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President Kaljulaid at the University of Southern California

President Kaljulaid at the  University of Southern California © Office of the President

03.10.2018

Dear friends,

I am very happy to be here in front of you representing the world's only digital society which actually has a State on its side – the Estonian digital society of 1.3 million people, our whole population, because in our case it is all-inclusive.

We have gone through a societal disruption to make sure that our citizens and businesses have a completely digital environment to deal with both the State and also with their private partners.

I would like to add an important notice – Estonia is not a technology developing country. At no point during the digital transformation of our society has Estonia created any cutting-edge technology. Tech-wise, all what we use is mundane, it is commonly used by other actors, mostly private.

It makes it cheap, it makes it reliable. Part of it is even open source, namely our e-voting system, so everybody can try to hack it. Nobody has managed, but you can try, if you feel like doing it.

Therefore, the difference in Estonian society compared to other developed societies, this disruptive innovation is not technology itself, the innovation lies elsewhere – in the process of bringing businesses and government together to help all people, young and old, to benefit from these technological developments invented by others. In other words, we are quick followers, not creators of technology. Already for 17 years, Estonians have a digital ID and can use this to sign and time stamp documents, including private contracts, apply for different public services, pay fines and taxes on-line, query the registries, and simply send encrypted e-mails. It is almost like block chain, but from the beginning of the century. We also use our private sector provided services on-line, on the same platform. Estonian e-government is like an app store, everybody can develop services on it: private companies, public sector, people-to-people. You can, too! If you become an e-resident, you have access to this app store and you can use it for developing your business. It will be an EU business, so you could actually do many creative technology things on this app store.

It is inclusive and it took some special effort to get all people to use it. All generations of course need to use it, because otherwise it will be divisive in the society, not creating social cohesion. It does not happen all by itself and we did run quite an expensive Tiger leap program, first teaching young people to use and stay safe in Internet, then teaching old people, because they are normally those who are most reluctant. We could not have done it alone. Our private sector paid part of the costs and created the incentives for those who were hesitant. For example, we identified the people near retirement age or retired as the most reluctant cohort to start using computer-aided services. However, we needed them to. Because we are not a densely populated country and we did not want old men and women standing for the bus, taking the bus to the centers to get services. We wanted them to enjoy the comfort of using these services from the nearest computer. At first, of course, at the turn of the century not every retired person had a telephone or a computer. However, the nearest computer normally was in the village library that was much closer than the town in the region. Therefore, we convinced elderly people, because e-service was closer and more comfortable. The biggest incentive though was that banks offered their services free for older people and you know that they are careful with their money. This made the system truly inclusive, involved all generations.

Digital ID is something we have on our ID card. Most European countries have their travel document, which is not the fat passport but a simple travel card, and we decided that we would put the digital chip on it, to make it possible for all people to start using digital services. Provided somebody is going to generate them. It was worrisome in the beginning for the government. I was there, I was advising the Prime Minister at that time, so I remember. The Minister of Finance wanted us to demonstrate what will be the benefits next year or the year after. The full benefits by now are two per cent of the GDP saved by simply signing digitally, six per cent of GDP being generated from ICT and four or five working days per capita saved from not going and queuing in the public offices. We all have a century to live, why waste so many days?

This is the story of the birth of a digital nation. The government realized it is not going to create so many services so quickly.

We opened the platform for businesses. Not only because we think it is a good thing if government and businesses do things together. Private-public-partnership has been a strong word, hardly executed anywhere. We needed it so people would have combined number of e-services to use, both public and private, so they would get used to it.

Our worry was that if we do not make the private sector use the same backbone of digital services, people will only maybe declare taxes on-line initially with their digital ID and this is too little. They will not get used to regularly using their card. Therefore, we very much supported that private sector was on the same platform.

We also had to make some services more or less happen automatically. For example in Estonia, when a baby is born, then the doctor enters the data of the birth – weight, length, everything – into the e-health system and in the background, without the doctor pushing one button, the digital identity is created for this baby.

This happened because originally we wanted the doctors to push one button and say: by this, you will create the registry for this baby, an entry to the registry. And they refused! They said: this is not my job, I am a doctor. We accepted. And therefore we created a system which automatically does it, in the background. So that the doctors even do not know that they are the civil registry managers. Quite efficient.

