Mar 26, 2018 · 49m · how-i-built-this
Atari & Chuck E. Cheese's: Nolan Bushnell (2017)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, host Guy Raz interviews pioneering entrepreneur Nolan Bushnell about bootstrapping Atari, launching iconic arcade and home video games, and creating the Chuck E. Cheese family entertainment franchise.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 28.3% of the talking time here. How this is scored →
Guy as informed peer 3.3 Guest teaching 2.9 Guest disagreement 1.3 Guy pushing back 1.5
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:10 Rejecting depression framing
Bushnell rejects Raz's suggestion that the Toy Fair failure left him depressed, asserting that conventional distributors were simply missing a massive opportunity.
Hardest push from Guy ▶ 21:20 Challenging the Sears volume bluffRaz directly calls out Bushnell for tripling his manufacturing team's capacity estimate to win the Sears order.
Biggest teaching moment ▶ 40:00 The novelty curve false positiveBushnell educates Raz on the hidden fragility of location-based entertainment, explaining how initial novelty creates false demand signals.
Guy holds their own ▶ 36:15 Questioning the rat mascot conceptRaz challenges the business logic of using a rat as the mascot for a restaurant chain before Bushnell reveals it was an accidental costume purchase.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Childhood Entrepreneurship and Carnival Game Insights | 4 | 3 | 1 | 1 | Guy Raz sets up Bushnell's backstory with conversational context about 1950s business and 1960s pinball mechanics. Bushnell smoothly explains how carnival economics and coin-op revenue models informed his early worldview. | |
| Encountering Spacewar and Heading to California | 3 | 3 | 1 | 1 | Raz asks chronological clarifying questions as Bushnell recounts encountering Steve Russell's Spacewar at MIT and relocating to Ampex in Silicon Valley. | |
| Building Computer Space and Founding Atari | 3 | 2 | 1 | 1 | Raz prompts Bushnell on the origin of Atari and Computer Space, while Bushnell explains the economics of timesharing slow computers across arcade screens. | |
| Developing Pong and the Overflowing Coinbox | 3 | 3 | 1 | 1 | Bushnell details hiring Al Alcorn to build Pong as a training exercise and discovering its immediate revenue potential after Bally rejected it. | |
| Manufacturing Pong and Its Cultural Phenomenon | 4 | 3 | 2 | 3 | Raz presses Bushnell with genuine surprise over Atari's lack of patent protections and copycats. Bushnell explains why innovation was his only leverage against established arcade distributors. | |
| Designing Home Pong and Toy Fair Rejection | 3 | 4 | 2 | 2 | Bushnell describes the 1975 Toy Fair flop of Home Pong, correcting Raz's assumption that he was simply depressed by explaining how price point mismatches challenged him instead. | |
| Securing the Massive Sears Sporting Goods Order | 4 | 2 | 2 | 3 | Raz playfully calls out Bushnell for overpromising manufacturing capacity to the Sears buyer after his team quoted a third of the volume. Bushnell leans into his carny background. | |
| Mid-Episode Recap and Second Act Teaser | 3 | 3 | 1 | 1 | After Raz recaps the Sears dilemma, Bushnell explains renegotiating unit prices and securing factory line financing from Sears Bank. | |
| Developing the 2600 and Atari Workplace Culture | 4 | 3 | 1 | 1 | Bushnell explains adopting programmable microprocessors and pioneering Silicon Valley's informal workplace culture, while Raz guides the narrative. | |
| Leadership Lessons and Working with Steve Jobs | 4 | 2 | 1 | 2 | Raz and Bushnell share a humorous exchange regarding Steve Jobs working in Atari QC and Bushnell passing on a one-third stake in Apple for $50k. | |
| Warner Communications Acquisition and Culture Clash | 3 | 3 | 2 | 2 | Bushnell narrates selling Atari to Warner Communications for $28 million and the resulting cultural breakdown that led to his termination, viewing the outcome pragmatically like a game of chess. | |
| Conceiving Chuck E. Cheese and Animatronic Pizza | 4 | 3 | 2 | 3 | Raz expresses disbelief at building a family restaurant centered on a rat mascot. Bushnell recounts buying a rat costume mistaken for a coyote and rebranding from Rick Rat's Pizza. | |
| Launching, Buying Back, and Franchising Chuck E. Cheese | 3 | 3 | 1 | 1 | Bushnell details buying back Chuck E. Cheese from Warner on favorable terms and scaling via unexpected franchisee demand. | |
| Analyzing Novelty Traps and the Value of Failure | 3 | 4 | 1 | 1 | Bushnell delivers an insightful reflection on misreading the entertainment novelty bonus and explains why experiencing failure is crucial to avoiding entitlement. | |
| Personal Growth, Dice Method, and Educational Software | 2 | 3 | 1 | 1 | Bushnell describes his dice-rolling technique for forcing personal exploration outside comfort zones and reflects warmly on his life choices. | |
| How You Built That: Paul Tecker's Hop Water | 3 | 2 | 0 | 0 | In the short 'How You Built That' segment, Guy Raz interviews Paul Tecker about developing non-alcoholic hop-infused sparkling water. |
Statements from this episode (27)
Arcade machines generated $100 to $200 weekly in the late 1960s
“These locations would very often do a hundred to 200 dollars a week.”
