(FORTUNE Magazine) – PRIDE FORETOLD the fall. But Nolan Bushnell, the exuberant Silicon Valley entrepreneur, was too pumped up to notice that summer day in 1983. He had just swept across the finish line first after a grueling, nine-day sailboat race between Los Angeles and Honolulu. A flotilla carrying mai tais, floral leis, and swaying women sped toward the winning sloop. Recalls Bushnell: ''The spinnaker was up. We were blasting through the waves. I was king of the world.'' Six hours later Bushnell ripped open a telegram: BAD NEWS IN SECOND QUARTER STOP. Before he could claim his trophy, he was winging his way back to California to try to rescue Pizza Time Theatre, a restaurant chain that entertained patrons with a noisy troupe of robot characters. Bushnell's theatrical concept had been so successful at first that he had decided to run the company with one hand and to seed more of his fantasies with the other. His venture capital firm, Catalyst Technologies, proceeded to launch several businesses in quick succession. Says he: ''I thought I was some kind of Wunderkind.'' But while Bushnell was ignoring Pizza Time's mounting costs and wild expansion, and the mediocre food it was serving up, copycat competitors swooped in. Even a last-ditch streak of 14-hour days failed to salvage the operation. Bushnell, who had also founded Atari Corp., king of the videogame producers in the late 1970s, plummeted just as surely as Icarus did for his reckless vanity. Pizza Time filed for Chapter 11 protection under the bankruptcy laws in March 1984, leaving Bushnell $100 million poorer than he had been just a year earlier. In this entrepreneurial age, we're bombarded with garage-to-glory stories. But those stories give us only a fraction of the picture. People also lose fortunes, and their tales are no less instructive. The principal lesson is an old one: The same sense of infallibility that propels someone to the top in the first place eventually undoes him. ''Fortunes are lost the same way they are made -- people take too many chances,'' says Martin Jaffe, chief operating officer of Wood Struthers & Winthrop, a money management firm that has been trying for over 100 years to help the very rich stay very rich. Ways to lose a fortune break down into three categories: business fiascoes that are undeniably your fault; disasters you figure you can blame on the gods; and the dreadful erosion caused by incompetent or wasteful heirs. Common to just about everyone who blows a bundle is hubris -- the illusion that he can do no wrong, that the business will keep on booming, and that the money will never run out. But as the men and women chronicled here attest, the wheel of fortune just keeps on turning. Fans of the gentry may balk, but the fact is, old money is no more immortal than new. Fortunes made overnight from oil wells or on Wall Street can fade fast, and usually get all the publicity. But most fortunes, even the hoariest, peter out eventually. Says a descendant of one of the original retailing tycoons: ''There's not an Anglican nickel left in New York.'' Just as time and human imperfection take a toll on wealth, so does another of fortune's foes: the IRS. ''As citizens, Americans have always supported laws favoring the division of estates,'' says Peter Dobkin Hall, a business historian at Yale. ''As individuals, they continually seek ways to pass their farms, firms, and fortunes on to the next generation intact,'' a challenge that has become increasingly taxing, shall we say (see box). The easiest way to make a small fortune in business? Start with a large one. Then disregard all the rules of prudent diversification and defensive planning. Add to that a sense of confidence that blossoms into arrogance. While absolutely everything goes right on the way up, suddenly one false move ruins it all. Consider Malcom McLean, 74, a man who changed the world 30 years ago when his company, Sea-Land Corp., pioneered the concept of container shipping, vans without wheels that can be slipped easily onto ships, railcars, or trucks. He sold Sea-Land to RJR in 1969 for a profit of $157 million. He later created a holding company, McLean Industries, and bought U.S. Lines. Things steamed along splendidly until as late as 1984. But already anchored in New York harbor were jumbo ships that would end up sinking him. Betting oil prices would rise, he paid $570 million for 12 of these supertankers, slower but more fuel-efficient vessels than his competitors were using. Luck promptly deserted him: The oil market collapsed, a fierce rate war broke out among shippers, and McLean's fleet was dead in the water. ''McLean bet the farm on the wrong technology,'' says Jeffrey Stone, a transportation analyst at the Wertheim Schroder investment bank. Nearly $1.3 billion in debt, McLean Industries filed for Chapter 11 protection from creditors in late 1986. Fortunes are hatched when a good idea comes