Valley of Genius: The Uncensored History of Silicon Valley (As Told by the Hackers, Founders, and Freaks Who Made It Boom)

by Adam Fisher

  Michael Naimark: Eric Hulteen had submitted a purchase request under Artie Fischell’s name for a Saturn V booster rocket.

  Brenda Laurel: Alan added “a pack of gum” and signed it. So this is going through the system and I swear to God, these facilities guys show up and say, “Well, how are you going to launch this thing?” “How much space do you need?”

  Scott Fisher: I was a little bit surprised that that actually went through.

  Brenda Laurel: It culminated in a live videoconference with Arthur. We had laid cable all the way across the building down to the conference room so that it really could be live. And I played Arthur in drag with crêpe hair, and I wore Michael Naimark’s jacket and stuff. And I’m at the desk and at every cutaway they put a different city in the window behind me. At one point some guy in Arab dress comes in and tries to give me an exploding pizza.

  Scott Fisher: People had no clue that this was totally an act.

  Brenda Laurel: And then we opened it up to Q&A and I’m answering the questions. And Douglas Adams was visiting that day, so he was in the audience.

  Kristina Woolsey: Alan did a good job with bringing people through the lab. He would meet somebody and just bring them through.

  Brenda Laurel: About four hours later I was at lunch with Ray and Alan and Douglas Adams, and Douglas was sitting next to me. They were debating whether or not it was live. Because they couldn’t quite grok that it could be. And Douglas looks at me and he said, “It was you, wasn’t it?” And I said, “I don’t know what you are talking about.” And he pulls this piece of crêpe hair off of me, a sideburn that I had missed. And he was the only person who got it. That was stellar. That was just the most fucking fun.

  Scott Fisher: Artie Fischell kind of makes it sound like we didn’t have enough to do. But in fact I think it was probably one of the most interesting research projects we did there. We were thinking about how do we as a group, author and give voice to a character?

  Brenda Laurel: In those days people were struggling with building artificial intelligence so they could build good nonplayer characters. But we thought you didn’t need to build a bunch of artificial characters to have a good interactive system—you could have people playing with people as opposed to people playing with made-up programmed characters. So by making this guy up and having multiple interactions with people at all levels, that was sort of a proof of concept. It presages so much, when you think about the value of the things we learned by doing that.

  Alan Kay: Atari wasn’t that interesting. Atari was us learning about corporations.

  Scott Fisher: Arthur was us projecting the lab director we really wanted.

  Michael Naimark: On the one hand, if you ask, “What actually came out of Atari Research?” The answer, I agree with Alan, is “Very little.”

  Brenda Laurel: We talked a lot about VR.

  Kristina Woolsey: Virtual reality was not a well-known concept, but we had a big program and played with it for a while. We would spend a lot of time talking about it, writing, but we did not produce anything. We talked a lot, we thought a lot, we wrote a lot, we gave speeches a lot.

  Michael Naimark: On the other hand, I truly seriously believe that the seeds of both virtual reality and multimedia came out of the work of Atari Research.

  But Atari itself was going bankrupt: gradually at first—and then suddenly.

  Bob Whitehead: Atari was generating a ton of cash. And unfortunately when you do that you tend to just start throwing money at things. There was a sort of disconnect: a misunderstanding of what really drives the creative process.

  Brenda Laurel: Warner thought that a good license would be a good game.

  Al Alcorn: Ray Kassar gets this phone call from Stephen Ross after getting off the jet with Steven Spielberg and Ross basically says, “I’ve bought the name E.T. for you.” Ross sent Spielberg a check for I don’t know how many millions, tens of millions.

  Howard Warshaw: The licensing deal was for $22 million; if you pencil it out that’s like the most profit you could ever expect to make on a game.

  Nolan Bushnell: The only way that the E.T. deal made sense is if they sold a certain amount of cartridges. It was all based on the royalty that they would have to pay Mr. Spielberg. And so rather than being driven by the economics of the market, they were being driven by the economics of the deal. It went from the engineers being superstars to the marketing department. If you have a good product, any idiot can sell it. They didn’t realize that.

