An article in the Guardian's finance section recently caught my eye. Entitled "Burning ambition doomed to failure" on - what else - the current crash-and-burn trajectory of several high-profile dot.coms, it began with this sentence: "There is a new technology buzzword: burn rate."

I did a double take. "New." Hardly. Burn rate, as the article goes on to explain, "is shorthand for the speed with which Internet companies consume cash resources".

As with so much American business slang, it's an excellent term, short, pithy and highly visual. But the phrase has been around at least for four to five years, emerging out of the rise of the Web and the consequent phenomenon of the profitless Internet company with an insatiable desire (and need) for investor cash.

The term was actually the title of one of the earliest and best books on the cut-throat nature of bringing - or attempting to bring - a dot.com to market.

Or at least, to sell one dot.com to another company for a sum equivalent to the GDP of a small European nation. This is the corporate variation of the Greater Fool Theory much beloved of share day-traders - the trust, not yet entirely discredited, that there's always a greater fool, willing to pay even more for a share/company than you did.

The book, Burn Rate: How I Survived the Gold Rush Years on the Internet, by journalist Michael Wolff, was published nearly two years ago and describes a period of his life another two years or so before that. So really, we are talking about a phrase which is geriatric in Web terms.

Surprisingly, the Guardian article is a guest piece by the chief executive of a securities company, whom you would think would know his terminology.

Certainly, the fact that he gets it so wrong on such a telling detail made me immediately sceptical about the article in general. But it's actually quite a good, insightful piece on the markets and their shifting attitude towards companies that, until recent weeks, would have had to top 25 per cent growth every year for decades in order to perform to their ridiculous market capitalisations. Which brings me back to Burn Rate, the book. Perhaps the most striking feature of Mr Wolff's tale is how stupid the bricks and mortar world was when it first gazed upon the Web. Mr Wolff had smart books called NetGuides that he realised could be spun off successfully for the Web.

Established media companies that wished to get on the Net - in this case, the company that eventually turned out the TechWeb technology news site - were willing to pay him astronomical sums for the concept. His descriptions of his encounters with old media company executives, willing to offer anything and totally clueless about the new online medium, are hilarious.

Mr Wolff then created an online media company himself and became entangled in a series of up-and-down buy-out discussions with everyone from Wired magazine to the late Robert Maxwell's media company, TimeWarner, and AOL. One night he went to bed believing he was about to become a multi-multimillionaire; the next, he found he had been removed as head of his own company by his venture capital investors. It's a stupendous read, inadvertently not always very flattering to Wolff, and a sizzling cautionary tale for the management of start-ups.

But even more so, it's a view into what's happening right now in the dot.com sector because the bricks and mortar world - and those of us used to investing in it -are still ga-ga over the Web and still as foolish as Wolff's initial investors.

Established real world companies still blindly throw money at business-to-consumer websites with little return on investment. Dazzled by the Web, they mistake the website as a business in itself, rather than a tool that might, handled correctly, enable them to magnify the capabilities they already have in the bricks and mortar world of selling.

At the other end, investors have poured money at unprecedented rates into this most nebulous of worlds, throwing out all the metrics usually used to predict a company's chances of success. Fascinated by this new world that few, still, understand, investors have been happy to buy shares from other investors according to the Greater Fool Theory, until valuations became hyped far beyond even the most enthusiastic rational evaluation of the company's prospects.

The shakeout has been long in coming. I think the critical moment arrived weeks ago when, as the Guardian article notes, Barron's magazine in the States published research that predicted many well-known dot.coms were months away from pulling down the shutters unless they received serious new infusions of cash.

Such scenarios had been predicted in the abstract for nearly the entire bull run of Net stocks. But reading that well-known, and seemingly highly-successful sites like CDNow and Drkoop.com were weeks away from implosion gave a startling tangibility to earlier warnings.

These have been underlined by high-profile failures of some very visible sites like Disney's ToySmart in the US, and Boo.com and NetImperative.com in Britain, with the promise of many more to come. Venture capital funding has, reportedly, dried up and venture capitalists are now more selective.

But I wonder. Are venture capitalists - the supposedly shrewd, high-tech money professionals in charge of vast investment funds - so blind that they could not see the need for at least relatively watertight and thoughtful business plans until Boo.com slapped them in the face?

If so, the world has indeed gone mad. But then, Michael Wolff realised that about the silly Net world back in 1996.

klillington@irish-times.ie