along at the right time. But if a craze takes hold, make sure you have a few eggs tucked away elsewhere. One entrepreneur who forgot to do so was George Merrick, the man who developed Coral Gables, Florida, in the 1920s as a community for wealthy retirees. As he plowed along, suddenly the great Florida land boom hit. Property prices exploded. Salesmen praised the blue skies on chilly street corners. Northerners in droves bought the pitch, and by the summer of 1925 George Merrick was easily worth $80 million. His relatives also came on down. ''He liked cream-colored trousers,'' recalls his nephew, Donald Kuhn, 65, a mail- order executive in upstate New York. ''When we went to visit him, he'd always root around in his pocket and give us each a dime.'' Then, out of the gray, the good times ended. On September 17, 1926, a hurricane swept away much of nearby Miami Beach, effectively drowning the public's interest in Coral Gables. Seasoned speculators ran for cover. But Merrick persisted, only to be socked by another hurricane in 1928. Coral Gables Corp. finally went bankrupt, leaving Merrick in such desperate straits that he could not afford to replace the tires on his Cadillac. ''I got nothing out of Coral Gables,'' he told FORTUNE in 1936. ''I never even went to Europe.'' Merrick spent his last two years as postmaster of Dade County and died ''the next thing to penniless,'' says Kuhn. Merrick might have blamed the gods for his losses. Instead he assumed the responsibility: ''I should have bought annuities.'' Guy de Rothschild, 79, heir to a vast and venerable banking fortune, had a good excuse for losing a bundle: His bank was nationalized when French President Francois Mitterrand first came to power in 1981. ''A Jew under Petain, a pariah under Mitterrand -- for me it's enough,'' he said at the time, heading off to live in a lavish New York apartment. ''To rebuild on ruins twice in a lifetime is too much. I am forced into retirement.'' Rothschild, back in Paris now, still lives in relative grandeur, but says he no longer keeps a full-time trainer in Chantilly for his 40 thoroughbred racehorses: ''One must live according to the times.'' Acts of expropriation aren't limited to the government. Such a fate befell the heirs of Sam (Momo) Giancana, a Chicago Mafia boss, gunned down in 1975 while cooking a snack of spinach and sausage in his basement. He left behind his share in a loan sharking and gambling empire that ''probably had bigger annual profits than General Motors,'' wrote his daughter Antoinette in her memoirs, Mafia Princess. But they weren't the kind of assets he could leave in a will. Other mobsters, presumably including his assassins, moved in and carved up the operations. Antoinette, 53, who grew up wearing rare and luxurious Somali furs, says she had to get rid of her Thunderbird recently because she couldn't afford the payments. Family problems can eliminate a fortune as completely as a machine gun and are a lot more common. ''The odds are stacked against dynasties,'' says historian Hall. Only 30% of family businesses survive to the second generation, and just 20% of those make it to the third. Typically the first generation makes the money, the next one spends it, and the third digs the shirtsleeves out of the attic. The decades between are typically filled with miscommunication, misguided parenting, and mismarriage. So consumed with empire building are the founders of fortunes that many fail to pass along the lessons they have learned to the next generation. Just as they never think about their own mortality, they can't imagine the money disappearing. Their sons, however expensively educated, just don't measure up. Daughters are often doubly damned -- denied any role in running the business and never instructed in the ways of wise investments and responsible spending. Inept because they are ignored, some wealthy women spend recklessly, having no sense of the limits of their fortune. The record setter here had to be Barbara Hutton, Woolworth five-and-dime-store heiress. Thrice a princess, once a countess, and Mrs. Cary Grant for three years, Hutton spent over $40 million on seven husbands. Occasionally a son gets trapped in the same cocoon. Thanks to his vain, controlling mother, George Huntington Hartford II had a hard time growing up. When Hunt, as he was called, finally came of age, he knew nothing about business. Heir to the family's $90 million A&P fortune, he squandered most of it on investments that included an artists' colony in California, a glitzy arts magazine called Show, and an art museum in New York. Flops all. ''Nobody ever helped me with my money,'' he admitted. ''I had no guidance.'' Floating by Hog Island in the Bahamas with one of his four wives, Hartford peered through his binoculars and conceived a vision. He imagined a lavish resort with hotels, water sports, and casinos. As usual, his vision was . blurred. He