For more on the hierarchy of psychic functions and how to avoid the degraded form of thinking here are some relevant excerpts from A Guide to the Perplexed Interdimensional Traveler:

Ego Bashing

In New Age and Eastern circles, ego-bashing and intellect-bashing are the norm, and it is often claimed that the only path to enlightenment is to eliminate ego completely. Unfortunately, they're never able to show you people walking around and functioning without egos. Their claims are like a diet book filled with endless horrifying "before" photos but without any believable "after" photos. To the extent that they have an "after" image, it comes into focus in the manner of an incompetent watercolor done in an impressionist style. And when they do claim to have an egoless guru to show you, it inevitably turns out to be a womanizer with fifty Rolls Royces and an immature, unruly ego so gigantic and off-Scale that the deluded disciples can't see that the Emperor of No Ego is naked while their ego projections clothe him in Saruman's wizard cloak of many colors.

The Self-Organizing Principle of the Organism

Ego is so basic to our existence that one transpersonal psychologist defines it as "the self-organizing principle of the organism." With no ego there is no self-reference which you need to do almost anything. An amazingly good discussion of the nature of the ego is to be found in the "What is Ego?" edition of What is Enlightenment magazine. Everyone they interviewed had something fascinating and insightful to say about the nature of ego except for one famous female guru from India, who while claiming to be a divine being without ego, reveals the classic delusions of a sadistic, power-tripping, gigantically inflated ego.

A Flaw in Many Eastern and New Age Paths

Eastern gurus with acting out, unruly egos have become such a classic syndrome that they deserve special mention in our discussion of ego. Jung, who helped bring the I Ching and other Eastern teachings into the West, warned Westerners not to uncritically adapt wholesale Eastern practices of transformation that were designed in a different era for psyches quite different from those wefind today in the West (and increasingly in the modern East).

A classic flaw in many Eastern approaches to transformation (and also certain New Age and Christian permutations) is a one-sided emphasis on vertical spiritual transcendence and a gross neglect of the horizontal plane of human incarnation — the engagement, the descent into the worlds of relationship, activity in the world and the details of how our personalities work and interrelate.

Especially deficient in so many of these vertical transcendence sects is the integration of what Jung called "the shadow" — the inferior and repressed parts of the personality typically hidden by a cloud of self-loathing, denial, and unconsciousness. Hidden within the shadow are often unexpected talents and powers cast off with the rest of the unwanted aspects of personality.

Mind and Ego in the Hierarchy of Psychic Functions

‎"The intuitive mind is a sacred gift, and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift."

— Albert Einstein

Eliminating the ego to resolve our troubled relationship with it is no more sensible than decapitation would be as a remedy for recurrent headaches. Superstitious dread of the ego is almost always accompanied by a fanatical anti-intellectualism and disparagement of the mind. Mind and ego are not our enemies. It is where we place our mind and ego and how we work with these priceless resources that often make them our enemies. In most I Ching hexagrams, the fifth line is the ruler, and the fourth line is the minister. This structure contains the secret of how to work with the ego and mind so that they become powerful allies instead of adversaries. In the place of the ruler in our psyche should not be our ego or mind but our higher Self and global intuition. (I'll discuss where the mind and ego should be in a little bit.)

True Will and Taoism

Taoism is often presented in a way that makes it seem that you are passively surrendering to an outside Tao. A way to pierce through this illusion is with a concept such as Aleister Crowley's "True Will." (Note: I'm not endorsing Crowley's character, only certain of his concepts.)

Your True Will is the will of your higher Self, the will that arises out of the depths of your Self. Some object to his use of spatial metaphor to describe the Self, but it is the most concise way of cutting to the essence of this concept. True Will speaks through the still, centered voice of global intuition and is often confirmed by synchronicities, oracle consultations, etc. It is your inner refraction of the Tao and the guiding star you should follow. Following your True Will might require you to overcome all sorts of inner and outer obstructions. You are not necessarily passively led by outside trends. As George Bernard Shaw said, 

"The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man." 

Many would interpret the reasonable man's position as Taoist and the unreasonable man's position as egoistic and anti-Taoist. This would be true if the unreasonable man expected the world to adapt to his ego. But if the unreasonable man is centered in his True Will, then his stance is Taoist as compared to a "reasonable" person whose reason and rationalized ego are oriented toward accommodating the default parameters of the Babylon Matrix.  (See Dynamic Paradoxicalism — the Anti-Ism Ism for more on my version of Taoism).

The Ruler and the Minister of the Psyche

With your True Will and global intuition in your psyche's ruling place, you can appoint your mind and ego as ministers that follow the ruler and work as helpful subordinates. In this place, ego and mind can, among other functions, act as skillful intermediaries between the aims of your True Will and the outside world. Only when the mind and ego are foolishly promoted above their capabilities into the ruling position do they work at cross-purposes and undermine everything we do. And yes, they can be foolishly ambitious in the way of the Peter Principle to rise to their level of incompetence. The unenlightened ego thinks it should be in charge. The goal is to develop a more conscious, evolved ego that knows its place. The mind can also be a brilliant amplifier and translator for global intuition and primal creativity, among other useful functions. Try fixing your computer with your feelings or transcendent spirit! 

I'm still working on aligning these aspects of the psyche in myself. Consciousness is not something you arrive at, but that you must earn and work toward moment by moment. I'll briefly use myself as an example to ground this in a particular real-life case. Because I am (according to Jung's typology) a thinking-intuitive type, raised by thinking types, people often have an understandable (but somewhat mistaken) impression that I am up in my head thinking of the things they hear me say or write. More often, the way I experience my psyche working is that there is a cascade of intuitions. My active thinking function works with that cascade, analyzing, interpreting, and typically turning the intuitive input into complex sentences that may give the impression they were "thought up." Of course, sometimes I call up memorized raps on various subjects and recite them. But originally, these raps were sourced from a melding of intuition and thought. After the fact, I can ask the thinking function to act as an information minister and recite the rap, which has been processed (and sometimes distorted) by thinking but not originally created by thinking. I experience my thinking function as hollow, dull, and incompetent when it works by itself (except when it's troubleshooting the computer, learning instruction manuals, etc.)

 I can only feel enthusiastic about using my psyche when intuition, thinking, and (often) feeling are all connected and working together. The difference is instantly discernable, like the difference between a stereo system where all the components work together to create a full, spatial sound compared to the tinny, irritating monophonic tone of an AM radio broadcasting a call-in radio show. Of course, sometimes the ego can play tricks, like putting a grandiose symphonic soundtrack behind its irritating, hollow monophonic voice. But if you pay attention, you can tell the difference.