Bushnell earned $100,000 in royalties on millions in Computer Space sales
“I licensed the game to a company called Nutting Associates, and realized that it did really well in college campuses. So, I mean, it sold a couple of million dollars in, in units, which was, to me, a big hit. But to the industry was kind of a mediocre flop. Bu…”
Bushnell and Dabney founded Atari with just $500 in total initial capital
“Ted put in 250 dollars, I put in 250 dollars, and that's all the money that went into Atari.”
Bushnell: Bally rejected Pong because coin-op norms required single-player games
“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 wor…”
Bushnell: Initial Pong machines earned nearly $300 weekly on $300 cost
“I mean, the game was earning almost 300 dollars a week. And the total cost that we had was about 300 dollars.”
Bushnell: Atari initially only had enough cash to build 12 Pong units
“I looked at all the cash we had, and we had enough cash to build like 12 units.”
Bushnell: Pong's success was driven by empowering women in bars
“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 …”
Bushnell: Atari financed early manufacturing through 60-day supplier terms and cash sales
“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.”
Bushnell: Atari produced only 35,000 of the 150,000 Pong machines deployed
“About a 150,000. Only of which, Atari only did about 35,000 of them. We got massively copied.”
The 1975 toy industry refused to sell products priced above $35
“What we didn't know
Is that the toy business at that point in time did not sell anything that was more than 35 dollars.”
Bushnell bluffed to Sears that Atari could build 75,000 Home Pong units
“And I had my manufacturing guy there, and I, and he says, we could probably do 25,000. And so, not wanting to be soul sourced, I said, we can do about 75,000.”
Bushnell: Sears ordered 150,000 Atari Home Pong units for Christmas delivery
“He give us an order for 150,000. And He wants them delivered by Christmas, by, you know, October, November.”
Sears Bank advanced Atari 80% of the contract price per finished unit
“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.”
Bushnell: Atari Sold Nearly 180,000 Home Pong Consoles to Sears in 1975
“We did. And in fact, I think that year we sold almost a 180,000 and they took them all.”
Bushnell believes Atari paved the way for young founders like Jobs
“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.”
Bushnell: Atari eliminated dress codes and time clocks to evaluate solely by outcomes
“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 broth…”
Steve Jobs worked as a quality control technician at Atari
“Steve Jobs worked for me, and He was a technician in quality control, and he was really good at it.”
Bushnell: Young Steve Jobs was opinionated but never wrong
“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.”
Steve Jobs offered Bushnell a third of Apple for $50,000
“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 dollars.”
Bushnell: Executive perks and traditional hours create toxic corporate divides
“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 th…”
Bushnell: Treating business like chess eliminates angst over failure
“I kind of view business a little bit like a game Chess. 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 that the fact, oh my god, I lost that game of chess, …”
Atari arcades sold for $1,500 but earned up to $50,000 in lifetime revenue
“Before I sold Warner, we were selling games. These were coin-operated games, remember. We were selling them for about 1500 dollars. During their lifetime, in CoinDrop, they'd earned 30 to 50,000 dollars.”
Bushnell bought Chuck E. Cheese from Warner for $500,000 over five years
“And that was all the technology and the one open store. The one open store was cash flowing half a million dollars a year. And they let me pay it a 100,000 a year for five years.”
Bushnell: Entertainment is fragile because it is driven by novelty
“Entertainment is very fragile. It's driven on novelty.”
Bushnell: People who rely on who they are rather than what they do become banal
“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.”
Bushnell picks an annual discomfort goal by rolling dice
“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…”