The benefits of using A.I. havent come at the expense of Novartiss people; its scientists havent become subservient to the technology. Au contraire, thanks to the technology, the scientists no longer have to comb through myriad documents to find data, and can focus on more value-adding tasks. Moreover, building on the A.I.s data-based recommendations, the scientists are deepening their understanding of molecular properties and stimulating their creativity, which is enabling them to develop novel molecular combinations faster. 

The technology may well be called augmenting, rather than artificial, intelligence. A popular perception is that businesses generate value with A.I. at the expense of employees, but thats mostly a myth. Our studies show that the technology benefits both companies and employees. Only 7% of employees believe that they get little or no value from using A.I. but that their companies achieve value from it, according to the recently-unveiled 2022 BCG MIT SMR A.I. Report. In fact, as many as 64% of employees admit that they personally benefit from using A.I. in their jobs. And despite the widely held suspicion that A.I. makes employees feel inferior, a mere 8% complained that job satisfaction had fallen after using the technology. 

Importantly, organizations are more likely to generate value from A.I. when they focus on how their employees too can gain value from A.I. Companies whose employees gain value by using A.I. are almost six times as likely to generate significant financial returns from the technology than organizations that dont. That begs two questions: How exactly do employees derive value from A.I.? And how can organizations ensure that it happens systematically? 

How employees personally benefit from A.I. 

Academic theory suggests that at work, people have three basic psychological needs: Competence, autonomy, and relationships. Once fulfilled, these needs lead to greater motivation and employee wellbeing. Employees derive value from A.I. when the technology helps fulfill those three needs, according to the BCG-MIT SMR A.I. Report. 

Greater competence. A.I. helps employees become more competent by deepening their knowledge of the work they do, and by providing granular recommendations so they make better decisions. It can also help people become more creative and explore new ideas, as at Novartis. The reports findings reinforce that relationship: Employees who use A.I.-based recommendations to improve their performance are nearly 1.8 times as likely to derive value from it as those who dont. 

At the American insurance group Nationwide, for instance, claim adjusters have become more knowledgeable about fraudulent claims by using A.I. The technology helps them analyze thousands of client data points, which has allowed them to better understand fraud markers and how theyre interconnected. By helping them gain better insights into the working of insurance scams, the A.I. is helping the adjusters identify fraud more confidently and stay ahead of the game. 

More autonomy. A.I. bolsters employees autonomy by providing data-based guidance and reducing the need for managerial oversight. It can help employees learn from past actions, project future outcomes, and recommend novel decisions. Two-thirds of our respondents reported that they use A.I. to recommend new actions they could take. 

A.I. is helping Walgreens pharmacists do their work with less oversight, for instance. By using tools that forecast when orders will be ready and using chatbots to inform customers, the pharmacists have been able to reduce customer wait times. Long wait times, a major source of customer complaints, used to result in the pharmacists constantly being quizzed by senior management. Those calls have now largely stopped; and by lowering the need for managerial intervention, Walgreens A.I. has made the pharmacists feel more empowered. 

Better relationships. A.I. can strengthen the relationships between managers, coworkers, and customers because it improves the way people collaborate and share knowledge. As many as 56% of respondents believe that using A.I. has led to improving their interactions with other team members. 

A.I. can also assist in building deeper customer relationships. Trying on lipsticks in retail outlets can be time-consuming, but Estee Lauders customers can now test an entire palette of colors virtually by using its A.I.-powered tool. Not only has it boosted customer engagement with the companys store assistants, but it has repositioned them as beauty advisors. The store assistants can analyze more options before making recommendations, which has deepened customer trust in them. 

Organizations must catalyze A.I. use and value for employees 

Companies have four tools to trigger employees use of A.I. and ensure that the latter generate value from using the technology. 

Raise awareness. Many employees use technological solutions that contain A.I.-based components without realizing it. That can be a problem; our data show that employees who know theyre using A.I. are 1.6 times as likely to perceive value from it compared to those who dont realize the fact. Organizations would do well to ensure that employees know theyre using the technology in their day-to-day work. 

To increase employees awareness, signaling A.I.s use is critical. Managers who lead by using the technology are 3.4 times as likely to boost employees A.I. usage than those who dont. Perception too is critical, especially in the early stages. Treating A.I. as an opportunity at the pilot stage correlates strongly with employees deriving value by using the technology. 

Boost understanding. Companies can nurture A.I.s use over time by ensuring that employees understand the technologys full potential, and the kinds of value they can extract from it. People who understand how to work with A.I., and can explain how it operates, are 1.7 times as likely to derive individual value from A.I. as those who dont.

