What's wrong with an Ego?

The ego is a curious thing isn't it?
Let me tell you a little story I heard recently.
A friend of mine was in a grocery store, just lookin around for a few things and he walked down one of the aisles.
While he was there a woman walked down the same aisle pushing a cart.
She had her little girl in the top part of cart and they were both just shopping.
Then for just a second the mum turned the corner and this little girl just started to wail.
My friend said it was one of those deep, throaty, blood curdling wails, like someone was trying to kill this kid.
Her mom had just turned the corned for literally about 2 seconds and this little girl frickin lost her mind. I guess she was convinced that her mom had left her for good, and that she'd be stranded in this grocery store with my friend. I thought to myself, hey that wouldn't be so bad, my friend's a nice guy, she'd have lots to eat, what's the big deal?
Right?
What's the big deal?
The funny thing is though that that little girl couldn't tell the difference between a non existent threat to her survival and an imaginary one.
She just didn't know what else to do but wail.
Our egos work in the same way. They're really quite naive. They work really well for what they're intended for, namely survival of the physical self, but what about when the threat is really just imaginary, or when we know that the physical self is actually a hindrance (e.g. transcendentalism and the like)?
What are we supposed to do when we confront situations that our ego tells us is dangerous?
How can we tell when it's just our ego talking and not a reasonable response to our environment?
How can we get rid of this pesky nuisance and start living a life that is more in tune with "reality"?

I'll talk a little more about this tomorrow.