part of that deal, right?

Because you created it while you're there. so for you to keep Chuck E. Cheese, you had to buy it back from them? Yeah. And what did you have to pay for it? Half a million dollars. $500,000 to buy Chuckie Cheese. And that was all the technology and the one open store. The one open store was cash flowing a half a million dollars a year.

And they let me pay it $100,000 a year for five years. And that was maybe the deal of a lifetime. So I had this business that was positive cash flow day one. Well, I was still chairman of Atari, and I had a team of people that had been working on it. I brought them on my payroll, and we immediately expanded to the second store. This one was 25,000 square feet. And I was having more fun at Chuck Cheese than I was having Atari. Atari was getting political, so when we decided to part ways, I decided I could focus all my time on Chuckie Cheese.

and I was kind of happy about it. Yeah, it must have been pretty liberating to work on this thing that, you know, you were like super excited about. You know, sometimes I feel that inadvertence shines on me because I hadn't even thought about franchising. A guy came in and said, I want to franchise this. And I said, okay. And we started franchising.

And so the franchise business was hugely profitable. So how many Chucky Cheese locations did you, eventually franchise. I sold the company when we were about 280 stores and half were franchise at the time. So we built about 120 and franchises built about 140, I think. What sort of mistakes do you think you made that you learned from at Checky Chews? I think that I didn't understand the nature of entertainment. Now, that sounds funny coming from the amusement park and all that.

But entertainment is very fragile. It's driven on novelty. And so when we would first open a unit, people would come from all around because it was novel. So there was sort of a half-life of a shine in which you say, gee, you know, this is St. Louis. Looks to me like I need four more Chucky Cheeses. when in fact what you were seeing is this novelty bonus

and that people in normal life didn't really want to come to Chucky Cheese three times a month. Yeah. They wanted to come to Chucky Cheese every other month. We got overbilled because we got another false positive. What was a false positive? That you could pack the place

365 days a year in a population of a million people, which you couldn't. You know, it's amazing because you built these two iconic companies. I mean, companies that for many, many people in America define the contours of their childhoods. And you've gone on to start at least a dozen other companies, some of which have been spectacular failures and spectacular successes, you've had this amazing range of experiences on both ends. And I guess, I guess I wonder what, I mean, I'm sure the successes were incredibly satisfying for, you know, for obvious reasons. But in some ways, do you think the failures were, or sort of more interesting or, you know, times where you learned more about life and about you and about business?

There is no question that a good failure is good for your soul. There is nothing worse than feeling like you are invincible and really cool and entitled. Being entitled is probably the ugliest thing that a person can be because all of a sudden it's not what you do. it's who you are. And people who rely on who they are, as opposed to what they do, become very banal. How long did it take you to become who you are, to realize that that's who you are? Well, I hope that I'm not there yet. I want to stay on this deep part of the learning curve.

And in fact, I've even done a methodology on it. I force myself to do something totally outside my comfort zone every year. And I write down 11 things that I think I can accomplish in a year that are outside my comfort zone. And then I mix them up, put a number on them, throw a pair of dice, and I have to, in that year, do what the dice tell me to do. And I've discovered a funny thing. maybe it's just me, but I think it's a generalized principle that when you do different things, you're happier. Huh. That this process of exploration and of discovery and of winning out the game and the meta game is very satisfying.

If you were able to go back to like, I mean, now you are a sort of an elder statesman of the tech world. you're in your 70s, and if you could go back to Nolan Bushnell in the late 70s or early 80s and say, hey, you know, I want to give you some advice. What would you tell yourself? Boy, that's a real hard one because, you know, some of the bad decisions I've made, I'm not sure that I would like my life to not have had them. and I'm not sure that if I were to give myself advice and change that trajectory, I would end up where I am right now.

And I like where I am. Tell me about what you're working on now. Well, then I'll have to kill you. No. Nolan Bushnell is the founder of Atari and Chuckie Cheese. And he's actually working on some pretty cool stuff right now, including a company called Brain Rush, which makes software designed to help students learn school subjects eight to ten times faster.

Please don't turn us off just yet in a moment. We're going to hear from you about the things you guys are building. Hey, we're back, and thanks for sticking around, because now it's time for how you built that. And this story comes to us from Danit Zamir. About three years ago, she was planning her wedding near her hometown of Fairlawn, New Jersey, 240 guests, 20 tables, and $7,000.

Just for the flowers, just for the flowers, $7,000. And it was that frustrating feeling of, I'm spending all this money on something that, you know, I want to have, but I don't want to be spending this kind of money on, quite frankly, anything that, you know, is going to be thrown out. So as Denise was trying to figure out how to cut down on the costs, she thought about a friend who was getting married the very next day. So what I did was when I was talking to the forest, I was asking them, you know, is it possible to, you know, maybe have her reuse the flowers? Maybe we can do some sort of sharing. And that was kind of that light bulb moment where I was like, okay, well, the forest is telling me that this can work. And I know that I'll do it. And I know that she'll do it.

Okay, so ultimately, Deneet and her friend could not make it work. It was too complicated. But she couldn't let go of this idea. So Deneet went online and she started to search through wedding chat rooms. You have everyone just getting advice from each other and asking if who's in the same area, can we share this? Can we do that? And so I think that was another big moment of, okay, you know, customers do want to do this. I'm not the only one who's wanted to share my flowers. And a few months later, Denise leaves her job at another startup to start Blumerant. And her idea was that brides in the same city could log on to a website and then share flower arrangements with other couples getting married on the very same weekend. They'd each get a discount on their flowers, Blumenent would get a cut of the florist's fee,

and the florist would make out really well too. Exactly. So, you know, for them, they get to create those centerpieces once and sell them twice. But as Denise started to put her website together and then reach out to florists in the New York metro area, she was surprised that a lot of them said no. You know what was interesting? Literally every single person said, you know, this is a really good idea,

and I love that you're reducing waste, but I just don't want to do something new. that is both the most frustrating thing in the world, but it's also, you know, really motivating. And so, Deneet just kept at it. Her first paying client was a friend getting married in New Jersey. And then things just kind of grew from there. You tell one person who uses it and another person uses it

and they tell their friend who tells their friend. And since she started the company three years ago, Deneit and her business partner have expanded bloom rent to 14 cities and to other events besides weddings. Right now, all of their money is, is being plowed back into the business. They're not paying themselves yet. But this year, Denise says, they'll open up to outside investors.

Oh, and those florists that couldn't get behind Blument at the beginning? You know what's funny? I do actually have that list. I do have a small list of people that I am definitely planning on calling in the next year. And I'm really excited to have those conversations. That's Danit Samir. To find out more about her company, Blumerant, head to our Facebook page. Just search how I built this.

on Facebook. And please do keep sending us your stories. We love sharing them. You could tell us all about the things you're building by visiting build.n.npr.org. That's buildwithad.npr.org. Thanks for listening to the show this week. If you want to find out more or listen to previous episodes, you can go to how I built this.npr.org.

Please also consider subscribing to our show on iTunes and do us a favor. Write us a review while you're there. You can also write directly to us at H-I-B-T at NPR.org. And if you want to send a tweet, it's at How I Built This. Our show was produced this week by Ramtin Arablewe, who also composed the music. Thanks also to Neva Grant, San Azmeshkampur, and Jeff Rogers. Our intern is Claire Breen. I'm Guy Raz, and you've been listening to How I Built This from NPR.