Thats why Levi Strauss & Co, for example, holds bootcamps at which frontline workers learn how to use A.I.According to the company, employees who participate emerge not only with a better understanding of what A.I. can do, but also with a fresh sense of what they themselves are capable of. Over time, many become ardent advocates of A.I.

Build Trust. Employees who dont trust A.I. will obviously be reluctant to use the technology. In fact, those who trust A.I. are twice as likely to use it regularly as those who dont, according to the survey. Organizations can foster trust in A.I. in different ways. The ability to understand A.I.s recommendations often builds peoples trust; employees who can interpret the technologys findings are almost three times as likely to trust it as those who cannot. 

Another trust-building lever is investing in a performance guarantee for A.I. Some companies have started buying insurance policies from companies such as Munich Re to cover their use of the technology. The insurer rigorously audits companies algorithms, so buying insurance signals trust in the A.I. to the company and its workers. 

Require A.I.s use (but let employees decide). As with all new technologies, companies will face resistance with A.I. adoption at first, especially in terms of decision-making. Mandating the technologys use, particularly in the early stages of adoption, was widely cited as a way of overcoming opposition in our survey and interviews. 

Although it may seem draconian, insisting that employees use the technology triples the likelihood that they will do so regularly. Moreover, employees are 1.4 times as likely to get value from A.I. when organizations require them to use A.I. as when the latter dont, suggesting that mandatory use still leads to individual value. However, managers should ensure that employees always have the freedom to make decisions; agency is critical for autonomy. 

Organizations are much more likely to generate value from A.I. when their employees are able to fulfill their psychological needs of competence, autonomy, and relationships, as the 2022 BCG MIT SMR A.I. study shows. Contrary to conventional wisdom, A.I. actually forges a symbiotic relationship between an organization and its people. 

Read other Fortune columns by François Candelon. 

François Candelon is a managing director and senior partner in BCG, and the global director of the BCG Henderson Institute. You may contact him at This email address is being protected from spambots. You need JavaScript enabled to view it.. 

Shervin Khodabandeh is a managing director and senior partner at BCG and the co-leader of GAMMA (part of BCG X) in North America.

Remi Lanne is a project leader at BCG and an ambassador at the BCG Henderson Institute.

Some companies featured in this column are past or current clients of BCG. 

We have a ways to go, we have ground to cover with interest rates before we get to that level of interest rates that is sufficiently restrictivewe will stay the course until the job is done, Powell told reporters after unveiling the Feds fourth consecutive three-quarter point hike in the Federal Funds rate.

Thats not exactly what builders and mortgage brokers were hoping to hear.

On one hand, this latest hike shouldnt send mortgage rateswhich financial markets price ahead of anticipated shifts in financial conditionsspiking. On the other hand, this additional rate hike also means financial markets arent about to send mortgage rates plunging.

During the presser, Powell acknowledged that continued quantitative tightening means more pain still awaits the U.S. housing market.

Housing is significantly affected by these higher rates, Powell told reporters. The housing market needs to get back into a balance between supply and demand. Were well aware of whats going on there.

What exactly does that mean?

To get a better idea of where the housing market downturn might head in 2023, lets take a deeper dive into recent Fed commentary. Heres the five big takeaways.

1. The Feds housing market reset has pushed us into a difficult [housing] correction

In June, Powell told reporters that the U.S. housing market needed to be reset.

We saw [home] prices moving up very, very strongly for the last couple of years. So that changes nowId say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again, Powell told reporters this summer.

At the time, Powell admitted he wasnt sure how the reset would impact home prices. However, fast-forward to the September meeting, and Powell acknowledged that the Feds policy moves had pushed the U.S. housing market into a difficult correction.

According to Moodys Analytics chief economist Mark Zandi, a housing correction is a period in which the U.S. housing marketwhich got priced to 3% mortgage ratesworks toward equilibrium in the face of spiked rates. Unlike the stock market, housing corrections are felt most acutely through a sharp drop in home sales. That said, Zandi says this correction will also put downward pressure on home prices.

2. U.S. home prices are falling for the first time since 2012the Fed says it could turn into a material drop

In June, Powell said he was "not sure" if spiked mortgage rates would translate into lower home prices. But on Wednesday, Powell said "in some parts of the country you're [now] seeing house prices declining."

The data backs him up. The latest reading of the Case-Shiller National Home Price Index shows that U.S. home prices fell 1.3% between June and August. That's the first decline nationally since 2012.

