Yesterday, the Wall Street Journal reported that former dot-communists in Silicon Valley are trading in their dreams of wealth and luxury for, well, reality. “Even until early this year, most felt that eventually-and possibly soon-things would turn around,” writes Mylene Mangalindan. “Not anymore….the nouveau not-so-rich are tightening their belts. And the well-educated dreamers who moved here to seek out their fortunes are increasingly disillusioned, with some considering bank teller and other hourly-rate jobs to make ends meet. Even many venture capitalists who fuelled the bubble are sitting on the sideline rather than looking for new startups to bankroll.”

This is the harvest sewed by the VCs in the late '90's. An entrepeneur I know in Palo Alto still is cursing the VCs who came to him to take his web operations public for abandoning him, but he admitted to me once that he was drawn in by the promise of turning a small, self-funded operation into millions in equity. He knew that it was a get-rich-quick scheme; he fell for it anyway.

The ideas of the dot-communist era, as good as they might have been, simply weren't worth as much as the VCs wanted them to be. Some of them — pet food online? — weren't very good at all. But in the end, for the VCs, the ideas didn't really matter that much–it was the sizzle that mattered, not the steak. They were mining the mystique of Silicon Valley, the coolness of the Internet, and using that to create wealth out of thin air.

Unfortunately, that thin air was really the sweat of dreamers woking for stock options (which were locked in, sealing their fate) and sucker investors, who bought into the obscene IPO gold rush and fattened VCs' wallets. As it became more obvious that they were running a giant pyramid scheme, that knowledge polluted the atmosphere, and they just ran out of air.

My enterepeneur acquaintance now finds himself trading debt for equity in his remaining business with banks, trading away what he built from the ground up out of his own pocket to corporate loan sharks. It's no wonder he's bitter. The web effort never went public; it went from dot-com digs in Palo Alto to a garage in Mountain View. Nobody made money off the deal–except possibly the VC fund managers, the lawyers and the bankers, who extracted their pound of flesh in fees and interest.

Now, analysts are looking at the long term patterns in the market, and sensing that this “bear” market could last more than a decade, just like '66 through '82.

There isn't much you can buy these days with a start-up stock option. And that's a good thing, because the Internet bubble defeated the ability of the marketplace to draw the best people and resources to the best ideas. The Internet IPO boom gave companies with marginal ideas and little chance of long-term success the financial resources of capitalist giants (Yahoo!, remember, once had a market capitalization greater than some auto companies; AOL was so overvalued that it managed to buy TimeWarner). Talent and capital was wasted on WebVan, Pets.com, and other pinhead ideas because VCs and the big finance companies conspired to use them to fleece the market.

Now,it's becoming clear that lots of companies