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President of the Republic at the Futureforum Espoo

President of the Republic at the Futureforum Espoo
President Kaljulaid speaking at the Futureforum Hanaholmen
© Jakke Nikkarinen


Dear ladies and gentlemen,

We have gone through a societal disruption to make sure our citizens and businesses have a digital environment both in their dealings with the state and with their private partners. By the way, at no point during this process has Estonia created any cutting-edge technology. Tech-wise, all we use in our digital society is well tried and tested globally by other actors, mostly private. Which makes it cheaper and more reliable. Part of it is even open sources, namely our e-voting system, so all and sundry can try to hack it if they can – but they have not managed in the past 7 or almost 8 years' time.

The disruptive innovation of Estonians is thus not at all technology,

the innovation lies elsewhere – in the process of bringing businesses and government together to help all people, young and old, so that they could benefit from the digital service options. It is now 17 years - almost a generation- that Estonians have a digital ID and can use this to sign and time stamp their documents, including private contracts. They can also apply for different public services, pay fines and taxes online, query registries, change their service packages and simply send encrypted e-mails.

It took some special effort to get all people in all generations to use it,

but through patient coaching plans (which we called Tiger leap) this was achieved also for older generation. They soon realised the advantages of taking to the PC instead of taking the bus in order to communicate with, say, their pension's office. Even if the computer was not at first on everyone's desk, more often in village library or at school, it was still remarkably closer than any office. As you know, Estonia has a big territory with a small population. So offices are a few between.

Digital ID is an integral part of all ID cards, so we simply sneaked it in our travel document in 2001. Digital identity is actually created at birth, automatically and in the background. When a doctor enters the details of a birth into medical records: 51 cm, 3,5 kilos etc, then the digital identity for the babies is automatically created in the background. The doctors are civil registry managers, but they do not even notice it. Later on, the parents can use their own IDs to give a name to the baby, who already has a digital identity. This is how an Estonian citizen is born.

When the parents have given the baby a name, then they can start applications for social services, kindergarten places etc. They do not even need to leave their maternity hospital room to get all this done.

Both private and public entities use the same platform, and I think this is one of the most important developments. We got it right probably accidentally but we got it right. We called it crossroads, and everybody uses the same crossroads. In Finland, you have it, so make sure you can quickly start using it as we do, in a more inclusive way for all services. Thus, the number of services, which are available on crossroads, is unlimited, because the only thing, which the state really does, is provide this platform where people and businesses can meet.

Some services are open to citizens of other countries as well and we call these people e-residents. This is our contribution to help people internationally understand how digital society works. It is open to everybody, so you can try it out.

Not all services, which we have ourselves, are available for e-residents. But it is possible to create the company in Estonia without going there. There is a background check however and it is not a tax haven. I have to add quite the contrary. In Estonia, the Tax Board knows of every bill, which is bigger than one thousand euros, and it is a chatty Tax Board, it chats to your Tax Boards as well. I believe it is the most transparent business environment,.

There is no enforcement in Estonia to go digital. However, as it is really simple, cheap, and available, then by now everybody has done so. As it has to be simple, cheap and work every time, then it indeed cannot be too innovative and untried. It is not. However, it includes really everyone, because the digital chip is on your travel document and it works every time. It demonstrates that for a society as a whole high rates of technological penetration of less cutting edge technology may pay off better than having something truly innovative in the hands of a few select people. As I like to say, the lives of millions have been transformed by cheap cars and washing machines, but not very many lives have been transformed because we landed on the Moon. It is important to keep that in mind when digitalising societies. There is nothing new in this.

Today we save 2% of our GDP only by signing digitally, not counting in the other effects of being the sandbox of the region. This 2% comes by simply never visiting any public office and never visiting any bank offices. We have very few bank offices left in the country. Automatic delivery lockers have also replaced postal offices and delivery announcement is routinely a sms, not a piece of paper. You may notice – I am not talking anymore of public services, this is a private service, but people do not need to think whether something is private or public. It is all seamless. The laziness of people to go and queue actually allows businesses to save huge costs by offering digital, automated solutions without facing the risk of losing their client base.

By now Estonian people think three times before they will drive themselves to anywhere to get the service. If it is available online they are very eager to try and test it, instead of going somewhere physically.

2% of GDP is actually a huge amount of savings and what is even more important for me as the president of the country, is that it is heavily skewed towards ordinary people and small and medium sized businesses. While big businesses and people who are better off have their way of managing bureaucracy, then ordinary people and small businesses may suffer in the hands of complicated bureaucracy. We feel that digital development is an equalizer and this 2% indeed benefits the weaker parts in the society the most.

