Money makes people do some really irrational, sometimes even dangerous things. Others just make bad decisions when there's cash on the line. So what is it exactly that happens to the human brain when money comes into play?
Kabir Sehgal, a former vice president at J.P. Morgan and author of Coined: The Rich Life of Money and How Its History Has Shaped Us, writes in Harvard Business Review about the intersection of money and neuroscience. In the mid-2000s, Sehgal writes, neuroscientists started using functional magnetic resonance imaging machines to observe which areas of the brain get stimulated when people make financial decisions.
The results from multiple studies found some incredible results. Check out the most interesting findings about how money affects the brain below.
1. Money heightens neural activity
When you are negotiating about money, your nucleus accumbens, a part of the brain tied to reward circuitry, is stimulated. In one study, researchers scanned the brains of 12 people as they played games for money. Everyone in the group experienced "heightened neural activity," Sehgal writes, especially in the nucleus accumbens. When the researchers compared their brain scans with those of addicts who were high on cocaine, they found they were almost identical. "Nothing had an effect on people like money--not naked bodies, nor corpses. It got people riled up," Brian Knutson, one of the researchers, told Sehgal. "Like food provides motivation for dogs, money provides it for people."
2. Brain scans reflect risk-taking behavior
Another study, from Stanford Graduate School of Business, looked into why investors make irrational financial decisions. The researchers found they could predict whether a participant would choose to buy a riskier security, like a stock, or a less risky one, like a bond, just by scanning their brains. The subjects who had naturally elevated stimulation of their nucleus accumbens would most likely buy the stock.
3. Ties to gut feelings
Do you ever have a "gut instinct" about an investment or deal? Research has found that the gut instinct is has a real physiological basis. In one study, researchers scanned the brains of volunteers while they played the "ultimatum game." The game goes like this: One player, the proposer, offers a deal to split a pot of money. The responder either agrees and they both get their agreed-upon cut of the dough, or the responder doesn't agree to the deal and neither party gets any money.
The researchers found that receiving a proposal on how to split the cash activates the responder's dorsolateral prefrontal cortex activates, the clump of gray matter responsible for self-awareness, reflection, and solving complex problems. If the responder is offered what he views as an unfair proposal, however, it activates the anterior insula, part of what Sehgal calls "emotional wiring of the brain," responsible for feelings of hunger, pain, and anxiety.
Interestingly, the anterior insula is partly composed of "spindle cells," which are also found in the digestive system. "When you get a 'gut feeling' that an investment has gone sour, you might not be imagining," Jason Zweig, a financial writer for The Wall Street Journal, tells HBR. "The spindle cells in your insula may be firing in sync with your churning stomach."