  Howard Warshaw: They bought E.T. as a loss leader to keep it away from other people. Back then Atari was the vast majority of the industry, but there was also Mattel, there was Coleco.

  David Crane: They had to get it out by a certain time frame for Christmas.

  Nolan Bushnell: Therefore the deal constrained the engineering time to six weeks.

  Howard Warshaw: Five weeks and one day. But I didn’t get to start until dinnertime the first day.

  Al Alcorn: Ray was like, “What?” Ray had learned enough by this time to know that this was kind of crazy, but the deal was done and he had to do it.

  Howard Warshaw: Nobody had ever done a game in less than six months on the VCS, and I had to do a game in five weeks. I was used to working under pressure, but this was just crazy. The CEO of Atari was betting a lot of his career on making this thing happen.

  Al Alcorn: Throw in the fact that Ray didn’t actually ever play games, so he had no way to know the game was a stinker.

  Chris Caen: It was ugly. It really was unplayable. People talk about it as being the world’s worst software game of all time.

  Nolan Bushnell: People used to smuggle cartridges out to me: prototypes, that they would just burn onto ROM. And I can remember getting the E.T. cartridge and thinking that it was broken—literally!

  David Crane: And what happened was that most people turned the game on, picked up the joystick, moved it to the right, and E.T. fell in a hole and they couldn’t get out.

  Jim Heller: The 1982 Christmas season was nowhere near as good as what had been projected because E.T. was pretty much a failure as a game. I guess it still sold probably two million cartridges. But that left close to three million cartridges that were unsold.

  Ray Kassar: We made almost five million, most of them were returned.

  David Crane: And so they’ve got millions sitting in the warehouses. Well, where do they go? Into the landfill.

  Jim Heller: We only had three days’ worth of dumping at the landfill before the weekend. When I came back I was told that the news media is going crazy as soon as I walked in the building. They’re calling wanting to know what we’re doing. Kids had come and scavenged the cartridges that we had dumped at the landfill, and they’d been arrested trying to sell the cartridges. No, this is not good. So I ordered six dump-truck-loads of concrete to be delivered to the landfill. And everybody thought it was crazy, but I figure if I covered them up with concrete, it would keep the kids out of the landfill.

  David Crane: Same thing happened with Pac-Man. They tried to design Pac-Man, which was a well-known game and it had to work in a certain way. The VCS couldn’t do that. So they made a subpar version of Pac-Man. And because they paid so much for the license they built millions of them. They sold none of them.

  Al Alcorn: When they were hurting after the E.T. disaster they went to Alan Kay: “Where is the new thing to put in production?” He said, “You don’t understand: research, not development.” And Ray is like, “Well, what’s the difference?” They didn’t get it.

  Alan Kay: Ray came to me and said, “Alan, I’m drowning. Throw me a rope.” And I said, “I can’t, Ray. You didn’t pay for the rope factory.”

  Al Miller: Ultimately the only thing that came out was a very lame next-generation game machine based on the Atari 400 home computer.

  Alan Kay: Atari had had their own version of a 6502 PC, which was in many ways better than the Apple II.

  Al Miller: They had taken the same chips, added some terrible con
trollers which were just nonfunctional, and tried to sell that.

  Chris Caen: The international sales team were notorious for having wine-and-cocaine parties. We used to joke that we had the only international sales team in the industry that imported more than it exported.

  Michael Naimark: In ’82 and ’83, coke was everywhere.

  Chris Caen: The home system was just bombing. But that’s okay because we have this huge library of arcade games—this evergreen set of titles—and we’ll just keep figuring out new ways to do them and bring them over to the home computer system. We will be fine.

  Scott Fisher: By ’83 it was kind of not so much partying as it was using the drugs to get these nineteen-year-olds to like hurry up and get this damn stuff ported over from the arcade game to the home machine by, like, tomorrow. “Here’s more. You need more coke. Here. Anything, I’ll give you anything if you get this done.”