Also, thinking of social groups: those who have a heavy burden at home, who are caring for small children or elderly people or handicap people, they find it very difficult to find time between 9 and 5 to go to a government office. Well, our government is open 24/7, so you can go in the evening when everybody is asleep. I am a mother of four; I know the value of that.

Already in 2006 Estonia graduated into the group of high income countries in the IMF tables. We ourselves still say middle-income, as we compare ourselves to the Nordic countries, but I believe that actually as far as the relations between a state and its' people go, we do enjoy higher living standards than many countries in the world.

I believe that I have now explained how a digital society works, I can come to some other questions I see on the horizon, which will disrupt our societies through the implementation of technology.

I will touch upon two. One is the future of the jobs and the other one is what I like to call the Alice in Wonderland issue.

First, on the future of jobs. We all know that industrial area jobs are vanishing fast and I sometimes hear people saying we need to pay everybody a sustenance fee and get money for that from taxing robots. To me it sounds absurd. I really doubt that we would have reaped the full benefits to our societies from industrial revolution if we had decided to tax tractors and pay a sustenance fee to everyone who lost their job in agriculture. Of course, we cannot deny that the transition was socially very painful and costly for majority of people who had to move without any social security and any education from countryside to cities.

I feel that it is not so scary for lower middle class and poorer people this time around to face the deterioration of industrial employment. I believe it will be quite soon, that it will be in the industry down to the same level we are now seeing in agriculture.

Instead of curbing people's ability to adapt themselves by talking sustenance fees, what we should do is we should focus on the ability of modern technology to rise the earning capacity of the society as a whole.

We must never take technological development simply as something limited to the better industrial processes and therefore job loss. It is not, it is a comprehensive change, and it reaches out to every single person, no matter their education level, no matter their occupation.

In fact, remarkable amount of jobs, which are created by technology development are surprisingly neutral to occupations or education. One might call them egalitarian opportunities, because they are not reserved for wise, well-educated and tech-savvy. Yes, they often do best by creating tech infrastructure, but some of the quickest growing companies sell actually strikingly simple services or services we did not think of before.

Think chatting to each other: in long version Facebook, in shorthand, Twitter; or Uber and AirBnb which allow people to turn their spare resource into service to others. These are big examples, but of course, SME versions of this transformation exist as well. For example, a bookkeeper can in principle work for 10 companies from any end of the world. I admit their market is not global because you need to know the laws, but it is bigger than their physical range, where they could work by car, bus or train.

In handicraft, a time-old available career option for people who do not wish to obtain high university degrees, previously it was limited in its earning capacity, first by your ability to drive around local markets, or later in the 20th century, by the ability to sign distribution contracts with souvenirs stands somewhere. Today, I know in Estonia a person who came to Estonia from South Africa, he lives in little Mooste, where there are 8000 people in the whole municipality area. He produces world-class bows and arrows and his market is among the global billions of people. None of them live closer than 800, maybe 1000 kilometres. He can do this job from wherever in the world and sell everywhere. So you see all sides of life actually can benefit from technology.

These examples show how technology enhances earning capacity and lowers the provision costs in traditional tasks as well. In addition, technology use and more free time for a bigger number of people, creates permanently these new jobs we do not know of yet. A travelling youtuber is a new job we already know, but the next one we cannot imagine we do not know what they are, but I am quite sure they will be there.

To sum up, job creation will continue beyond the industrial age as it did beyond the agricultural period. The transition should be more tolerable to vulnerable classes of poor and uneducated due to existing social systems and the democratic nature of this transition, which creates opportunities for all social classes.

Which of course brings me to the Alice in Wonderland issue I mentioned, my third topic of societal disruption I wanted to talk about.

You remember, when the cat vanished, the grin just lingered on and Alice could see it hanging there in a thin air? If we talk about the disruption to current jobs and indeed, working habits of people, we need to test whether our governance models are sustainable through these disruptions? Or will our tax base, let's take a simple example, social tax base, simply vanish when industrial jobs are vanishing?

If we do not believe that the grin stays on when the cat has left, we need to assume that the social security model, which is built on the industrial system of work, cannot survive if the industrial model itself is gone.