bought the land for $11 million in cash, renamed it Paradise Island, and threw another $19 million into development. But he didn't stick with the project long enough. After colliding with authorities over bridge rights to the main island and a gambling license, he sold out his interest. Had he held on to his island -- today a prime vacation spot -- Hartford probably would have doubled or tripled his inheritance. Instead, down to his last few million, the 77-year-old heir lives a Dickensian life much like Miss Havisham's in a decrepit townhouse in Manhattan. Friends with whom he used to make the gallery and nightclub scene say he is nearly crippled from years of drugs and high living. He almost never leaves his iron-frame bed. GENERATIONS that fail to replenish the wealth will eventually deplete it. Oliver Wendell Holmes, a wealthy heir himself, wrote of a large fortune: ''It splits into four handsome properties; each of these into four good inheritances; these, again, into scanty competences for four ancient maidens -- with whom it is best that the family should die out, unless it can begin again as its great-grandfather did.'' Holmes would have tipped his hat to August Belmont IV, 80, a great-grandson who got the moneymaking machinery cranking again -- though not with the original family assets. A Harvard graduate, Belmont worked his way up to become head of the Dillon Read & Co. investment bank in 1962. As a banker, he made out handsomely: Call the operator for his number in Maryland, and she'll ask if you want the main residence, the guesthouse, or the cottage. But Belmont never restored his family to its former glory. As a child he traversed New York City in the family's private subway car, a teak and mahogany lounge with green velvet draperies, stained-glass windows, and a bar. The car belonged to August P. Belmont II, a banker who started the Interborough Rapid Transit construction company. The senior Belmont and his friends, among them the Astors and the Vanderbilts, would ride out to his society race track on Long Island and later that evening stop for a drink at Belmont's bar in the Belmont Hotel. Somewhere between generations II and IV, the fortune dwindled. ''Money?'' asks August Belmont IV. ''You tell me where it's all gone. Somebody lost it somewhere along the line.'' A son or son-in-law out to prove his worth can sometimes lead the family and its fortune over the brink. Anxious to outdo their daddy, a wheeler-dealer in the oil patch, Nelson Bunker and William Herbert Hunt of Dallas began hoarding silver in the early Seventies. When the market collapsed in 1980, they borrowed $1.1 billion to meet margin calls, borrowings they secured with oil assets. Mistake No. 2. Oil prices plunged, and their company filed for Chapter 11. ''Sometimes,'' moaned Lamar, a third brother, ''it is necessary to knock a knot on a kid's head.'' Bunker is a notorious tightwad, but playboys can go through a bundle too. Consider Horace Dodge Jr., son of the automotive pioneer. During the 1951 winter season, Horace Jr., then 51, accompanied his mother to a charity fashion show in Palm Beach. Ogling the models, he spotted Dora Gregg Sherwood, a 27-year-old blonde from Wisconsin. Smitten, and newly separated from wife No. 4, Dodge bought every dress Sherwood modeled. Then he married her. When Dodge died a decade later, Gregg got her hands on about $9 million of the family money. She spent every penny of it with her next husband, a retired New York City cop and bodyguard. Actually she spent more: In 1979 she pleaded guilty to looting her son's trust fund. Some of the money went to support scores of servants in her home, some was lavished on reckless whims like a three-month holiday at London's posh Dorchester Hotel. For her part, Gregg Dodge claims she lost most of her money because she was badly advised. On the recommendation of an attorney, she dipped into her principal to buy a tool and die company in Atlanta and a gold mine in Colombia, both of which turned out to be mere dross. Now 64, Dodge rents a relatively modest home in Palm Beach and is writing a novel set in that neck of the woods. As fortunes go, hers is long gone. But, she says, ''I've learned the value of a dollar.'' If your children are going to end up wasting the money, you might as well give it away in the first place. Among the greatest American philanthropists was Meyer Guggenheim, whose family was worth some $2 billion at the turn of the century, controlling as it did an estimated 80% of the world's metal- mining industry. Today the fortune lives on in name only in things like the Guggenheim fellowships for writers, composers, scholars, and artists, and in such landmarks as the Guggenheim museum of modern art on Fifth Avenue in New York City. One of the last remaining Guggenheims is William III, 49, a soft-spoken fellow who lives in a merely middle-class section of Altamonte Springs, Florida. He