  Brenda Laurel: A guy from biz-dev invited me into his hard-walled office. And he had the glass from the Battleship arcade game on his desk, and he cut a big line of cocaine and he said, “Here, snort this, it will help you work better.” I’d never seen cocaine. I didn’t know what it was. I’m a naïve hippie and I’m thinking, Cocaine? You know they lied to us about grass. So this is probably fine. And coke became a problem for me for about a year until I realized I was going to kill myself. So there was a lot of coke going around.

  Scott Fisher: We were all watching this thing go down the tubes because of that. I think that’s ultimately why things got so bad.

  Chris Caen: In ’83 the wheels are starting to come off of Atari in a dramatic fashion.

  Alan Kay: I used to show them slides about what they were spending on, and ask, “How fast will it go when the thing flips?”

  Kristina Woolsey: I was amazed at the exorbitant spending. And it did not taper off. It was exorbitant and then it was, “Oh, we are in trouble!”

  Brenda Laurel: And this was right about the time they were burying the E.T. cartridges in the desert.

  Kristina Woolsey: A group of us managers got pulled into a conference room, it was just plush, Hollywood plush. And a man in a suit—I think it was the CEO—said, “Guys, it’s over. We are looking for a buyer.” Basically he laid it all out. He had this wonderful line that caught my attention: “You cannot fool thirteen-year-olds.”

  Howard Warshaw: At the beginning of ’83 or so, we’re still at about ten thousand employees. By late ’83, we were down to two thousand employees.

  Chris Caen: You’d call someone in the morning, then you’d call them in the afternoon and the extension would be disconnected. The company was just being decimated on a weekly basis.

  Scott Fisher: I remember sitting with Alan Kay in a park in Sunnyvale as a kind of retreat, just getting out of the office and going out to talk about what our plan was for the next twenty years. And then literally going back to the office and finding out that we—well, at least Brenda and me—had been fired and had fifteen minutes to get out of our offices. It just seemed so crazy to be talking about twenty-year-long projects and then have the security guards escort you out.

  Brenda Laurel: It was insane. Like five thousand people in one go! I got it that day.

  Chris Caen: Layoffs of fifteen hundred people? Now we’re used to it, but when it happened in ’83 there was no context for it. It was a psychic shock.

  Alan Kay: Once a month or so Steve Jobs would come over and have lunch with me—and it used to drive Ray crazy. He’d come along and here I am sitting with Steve Jobs of Apple. In the course of our lunches Steve said, “You know, you should come over to Apple.”

  Michael Naimark: It was either in late ’83 or early ’84 that Alan Kay leaves Atari. And we are all thinking, Okay, you know it’s a little crazy out there, but the rest of Atari is still making lots of money, so what’s the problem?

  Brenda Laurel: So the lab limped along for another half a year or so and then they finally shut everything down.

  Michael Naimark: But after Alan left things started tanking very quickly. Atari went from like earning billions to losing billions. And I think the first quarter of ’84 was the turning point.

  David Crane: It was a whole disaster. There was a time when Atari lost a hundred million dollars in a quarter.

  Alan Kay: It went awfully fast. In their first bad year I think they lost a billion.

  Howard Warshaw: By mid-1984 we were down to two hundred people. So, in about a year and a half the company goes from ten thousand employees to two hundred employees, and I was still one of those people. It was a dark time.

  Kristina Woolsey: We thought the video game business was over.

  Brenda Laurel: At the very end, I’m told, it was like the fall of Saigon. People were dropping equipment into the trunks of their cars from the second story. You know it was just like chaos. Everybody moving out and people carting computers down the stairs.

  Chris Caen: That’s when that first magical wave of Silicon Valley ended. There was a shift: the idea that the company was a family disappeared with Atari.

  Kristina Woolsey: If you are young and you don’t know how the system really works and you believe in something, then it truly was horrible. It was heart-wrenching. It was socially destructive.

  Chris Caen: There was a certain feeling of collective mission that broke, and all the corporate folks and off-sites in the world weren’t going to put it back together. That sounds overwrought, but if you were there, it wasn’t.

  Kristina Woolsey: But this is how the Valley works—people come and go from job to job because start-ups are starting, and big companies can disappear, too.