New jobs and income methods – if you are not able to call youtubing a job, call it an income method – are free from a physical location, therefore geographically they are not attributable to any one state, and they are not easy to define as being employer, employee, benefits from assets etc. What is worse, everybody is doing more than one thing to more than one customer, the economy is much more centred on each individual and his or her creation of added value than on enterprise as such. The cost of going it alone is lowering. There are hundreds of self-employment jobs created already in the UK, Netherlands, in Estonia and elsewhere. Add to this the fact that people do all these varied things intermittently and since the added value tends to be high, they take long breaks if they can afford it. More and more they can afford it, so they will simply live their lives until money runs out and then they do something again.

Our social security models are based on working 12 months a year, with 4 weeks for holidays, 8 hours per day and 30 years, then you retire, and this is not an option the younger generation wants. They do not work this way. However, we offer them societal support if they do. The result being that a lot of people opt out at early years of their career from our social models, only to plan to opt back in once they need these services – medical ones, putting kids through school, etc. Pension systems are really the only ones nowadays, which do not allow full benefits opt-in later in your career, as some of the potential to put money into your pension pillars – is lost by the years spent outside of the system. However, medical, educational, all other social security systems are 100% vulnerable to this change. Yes, we can tell people to work the old-fashioned way or else go uninsured. It will not deter them; they will simply go uninsured. We lose the best part of the tax income from the life cycle value creation of each individual – the years somewhere between 20-35, maybe longer, if they do not need to have and school kids. They will then later try to opt in. It is not sustainable and it is not tolerable for governments any more than it is sustainable for them to be the last ones forcing people to present themselves physically to apply for services, which is already happening.

Governments really need to start thinking how they will replace the current models' tax river flowing in from lifetime of careers defined as employee, employer, enterprise, independent worker, renter – with some new streams. They will not be a river; they will rather be an intermittent trickle from varied streams. It may not be any more linkable with any geographical state self-evidently at all. We are right now spending our time hunting down huge companies to make them pay their fair share of tax in every country.

Imagine trying to come to terms with all the digital job nomads on where they need to pay their taxes? Yet we want them to pay, and we want them to be somehow connected to our society's social security network. Even more – they want it too, but the effort to stay in one place, one job, permanently or with certain allowed time gaps in order not to lose benefits – simply does not fit their understanding of work and life. We force them out with inflexibility, unless we offer them easy flexible opt-ins. I have no answer to this disruptive development and on how to come to terms with it yet, but

I see we need to tackle this as quickly as possible. The ones who go quicker, who become this kind of safe dock in your pocket for globally travelling people, they will win. Digital and other nomads will dock in only at places, which offer them more flexibility in paying taxes and earning benefits.

I am seriously thinking about Estonians who live and work globally everywhere, there are many in Finland, many are also further from Estonia physically. Yet we need to offer them Estonian language education for their children if they so wish. They should have the opportunity to study wherever they are – globally.

Our citizens, and the citizens of any other country will live elsewhere, and they would want to consume help services elsewhere. You may work in the morning in Finland and in the evening in Lithuania; half a year you would live in Estonia, but of course in the winter you would move to Australia, because it is warmer there. However, you still want your services with you. That is the next societal disruption, which in Estonia we may already see better. We are around one bend, most governments are still grappling how to cope with the facts that the people are already in the internet and the governments are the ones who are analogue. We have taken this first step, which has not made us free of worries for the future. It is just that we see behind that particular bend already.

As an Estonian I am of course relieved that, we have already solved the first curve. On the other hand, we are a tiny market and even if we are able to operate digitally in Estonia, as soon as we are outside of the country, we are as bad as anybody else is. In cross-border transacting and communicating, which even more needs self-identification for people and businesses; there you rely on those things, which a European politician normally despises. It is called a big internet company. For example, Google provides identification needs. Yet I feel that if in the analogue world it is government's obligation to provide safe identification needs then it should be the same in the digital sphere. This is the starting point to make sure that our citizens are safe and secure inside the sphere. Indeed, very often we hear that it is dangerous. People drive on highways – it is dangerous, but you take the safety measures that you can – you fasten your seatbelt, you use airbags in the car, yet you do not leave the street space. Even more, we feel that the street space is dangerous because there are more crooks. We make sure that the government is somehow there. Its footprints are there and it makes street space safer. Cyber sphere should also not be abandoned to crooks. Government should leave their footprint there to make sure that people are safer. I feel this is quite clear now already this case has been on our table long enough to be thoroughly investigated. And it does not go away. Our people and businesses did it. All governments in Europe and globally need to follow, but as always the benefits are reaped by those who are first in. Estonia, also Finland, they are definitely first in. I would also say Denmark, Luxembourg, all relatively small countries, but is it not wonderful that the 21st century is for us, I am really happy about that. Thank you for listening.