Amygdalae Management Key to Avoiding Another Great Depression

I’ve been following the Bear Stearns/Fannie Mae…err, Fannie/Bear/Merrill/Lehman/AIG (until further notice, dubbed FrannieLeh) for a few weeks now. I’ve been especially fascinated by peoples’ comments, which offer insight into peoples’ emotional reactions to the ongoing crises. Here are some real-life examples:


Bye Bye Lehman – glad to see you go. This was a long time in the making and a much deserved outcome.

Prediction: Dow @ 50 next week.

…the pessimism bubble has hardly even begun.

U.S. Financials sinking like a stone and taking the whole world down with us…..I guess misery loves company. At least this will be one for the history books….a GLOBAL depression instead of just a U.S. depression. watch on the corners soon for apple sellers.

Let’s sell New Orleans and Detroit to China to pay off our national debt. Move the capital to Bismarck, ND and sell Washington DC too.

Let them go bankrupt. If the treasury comes to the rescue I will not vote Republican in the election.


This is what happens when the dems legislate for minority and disadvantaged borrowers – forcing banks to act like socialsts.

the real idiots were those borrowing more than they could afford, and those hoping to profit off it (read “Americans”). It’s time to pay for your ignorance and arrogance.

The funny thing about economics is that emotions are just as important to outcomes as balance sheets. When people are using this kind of language, consistently, across blogs, we’re in a fragile place, expectations-wise. It’s not mass hysteria, but I see it edging closer to that.

Yesterday, I read about a part of the brain called the amygdalae.
The almond-shaped neural clusters, located on each side of the brain, receive input from sensory organs such as the eyes and ears (via the relay switch that is the thalamus). They then process this information to inform physical reactions, such as reflexes, facial expressions, and dopamine rushes, as a response to the information. In other words, the amygdalae turn external inputs into emotional reactions.

The neocortex also processes sensory information, and tends to come to more rational conclusions. However, our bodies are wired such that it takes sensory information longer to reach the neocortex than the amygdalae. We’re physically wired to react emotionally first, then rationally.

Take the current financial crisis. By the time the neocortex tells us to relax and wait things out (or to sell X or Y), the amygdalae have already caused us to pace restlessly and shout out emotionally charged conclusions.

Right now, commenters’ amygdalae are making them twitch and jerk in paranoia. I’m sure Wall Street feels the same way. This concerns me, because charged emotions not only reflect crises, but expand them as well. They’re the bridge between bad and awful.

If there is another Great Depression coming (a topic I’ll explore in more depth in the near future), it will undoubtedly be precipitated by people incapable of managing the consequences of their fired-up amygdalae. Scared corporate leaders, a scared population, and scared politicians will lead to a painful downfall more readily than a collapsed set of banks.

My words to people in general: Be temporarily fired up, if you must. But before you make things worse, calm down. Please.

  • I like the way Brad Sugars put it: “You can choose to be a statistic or you can choose to do something different,” when it comes to the gloom and doom predictions on the economy (…). I’ve definitely had my share of Chicken Little phone calls telling me to take my money out of the bank because – get this – the entire American economy is collapsing. My thought is: if the economy tanks, does it really matter where I keep my money, if it’s suddenly rendered worthless? Doubtful.

    Drea, I’m looking forward to your upcoming post on whether you think there will be a depression. Do you think we could get you to do a guest post on our blog about your thoughts on what things will mean for small businesses?

  • I don’t hear panicing in the streets or feel the flames of riot. I suspect this disaster is more like a rollin cancer then a sudden storm.. of some combination of both.