A couple weeks ago I read a Snopes article about how Atari may have buried millions of E.T. game cartridges in New Mexico. After reading it, I found a copy of Zap! The rise and fall of Atari, on which much of the article was based.
The book was fascinating. Author Scott Cohen describes the meteoric rise of the company from Nolan Bushnell's Pong game until the company's self-inflicted and fatal shot to the head on 7 December 1982. Since Cohen wrote it in late 1983, the story ends a few months before the company did. But Atari had already been measured twice by that point, so no one reading the book when it came out would have any doubt about its prospects.
It always astounds me how companies keep making the same mistakes. Societies do too; but one can explain the timescale of human idiocy (usually 75-125 years) because people who would have known better tend to die eventually. Companies can flame out in just a few years.
Take Atari. In short, the company died because management—in particular CEO Ray Kassar—made a series of horrible decisions and ignored the lessons from their consequences. The initial growth and success of the company after Kassar took over was impressive, but it happened despite management, not because of it. The company's future sales required continuous development of new games, but management thought creating software wasn't any different than building cars.
At one point, four of Atari's top engineers, the guys creating the products Atari needed to sell, asked for commissions on the millions of game cartridges that people bought. In other words, they wanted recognition for their successes. Kassar responded, "You are no more important to that game than the guy on the assembly line who puts it together." The engineers quit and formed Activision, which then ate Atari's lunch.
With massive turnover in engineering, a game console that had not been upgraded in six years, over-saturation of the game cartridge market, poorly-reviewed products, and direct competition from technically superior products like personal computers, one would think management would notice the problem. Nope. On 7 December 1982, Atari announced disappointing earnings and precipitated the video game crash that left none of the original players standing.
The book concludes with a description of Silicon Valley as the new Detroit:
Silicon Valley is no longer the place for development and technology that it was. Now it's a meat market. What is happening to the Valley happened to Detroit, except there it was spread out over forty years. There are more companies in the Valley now than before, but it's not the hot spot it was. More companies are thinking about moving to the Midwest, since "cheap" labor down South is no longer cheap. Much of Silicon Valley will probably end up in Detroit, where all those auto workers are standing around with nothing to do.
So, not all of the book is accurate... It was a good read, though.