Risky decisions and safe decisions happen in a different part of the brain.....

In a third study—this one in 2005—researchers used fMRIs to monitor the brain activity of participants as they chose between stocks and bonds based on a small amount of information about the performance of each.
Participants were prone to two types of investing mistakes: risk-seeking mistakes (going for the stock when it was unwise) and risk-aversion mistakes (going for the bond when a stock would have been more promising). And in the brain, the two looked completely different.

Whereas risk-seeking mistakes were associated with high activation of the nucleus accumbens, risk-aversion mistakes were linked to activation of the anterior insula, a hub of social emotions and self-awareness which other studies have found lights up when people "feel pain, anticipate pain, empathize with others...see disgust on someone’s face...[and] decide not to buy an item."

What Happens to Your Brain When You Negotiate About Money

Not once in the original edition of Getting to Yes: Negotiating Agreement Without Giving In, which was published in 1981, was the word “brain” mentioned. Certainly, the “mind” was invoked several times to discuss the psychological aspects involved in negotiation. The absence of the “brain” is to be expected, as neuroscience didn’t reveal insights into negotiation and money usage until the mid 2000s, after functional magnetic resonance imaging (fMRI) was introduced a decade before.

But as one prominent neuroscientist put it, “MRIs are a game-changer.” For example, researchers in one study could predict whether participants would choose to buy stocks or a bond by looking at their brain scans. Participants who chose stocks, the riskier investment, had more activation in their nucleus accumbens, a section located deep within the brain that’s part of our reward circuitry and plays a role in processing motivations and emotions.

Part of the reason such results are so easy to see is that nothing excites the brain quite like money.

When you’re negotiating about money, for instance you’re dealing with something that elicits tremendous neural excitement. In one study, a team of researchers scanned the brains of a dozen people while they played a game in which they could make or lose money. The scans revealed the nucleus accumbens had heightened neural activity. The researchers then compared the brain scans of the participants who were about to make money with drug addicts high on cocaine. The results were startling: the brain scans were nearly identical.

“We very quickly found out that nothing had an effect on people like money – not naked bodies, nor corpses. It got people riled up. Like food provides motivation for dogs, money provides it for people,” says Dr. Brian Knutson, one of the researchers, and an expert who has published many works on the neuroscience of financial decision-making.

Brain scans can also help illustrate what’s happening in our brains when we’re making non-rational financial decisions in a negotiation. In another study, the brains of nineteen participants were scanned as they played the “ultimatum game,” which involves negotiating about money. During each iteration of the game, two participants known as the “proposer” and “responder” were asked to split an amount of money. If they couldn’t agree, nobody would receive the money. The proposer made an offer, and the responder decided whether to accept or reject it. The rational, logical decision for the responder would be to accept any offer, as its better to have something in your pocket instead of nothing at all. But responders rejected about fifty percent of low offers, as they felt insulted with the low offers. The responders would rather punish the proposers than make a buck themselves.

But what’s happening in the brain to lead to this decision? When a responder receives a proposal on how to split the money, it fires his dorsolateral prefrontal cortex. This region of the brain is what makes us self-aware, reflective beings and helps us solve complex problems. So it makes sense that it activates when we are evaluating a financial decision. But when responders were offered an unfair proposal, another part of the brain activated, the anterior insula, which is part of the emotional wiring of the brain, involved in making us feel anxiety, pain, even hunger. And actually, the anterior insula has what’s known as “spindle cells” that are more commonly found in the digestive system. “When you get a ‘gut feeling’ that an investment has gone sour, you might not be imagining. The spindle cells in your insula may be firing in sync with your churning stomach,” writes financial journalist Jason Zweig. So when you negotiate about money, and you get a lowball offer, you might feel it in your gut.

Given how transparent our brains are when we’re thinking about cash, perhaps today’s negotiators should take comfort in the fact that MRI machines are still confined to hospitals and research labs. But know that it might not stay that way forever. Already, some hedge funds are exploring whether to use brain scans in evaluating prospective job candidates to see whether they are more risk averse or risk seeking. And the day may come when the brain scans of negotiators, arbitrators, and mediators, are scrutinized to see whether an individual is predisposed to making decisions that are rational or more subject to emotions. “Getting to yes” may mean taking an MRI first.