So much for the new economy.
The stock market has shaken out the dot-com wonder-companies with grand ideas and no visible hope for profits.
Everybody knew a reckoning was due. It arrived with a stunning crash last week in the Nasdaq, where internet and telecommunications start-ups graze for capital.
The Nasdaq's partial recovery this week is a good sign, though. It shows that there's nothing wrong with dot-coms as a class. Investors just need to discriminate.
For a while, popular commentary was distinguishing between a new economy, populated by virtual companies and based on information, and an old economy, haven of brick-and-mortar has-beens.
And dot-com stocks behaved as though the new economy made old rules, such as the need for investors to discriminate, obsolete.
The Nasdaq crash ended that nonsense. Oil and gas companies should welcome the development.
The ballyhooed "information economy," fueled by rapidly advancing internet and telecommunications technology, can't exist in isolation from brick-and-mortar factors of production: land, labor, and capital.
Information has to attach to something in order to create value. It has to be about something.
It performs two main functions in the economy: leveraging labor and mobilizing capital. In those capacities, its power is profound.
But it does not make labor and capital any less essential to the creation of wealth.
In that sense, information is like externally sourced energy, which changed human existence by leveraging labor. Without the link to human exertion, energy is just random fire in a dark forest.
There is no economy based on energy alone. And there is no economy based on information alone.
The message is subtle but important. Information has value only to the extent that it closes vital circuits of curiosity and enlightenment in the physical world. Without those attachments, it's only babble.
The internet and wireless telecommunications have made enormous changes in the traditional economy. But they haven't created an economy unto themselves and never will. Their value resides not in the virtual air but where information connects with tools of physical creation.
There is no new economy. But there can always be a better one.