Of course then the parents can name the baby online. You know, if you tell an Estonian parent, that you have to leave the hospital and go to a city office, and name your baby, they would be shocked and in horror. Because you can do it from your hospital bed, of course. Why would you go to the city office and risk maybe catching some virus while you have a vulnerable newborn?

You name the baby where you are. Register at the same moment the baby for social services, for kindergarten. You can do all that from your maternity ward. Very comfortable, our people think.

It demonstrates that for a society as a whole, high rates of technological penetration even when the technology itself is not really cutting-edge, may pay off better than something truly innovative in the hands of a selected few. For example, an analogy from the real world. How much did your life change when somebody landed on the Moon? Not much. How much did your life change, when the washing machine was invented? Women, hands up! Hundreds! You see, we have all experienced this also in the analog world. Technology, which is inclusively used by the society, brings much greater benefits to the society.

The two per cent which I mentioned is a huge amount of savings. On the other had, digital is also a great equalizer. Because the government also spends considerable amount on developing the e-services and maintaining them and protecting them. About the same amount actually. So you could say it is kind of neutral project NPV-wise. However, this spending is heavily skewed towards the weaker in the society. In the business, the SMEs, because Estonian businesses of course also do not run to any offices, they do everything on-line. All the declarations you need to do: who is working within my company, all the salaries, everything, online. If you are an entrepreneur and you pay somebody a salary, then this information immediately appears in the tax board, that you have done this, and also on the tax declaration pre-format of this person. So that when you finally go to declare the taxes online, everything is already there, what you have been doing, you can just sign it off. Partially, your accounting is taken care of by the tax office. The big businesses of course gain less than the small ones, because SMEs have no ways of managing with big bureaucracy. In this way, the government spending goes more towards helping the weaker ones in our business sector.

Also, if you think of it: who bear the burden of queuing for social services? Women, usually. Who bear the family life burden most? Even if you try hard to make it equal, we know it is us, the women. It is extremely important for women to have access to public services early in the morning, late in the night, not from 9 to 5. You can do it, when your baby is asleep. In addition, this way of thinking, once spread in society, creates sooner such jobs where it is not so important any more to go to a workplace.

Our biggest bank has decided when advertising for a vacancy never to say that this job is in Tallinn or in any other concrete town in Estonia. It says that it is a job in our bank. When they find somebody for this job, then they do not have to move – they work from where they are. It is quite possible since most of the banking work does not need any direct contact any more. There are therefore new possibilities for participation in the job-market for handicapped people, people in rural areas, also again for women with small children who cannot displace themselves so easily. The great equalizer. I think digital disruption has made our society not only richer, but also a better place, more equal.

Very often people say that digital takes jobs away and we should be scared. Quite on the contrary. Digital makes the job-market more equal, more accessible. And you know, what? Also much bigger. Because you do not have to necessarily work in your own country. It is perfectly feasible to know the Estonian tax-code and work from somewhere in Africa. If you are for example an African girl, eager to learn bookkeeping on-line. You are welcome! Estonia of course does not say that the underlying documentation always needs to be in the country of bookkeeping. Everything is electronic anyway, so you can manage it from Africa. See, our job-market, our salaries are extremely high now already, we are 32nd highest average salary country globally but the job-market could be open, even without displacement – to make sure our companies can save the cost.

I think it could solve a lot of our problems, if we all in the developed world collectively took this view. I know we do not. It is a worrisome issue and I will tell you why. I call this the Alice in Wonderland issue. This means that... You know Alice in Wonderland, yes?

There was a cat, Cheshire Cat, when he left, the grin did not leave, it lingered on. Well we see that our job-market is changing. Industrial jobs are vanishing. Do you think that our social model of tax-gathering and distributing it according to where people live and where they work, in a single place, will stay? It will linger on for a while, like the grin in Alice in Wonderland. We know that finally also the grin packed itself up. We do not realize yet that more and more people work independently, we see the numbers growing up everywhere, but we are not adapting. We still expect people to have a working address and one company where they work, maybe two. Or maybe they are an independent worker living in in this country registered in this address. Then we tax them and then we provide services to them.

This is not the way to go. Our citizens travel – you need to offer services globally. For example, a citizen must be able to vote wherever he or she finds himself or herself. We need to develop schools where people can educate their children in their maternal language even if they are very far from home. Obligation for us, because world is global, economy is global. In Europe we have enhanced it by free movement of people in 28 states. Therefore, it would be vile if we would not provide state services to our citizens even if they were not physically in our state.

