• Fortune, Thursday, March 27, 2008 11 AM

Fortune writer Adam Lashinsky thinks there's something eerily familiar about the last-dot com bubble, which started and ended in Silicon Valley, and the current one. He writes: "Those who watched its giddy rise and sickening fall remember the predictable way the collapse began: in denial." There was this belief that whatever was going on in the economy wouldn't affect the innovation that was happening in Silicon Valley. Well, it turned out that the very thing that was wrong with the economy was what was going on in Silicon Valley.

Of course, things are different now. The economy isn't tanking because of irrationally priced tech IPOs--but it's still tanking, says Lashinsky, and to think the tech industry will be an exception would be folly. As venture capitalist Jim Breyer says, the ramifications of an economic slowdown are "huge" for established Web firms and Silicon Valley startups alike. "Silicon Valley is often very delusional," Breyer says. "So one of the challenges is to step back and say: 'If there is a recession, why won't advertising spending be cut dramatically? And if advertising spending is cut dramatically, why doesn't that deeply affect our consumer Internet companies?'"

Another way of looking at it, Lashinsky says, is that if Google's profitability is threatened--and by most accounts now it certainly is--then no technology company is safe.

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