At some level, all entrepreneurs have to be optimists, ready to charge ahead in the face of long odds. At the same time, though, they have to be pragmatic, lest they foolishly waste other people's money. The inherent conflict therein is especially acute in what optimists refer to these days as the "uncertain" economic environment.

Any pragmatist who is paying attention will tell you that the "uncertainties" of the economy, or at least the US economy, have to do not with whether it will get uglier, but how much uglier it will get. This weekend's headlines about a de facto nationalisation of Fannie Mae and Freddie Mac, the government-charted mortgage lenders, were chilling indeed, suggesting there could be literally trillions out there in homes with negative equity as housing prices continue to drop.

There are also some related financial disasters that are imminent, namely a meltdown in non-mortgage consumer credit markets. The easy money that helped create the housing bubble was also the norm in credit cards and other forms of consumer finance, and the same economists who warned about the housing bubble say it's all but a given that this will soon blow up as well. Once people start defaulting on their car loans and Visa payments, it will be clear that the financial institutions holding that debt have yet another huge problem on their hands.

Combine all that with the doubling of gasoline prices, soaring costs for food and other commodities, and ongoing (and hugely costly) military engagements, and it's very hard not to conclude that we're heading for some seriously tough economic times. We all want to believe things won't be so bad, but as they say, hope is not a strategy.

Media businesses are certainly vulnerable in a recession, and we've already seen some of the impact at NewWest.Net. Many advertisers are turning cautious, especially when it comes to our new print magazine. Fortunately, all forecasts suggest that online advertising will be far healthier in the downturn than TV, print and other traditional venues. The shift of ad dollars from other media to the internet will continue no matter what the economic situation, and thus online advertising is almost certain to grow no matter what – though growth might be closer to 10 per cent annually than to the 30 or 40 per cent of recent years.

And this in turn points to the core dilemma facing internet entrepreneurs and their financiers. On the one hand, the core premise of Web 2.0 is that we are in the midst of once-in-a-lifetime changes in the media world, basic structural shifts that will take decades to play out fully and will result in an information universe that looks nothing like what we have today.

If that's true, even a serious recession will be only a blip in the grand scheme of things. Venture capitalists by definition are long-term investors - a five-to-seven-year time horizon is pretty common among VCs – and thus macroeconomic cycles matter only at the margin. The big recession of the early 1980s actually coincided with the birth of the personal computer and a dramatic re-birth of Silicon Valley. Silicon Valley today, not coincidentally, has one of the healthiest housing markets around.

Still, the theory is all well and good, but the reality is that most Web 2.0 business are mostly advertising-supported, and if there are fewer ad dollars that is going to hurt. VCs too can lose faith in the face of a persistent bear market.

Entrepreneurs, while they charge ahead, are also supposed to be looking around the corners and acting prudently on the information they have available. So how do you balance the short-term macroeconomic risks with the long-term opportunities?

Playing for the long run is fine, but as Keynes famously said, in the long run we're all dead. Don't be too careful, or you'll miss the big chance. Don't be too heedless, or you'll be finished before you even get your shot. That's one of the reasons start-ups are hard – and why recessions are scary for everybody.

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Jonathan Weber is the founder and editor in chief of NewWest.Net, a regional news service focused on the Rocky Mountain West in the United States. He was previously the co-founder and editor in chief of the Industry Standard

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