Icarus Factor

AAA

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.

INVESTOPEDIA EXPLAINS '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 Finance

    A field of finance that proposes psychology-based theories to ...
  3. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  4. Taylor's Rule

    A guideline for interest rate manipulation. It was introduced ...
  5. Irrational Exuberance

    Unsustainable investor enthusiasm that drives asset prices up ...
  6. Emotional Neutrality

    The concept of removing greed, fear and other human emotions ...
RELATED FAQS
  1. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  2. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
  3. How is perpetuity used in the Dividend Discount Model?

    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
  4. How valid is the notion of economies of scope?

    The concept of economies of scope is widely accepted in both managerial and theoretical economics. It proposes that it is ... Read Full Answer >>
  5. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... Read Full Answer >>
  6. What is the relationship between modified duration and interest rates?

    Modified duration is a formula that measures the value of a bond in relation to changes in interest rates. Modified duration ... Read Full Answer >>
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. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  5. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  6. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  7. Economics

    Explaining Cash On Delivery

    Cash on delivery, also referred to as COD, is a method of shipping goods to buyers who do not have credit terms with the seller.
  8. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  9. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  10. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center