doesn't actually go to work in the traditional sense. But he is rather active on the spiritual plane as a mystic and counselor. For his mundane needs, which include alimony and child support payments, he draws on the interest from a trust fund, an income that he claims amounts to no more than a dentist's salary. The classic rich kid without purpose, Guggenheim dropped out of Yale and thrashed about in several careers. He worked as a stockbroker, which he hated, and as a stock analyst, which he loved, and ran a store in New York called Indispensable Disposables, which sold paper dresses. In 1971 he published Love Game ''to promote sexual sensitivity'' between men and women. Guggenheim's latest effort: a trilogy on the afterlife. Less at peace with his meager inheritance is Shearn Moody Jr., 54, whose grandfather left $439 million that he made in the insurance business to a foundation. Hands off, kids. By all accounts a rather odd, vindictive man, Grandpa didn't want his heirs to touch the foundation money. But Shearn has devoted his life to getting at it, enlisting the help of more than 150 lawyers over 30 years. As eccentric as his grandfather, Shearn collects live penguins, stuffed animals, and Hitler memorabilia. Around his hometown of Galveston, Texas, he is known as a fighting man. Says a former aide: ''He was born and will die in litigation.'' Last fall he was convicted on charges of bilking the foundation out of $1.3 million to pay his legal fees. While he awaits sentencing, he has been keeping a low profile. At the other end of the spectrum are guilt-stricken heirs who can't wait to be rid of the lucre. Michael J. Brody Jr., grandson of the man who built an empire from Good Luck margarine, took to the window of his Manhattan apartment in 1970 and flung cash to the crowd below. He later shot himself in the head. Sylvia Schroeder Jenkins, 41, daughter of a wealthy German industrialist, didn't go quite that far. But she recently got herself disinherited from a $2 million trust fund by marrying a Masai warrior several years her junior. Says Jenkins: ''I found what I wanted.'' Jenkins could probably go home again if she has a change of heart, or at least start over with a few goats of her own. The fact is, when the fabulously wealthy fall, they rarely hit absolute zero. They may have to forgo million- dollar parties like the ones Guy de Rothschild used to throw at his sprawling French chateau, or open the doors of their castles to tourists, as many a | British lord has done to keep up the maintenance. But most also have a secret trust fund to fall back on or a parcel of country real estate that will guarantee them a genteel lifestyle. Says Bushnell: ''No one needs to pass the plate for me.'' WHAT LURKS in the hearts of those who make a fortune and then lose it? Some throw in the towel; others throw themselves back into the fray. Imbued with that irrepressible Texas spirit, the state's former governor John Connally survived with aplomb the auction of his bankrupt estate this year. ''We have our health,'' Connally said, $48 million in debt after his oil and real estate investments soured. Connally had a bankable asset to fall back on when his money disappeared: his name. He immediately landed jobs on the board of Coastal Corp., an oil company, and as advertising spokesman for a Texas savings and loan. ''Things haven't worked out exactly as we planned,'' he says, in a warning to television viewers to save for the future. Guy de Rothschild's son, David, has also used his good name to run a small investment house in Paris. ''Without being a prisoner of the past,'' he says, ''we are taking a new course.'' Nolan Bushnell, 6 feet 4 inches, has a shorter history than Rothschild's to live down. But his all-American attitude toward failure is much the same: Never say die. ''Entrepreneurs can lose tens of millions of dollars many times. That's the game,'' says W. Gibb Dyer Jr., a business professor at Brigham Young University. ''But they believe they will triumph in the end.'' Founder of 14 companies, six of which failed, Bushnell is now back with what he believes is another $300 million idea. He wants to make Axlon, his Sunnyvale, California, company, into a research and development lab for the toy industry. He has already signed contracts to produce around 20 videogames for his first brainchild, Atari, and some electronic toys for Hasbro Inc. Says Bushnell: ''I always knew, even when I was at the bottom, that I could pick myself up and make it all back again.'' Musing on past mistakes, Bushnell says he sold Atari too early and Pizza Time too late. But he most regrets spreading himself too thin over the years. Not surprising for a man blessed with a child's imagination but cursed with a child's attention span. ''You can never lose sight of the mountain,'' he says. ''I wandered down side streets and forgot it was there.'' Forget long enough, and it won't be.