In addition, people can work in 10 different companies in a narrowly specialized way, if they are highly valued. Then the question is extremely persistent: who gets the taxes and who provides the social services? Logical answer is that we have some new contract where people pay taxes to the country they feel closest to, live in or are citizens of, and this country offers them services globally.

If I think about how we regulate for example tax distribution in OECD agreements, this all flies into the face of this new world I am thinking of.

We try not to just sit on our hands and complain about it. During our EU Council presidency, we got officials from all ministries of finance together in Tallinn to discuss what could be our global proposal to solve this issue that industrial jobs are vanishing, but our social system is based on our industrial model.

If we are not quick to adapt, more and more people every day opt out of our social models. Later they opt back in when they need health-care or education for their children. By then we have lost a big proportion of their earnings. Only pension system really penalizes you for late option, everything else you can opt in practically without loss.

However, we do not want to lose our social state in Europe.

We appreciate it and we want to keep it.

It could help us to make this transition easier than was the transition from agrarian society to industrial society. Because at that time, it was painful for the people. You lost your job in agriculture, had to go to the town and work in really bad conditions in the industry – long hours, polluted air, everything. Huge suffering for people who were not so rich.

This transition is as big.

What do we have now, which could make it easier for people? Our social systems: education system, health-care systems, which help to protect people in this transition. However, it will only happen successfully, if we stop all talks about taxing robots and trying to keep the old jobs alive even if they are dying naturally. It is as if we had taxed tractors so that people could still go and work manually in agriculture. We did not and we also did not help people to feel supported when they moved to industrial areas. The majority of our ancestors actually had rotten lives in those years, only gradually getting better with productivity rises in industry.

We need to take care that our people can manage this new societal change, and for that, we need tax money.

However, we need to start thinking about it now. Before too many people opt out. Because when they opt out, some will get rich and they can buy private insurance. It is all fine and dandy. A lot of people will fall into the precarious classes because their earnings are not that high. They work intermittently, they do not work 12 months a year, another requirement of industrial era. You only get insurances, if you pay a certain amount of taxes every month.

What for? You could do it once a year, you could pay when you are currently earning, if you are not earning, you are not earning. There should be more options about how you can contribute to the state and it should be much, much more flexible in the future.

But we need an international agreement on it.

It is extremely important that we understand that these new jobs, they are not created only for software engineers. Yes, they do create the carrier service, but the content service is much more democratic. If you think what has been the main income source for big tech companies, if they are not in carrier service, or hardware? Talking. Short talking – Twitter. Long discussions – Facebook. I mean, what is hi-tech in them? Nothing. It is not something where you need a PhD. For example you can make money as a travelling youtuber. Or think of people who are handicapped. Let us take an autistic person living somewhere in a rural area in whichever country who loves to knit red socks. Ten years ago, he could not have made a living out of this, because in the region there were not enough takers for red socks. In addition he is afraid of talking to people and so he cannot sell. These problems are all solved now. He can make independent living.

I do not know this person but I am sure such people exist. I do know that handicraft in general is benefiting from internet. And there are real life examples. In Estonia there is a guy who came from South Africa to live in Estonia. He makes bows and arrows, really good, world-class sporty bows and arrows.

As far as I know his closest client lives about a thousand kilometers from where he lives. Within his parish live about 800 people and nobody can afford a bow and arrows from his workshop. He can afford to live where he likes and to do what he does really well in the whole world. Make a good quality living out of it.

Anyway, technology changes societies and not in this simplistic way that it is dangerous, it is taking jobs away, only creating jobs for the educated and the mighty. It does not need to be this way, if you make it inclusive. We have made digital inclusive in Estonia. I am quite sure that other countries can make it too.

Then there is something that we have not yet talked about, but must - security. It is extremely important that people use the new technologies in a secure way. There are many layers to that, but everybody can do one thing: you can train yourself in cyber-hygiene. The term is coined by me, so use copyright if you use it. It is a social copyright, I have not protected it and I never will. I trust globally in people's honesty and goodwill. Cyber-hygiene is something that makes people safe in Internet.

We all know that technology will not make us hundred per cent safe. Nothing is hundred per cent safe, of course, but more or less safe. It is ourselves. If your phone or your computer says update, you update, because otherwise there is a hole where somebody can peep in. Do not trust people on-line if you do not know who they are. Which again brings me to this issue that governments, if they want to teach people cyber-hygiene, they have to offer them safe identification means – digital-ID guaranteed by government, an electronic passport.