While this [housing] market correction could be fairly mild, I cannot dismiss the possibility of a much larger drop in demand and house prices before the market normalizes, Fed Governor Christopher Waller told an audience at the University of Kentucky in October.

Waller went on to say this could turn into a "material" home price decline.

Just how big is a "material" correction? Waller didn't elaborate.

3. The pandemic's demand boom is over

Even as policymakers scrambled to save an economy with a double-digit jobless rate in the spring of 2020, the U.S. housing market was already moving into boom mode.

That boom was set-off by a spike in housing demand. Wealthy urbanities wanted second homes to help them escape locked down cities. Remote workers realized they could finally move deeper in the burbs or take off for a more affordable market. Meanwhile, investors realized that a combination of home price appreciation and historically low mortgage rates meant they could make a killing in the housing market.

"We show that the COVID-19 housing boom in the U.S. was driven by an increase in demand...Since new construction typically accounts for about 15% of supply, our estimates imply that new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand," wrote Fed researchers this summer.

That's all over now. In the face of soaring mortgage rates, that demand boom deflated. Second home purchases tanked. Flippers called timeout. And some would-be buyers got called back into the office.

This historic demand pullback could help the housing market achieve Powell's goal of "balance." By temporarily sidelining buyers, the Fed can give inventory breathing room to adjust upwards.

4. The U.S. mortgage backed securities market remains "broken"

Anytime the Fed moves into inflation-fighting mode, mortgage rates rise.

That said, the magnitude of the mortgage rate gains rates jumped from 3.09% to 7.3% over the past yearhas caught the industry off guard. Historically, mortgage rates trade around 1.75 percentage points above the 10-year Treasury yield (which is currently at 4%). That spread is around 3 percentage points right now. The reason? As the Fed backed off buying mortgage-backed securities, investorswho assume new borrowers will refinance in the future and thus reduce returnsweren't eager to pick up the MBS securities.

This divergence between Treasury yields and mortgage rates has some analysts claiming the "MBS market is broken."

While the Fed hasn't publicly commented on the spread, Powell did say in June he expects mortgage rates to eventually fall. What could cause that? If the Fed successfully tames inflation, it could pull back on hikes. There's also the chance that higher rates could push us into a recession, which would then prompt the Fed to lower rates.

5. A "material" drop in home prices shouldn't set off a 2008-like financial crisis

Unlike the housing correction that started in 2006, Powell doesn't expect the 2022 correction to trigger a financial collapse.

"From a financial stability standpoint, we didn't see in this cycle the kinds of poor underwriting credit that we saw before the Great Financial Crisis. Housing credit was much more carefully managed by the lenders. It's a very different situation [in 2022], it doesn't present potential, [well] it doesn't appear to present financial stability issues. But we do understand that [housing] is where a very big effect of our policies is," Powell said on Wednesday.

Fed Governor Waller had a similar message back in October.

Despite the risk of a material correction in house prices, several factors help reduce my concern that such a correction would trigger a wave of mortgage defaults and potentially destabilize the financial system, Waller told an audience at the University of Kentucky. One is that because of relatively tight mortgage underwriting in the 2010s, the credit scores of mortgage borrowers today are generally higher than they were prior to that last housing correction. Also, the experience of the last correction taught us that most borrowers only default when they experience a negative shock to their incomes in addition to being underwater on their mortgage.

Want to stay updated on the housing correction? Follow me on Twitter at @NewsLambert.

Sign up for the Fortune Features email list so you dont miss our biggest features, exclusive interviews, and investigations.

Investors can plow a minimum of $500 in her new so-called venture capital fund, which has Twitter as its top holding. Unlike most funds, this one will continue to own Twitter shares even after its switch from a public company to a private one under Musks control.

Venture capital is among the riskiest of all investments as it typically focuses on immature companies, which by their nature, have a high chance of failing. Musks erratic leadership style adds to the uncertainty.

We just started a public-private crossover fund and Twitter is in that fund, Wood told Bloomberg TV on Wednesday.  

She thinks that Twitters future looks bright, if Musk is able to make the major changes that hes promised. Hes already talked about expanding Twitters reach to include payments through a digital wallet similar to WeChat, resurrecting Vine as a short-form video alternative to TikTok, and growing its subscription business via Twitter Blue. 

The venture fund, marketed with Titan, a fintech startup that fancies itself as a kind of hedge fund for the little guy, is still quite small with an estimated portfolio of only $8.3 million. Its Twitter holding only amounts to approximately $1 millionabout 12% of the overall fund.

Over time we would like Twitter to be a larger holding, Wood said.