  Jamis MacNiven: Titans rise, titans fall—that’s the nature of the world. It just happens faster in Silicon Valley.

  Hello, I’m Macintosh

  It sure is great to get out of that bag

  While Atari was having its troubles, so was Apple. By the early ’80s the Apple II was starting to show its age. Other competitors, including Atari but most importantly IBM, were coming out with newer, sleeker machines. Apple was trying to counter, first with the Apple III and then with the Lisa, but both machines were flops. The next machine in line to be released was the Macintosh, and it would make or break the company. The Mac was Jobs’s exclusive turf. Although Jobs was the public face of Apple, he did not have actual control of the company. Jobs contented himself with being the (nonexecutive) chairman of Apple’s board and directing what was, in 1980, a minor research effort: an experiment in making a computer for the common man. He and his hand-picked team of twenty-somethings had been hacking away at the idea ever since returning from PARC. It took four years, but by 1984 Jobs’s vision became reality. The Mac put the mouse—and the PARC-inspired GUI that accompanied it—into the hands of the masses.

  Dan Kottke: The IPO was November of ’80, and Steve is raring to go. Because he had money to spend, right? The Apple III was launching, but Steve Jobs had already moved on. The Apple III didn’t interest him, because there were too many other people involved and he wanted to be in charge.

  John Couch: Steve says, “I want to run Lisa,” because it was the newest, newest product.

  Randy Wigginton: But they weren’t listening to him.

  Steve Jobs: I thought Lisa was in serious trouble. I thought Lisa was going off in this very bad direction.

  David Kelley: Lisa—the Apple IV—was really mixed up.

  Dan Kottke: Steve was trying to bully the Lisa group.

  Randy Wigginton: Jobs was angry at the Lisa group because they named it “Lisa” after his daughter to make fun of him. Steve lived with a girl for several years, Chrisanne. And she got pregnant and insisted that the baby was his. He always claimed that she was sleeping with other people and it was probably someone else’s, and no one inside of Apple believed him. And when the baby came she was named Lisa. Steve absolutely insisted that it was not his baby. And so that is why the Lisa was called “Lisa.” It was a big fuck-you from the engineers and the people over there. So he h
ung around with all the Lisa folks basically until they drove him off.

  John Couch: And so when they wouldn’t let him run the Lisa project he went around looking for something else to do.

  Michael Dhuey: And across the street was where the Mac group was, and the group had nobody in it except Jef Raskin.

  Dan Kottke: Jef’s outlook on the world was tiny, friendly machines—like a home appliance. Jef was completely obsessed with that.

  Steve Wozniak: Jef is the one who brought that idea to us.

  Andy Hertzfeld: The Mac was initially a skunkworks. At the time it was not an important project at Apple. It was a very minor thing.

  Randy Wigginton: And Steve went over to Macintosh where Jef Raskin was, and he and Jef did not mix well.

  Steve Jobs: Jef’s a shithead who sucks.

  Jef Raskin: Steve would have made an excellent king of France.

  Michael Dhuey: They lasted about a week together, because Jef realized that Steve was going to immediately take over the group, and so Jef came back to the executives and said, “He’s taking over my group, he’s wrecking everything!” And then they said, “Tough. Steve wins.”

  John Couch: I don’t think he asked Jef’s permission; Steve just took it over.

  Randy Wigginton: Steve hijacked it.

  Andy Hertzfeld: When the Mac started, the big projects in Apple’s future were the Lisa on the one hand and the Apple III on the other hand. Even the Apple II was diminished in their minds, not thinking it would last as long as it did.

  Randy Wigginton: Remember Steve always had this insecurity about the Apple II, because he didn’t actually make the Apple II, right? And Steve’s idea for the Mac was basically the next-generation Apple II for the rest of the world.

  Andy Hertzfeld: The Mac was going for well more than a year before it found what it really was: the volks-Lisa. We were taking the Lisa technology but making it for everybody.

  Mike Murray: But there wasn’t a lot out there that suggested the Macintosh would succeed. Could we do it with a smaller box?