Icarus Factor

DEFINITION of 'Icarus Factor'

The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

BREAKING DOWN 'Icarus Factor'

In Greek mythology, Icarus and his father, Daedalus, were imprisoned in Crete by King Minos. Daedalus created two sets of wings made from wax and feathers. He and his son were to use them to escape by flying. Daedalus warned his son not to fly too close to the sun. Icarus was overcome with the excitement of flying and disregarded his father's warning. He flew higher and higher, approaching the sun. As the wax melted and the feathers fell, so too did Icarus fall to his death in what is now called the Icarian Sea, near Icaria, an island southwest of Samos.

The Icarus factor is most often seen when companies plow into businesses that work on different models from their existing lines. As they spend more and more money to try and catch up to companies already dominant in those fields, they use up the cash reserves built up by their core business - sometimes this drain can be fatal.

RELATED TERMS
  1. Infectious Greed

    A phrase used in his July 2002 testimony before the Committee ...
  2. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  3. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  4. Emotional Neutrality

    The concept of removing greed, fear and other human emotions ...
  5. Irrational Exuberance

    Unsustainable investor enthusiasm that drives asset prices up ...
  6. Taylor's Rule

    A guideline for interest rate manipulation. It was introduced ...
Related Articles
  1. Active Trading Fundamentals

    3 Psychological Quirks That Affect Your Trading

    There are human tendencies that can block the road toward achieving our financial goals. Here's how to get around them.
  2. Investing Basics

    Master Your Trading Mindtraps

    Traders are only human; therefore, they are subject to psychological traps when they trade. Read how you can manage your emotions so that you can profit from your trading.
  3. Options & Futures

    The Importance Of Trading Psychology And Discipline

    Find out how investing success can be more about your mindset and less about the markets.
  4. Term

    The History and Purpose of TQM

    Total quality management explores processes to enhance quality and productivity.
  5. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  6. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  7. Executive Compensation

    How Restricted Stocks and RSUs Are Taxed

    Many firms pay a portion of their employees’ compensation in the form of restricted stock or restricted stock units.
  8. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  9. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  10. Economics

    The Basics Of Business Forecasting

    Whether business forecasts pertain to finances, growth, or raw materials, it’s important to remember that a forecast is little more than an informed guess.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  4. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center