Other holdings include a health tech firm called Freenome, a digital payments company serving Africa called Chipper Cash, machine learning startup MosaicML, and a small indirect stake in Fortnite publisher Epic Games.

Wood said shes a huge fan of Musk, who she called a modern Thomas Edison, and is among the best known Tesla bulls on Wall Street. Critics, however, point to Musks impulsiveness and his habit of making promisesespecially related to his other company, Teslathat he fails to deliver on.

Paid dearly

The risks for people who invest in Woods new venture fundnever mind the other holdings in the portfoliohowever, are substantial given the price Musk paid for the money-losing social media company.

When he launched his bid, the Tesla CEO offered existing Twitter investors $54.20 a share, representing a 38% premium above what the stock was trading for at the time. 

Using the underlying $39.21 closing price from April prior to news emerging of Musks interest in Twitter, and applying the same 28% decline that hit the tech heavy Nasdaq, Twitters shares would be merely worth $28.40. 

That means Musk conservatively paid twice as much as the company is currently worth, more if you look at the collapse in social media stocks like Facebook-parent Meta and Snap that have fallen in the same period by 60% and 75%, respectively. 

As a consequence, trying to first recoup the investment and then earn a decent return is not a garden variety challenge.

Its been a hard year for Wood, whose flagship growth fund, which is focused on publicly-traded companies, has lost 60% of its value since the equity market rout started this year.

Its not just the overall bear market sentiment thats hurting though. Her stock picking record also hasnt been the best of late, either.

In May, she elevated Roku to one of the top three picks in her ARK Innovation exchange traded fund. On Thursday its shares dipped to the lowest theyve been since late 2019 after the company issued a disappointing outlook.

In her Bloomberg interview, Wood blamed her funds poor performance on supply chain bottlenecks impacting the companies its invested in, the war in Ukraine, and higher U.S. interest rates over the past nine months.

But Wood remained upbeat, saying the equity market was in the early stages of a bottoming process and the first to profit from that would be the innovation leaders in her portfolio that most have never heard of, not the heavyweight FAANGs of the world that include the parent companies of Facebook and Google.  

In the later stages of a bear market, our strategy starts to outperform, she said. We are the new Nasdaq, and most of our stocks are not in those indexes.

Sign up for the Fortune Features email list so you dont miss our biggest features, exclusive interviews, and investigations.

Billionaire Elon Musk plans to eliminate half of Twitters workforce, making good on plans to slash costs at the social media platform he acquired for $44 billion last month, people with knowledge of the matter have said.

In an effort to place Twitter on a healthy path, we will go through the difficult process of reducing our global workforce on Friday, Twitter management said in an email reviewed by Bloomberg. We recognize that this will impact a number of individuals who have made valuable contributions to Twitter, but this action is unfortunately necessary to ensure the companys success going forward.

The company will inform affected staffers Friday at 9 a.m. San Francisco time, according to the memo. Amid the layoffs, Twitter plans to temporarily close offices and suspend badge access to help ensure the safety of each employee as well as Twitter systems and customer data, the memo said.

All told, Musk wants to cut about 3,700 jobs at San Francisco-based Twitter, people with knowledge of the matter said this week. The entrepreneur had begun dropping hints about his staffing priorities before the deal closed, saying he wants to focus on the core product. Software engineering, server operations & design will rule the roost, he tweeted in early October.

Security staff at Twitters San Francisco headquarters carried out preparations for layoffs, while an internal directory used to look up colleagues was taken off line Thursday afternoon, people with knowledge of the matter said. Employees have been girding for firings for weeks. In recent days, they raced to connect via LinkedIn and other non-Twitter avenues, offering each other advice on how to weather losing ones job, the people said. Ex-Twitter engineers are also using social media to respond to former Tweeps looking to land jobs elsewhere.

Musk has also been huddling with advisers to come up with new ways to make money from the blogging platform, including charging for verifications, which can help delineate real users from fake accounts. Hes also considering reviving a long-since-discontinued short-video tool called Vine, a way to vie with popular video-sharing apps like TikTok. Another product under consideration, the New York Times reported, is paid direct messages, which would let the rank and file send private messages to high-profile users.

Several advertisers, meanwhile, have tapped the brakes on placing ads on the platform until they get a clearer idea of Musks plans. The new owner has said he wants to remove some content moderation, giving rise to concerns that hate speech, misinformation and other potentially harmful material will flourish even more freely. General Mills Inc. said its temporarily pausing advertising on Twitter, joining Volkswagen AGs Audi and General Motors Co. in rethinking their presence on the platform.

Sign up for the Fortune Features email list so you dont miss our biggest features, exclusive interviews, and investigations.