Some European countries already have it, but they do not have enough services tied to it. But in Europe we are moving in this direction. During the EU Council presidency, we had the Digital Summit, which forwarded the message to other leaders of Europe: your people, your businesses, they are online, you have to provide them with safe identification means. You absolutely have to.

We see a movement. Germany started last year, France is starting hopefully the next year, some Nordics have it, also Belgium, Luxembourg, Estonia, Finland, Iceland operate the same system. So, it is moving in the right direction. Cyber hygiene cannot come without a digital ID, like normal hygiene cannot come if people do not have running water and soap. Digital-ID is running water and soap for the cyber-hygiene. People will realize that if they use their digital-ID, which encrypts the discussion between them and the other party, who is also signed in with the digital-ID, it means that you know with whom you are talking. In a normal world you would not buy or sell unless you are sure that the person who is selling you something is who they say they are. If you go to the notary office, you take your physical passport. In Internet you need the same kind of state-provided security – a digital-ID. I think it is a human right and we need to provide it.

Then we need to teach our people that if you are in the safe, state provided environment, which consists of identification and then the apps surrounding it, linked to it, then you are safe.

By this people more or less automatically learn that Facebook is not as safe, as identification is not guaranteed. You do not have to tell them, they know. They would never know who is on the other end. And by the way they would not blame Facebook and others because they did not do anything criminal. They were operating in a legally unregulated space where the governments did not provide people with their identification means. So big firms did the best they could. Alas, it cannot be as good as state-guaranteed digital passport. Therefore, I think we should apologize to them. Also to thank them that they have created at least some ways for us to shop on Amazon, for example or to identify each other through Facebook identification. Yes, the data has leaked, yes, it is not as secure as digital identities could be, and yes, our data may sometimes have been exploited, but it is because the legal space is not regulated.

By the way, in Estonia it is regulated. Because we of course have a lot of big data in our government databases, which can be used. For example, our tax-board can make plotters, which will allow you to understand how regional economy is changing. Do you see the trends in the graphs that will indicate that the job-loss is going to occur? Not yet occurring, but going to occur. We can to a certain extent predict and then take measures, start preparing for unemployment or something. At least look, what is causing it and try to understand it better. So, big data of the state can be used. However, it is clearly regulated. It is not that you cannot use the data, let us forbid everything. No, it is a permissive legal space, which says, yes, you can use this data, but under certain conditions. Like, it has to be in impersonalized format so that everybody have the ownership of their data. If anybody has been looking at your personal data, there will be a sign in the system, who it was. In addition, if these people did not need to look at your data, then you can actually complain and they are prosecuted. Because it is criminal offense to snoop, so it is not okay if you are a police officer and you check the data of your ex-girlfriend's new boyfriend. You go to the court for it. We had these cases. People quickly learned that this is a no-no.

In addition to providing a secure element and enabling cyber-hygiene developed in the country, we have also created a legally permissive space for digital technologies to create services.

A sandbox for all to use. It is obviously working, because Estonia has four unicorns per 1.3 million people. San Francisco does not have so many per capita as we do. In addition, it is of course all open to you as well. You can become an Estonian e-resident and create a company in Europe and try it out. To educate yourself, to have encrypted e-mails with your friends, or then come and create a company in Estonia. We like to joke that we did it because we got so tired of people asking, how can it work. Now they can try.

Of course we do believe that people deserve a chance to create a company in a low-bureaucracy environment. It is not a tax-free environment, it is not a tax-heaven, quite the contrary. It is very transparent. For example, Estonian tax-board keeps track of all business transactions above one thousand euros. 99 per cent of transactions in Estonia are done online, so we have a basically zero-cash environment, at least in the big transactions. Our companies are transparent to our tax-board and our tax-board is chatty. It talks to your tax-boards as well. It is definitely transparent, low bureaucracy environment, but not low tax environment. Please do not confuse us with those. We also want of course to add to our economic growth with the e-residency.

To grow the circle of the friends of Estonia, because in Estonia economic development has led us to the situation where we are not seeking FDI, but we are seeking smart people to play in our digital sandbox or our genetic sandbox. We have our population genetics analysis in the same kind of legally permissive environment, which is safe for businesses and scientists to use.

However, we still have one worry and we try to remedy that as well. Estonia is running for the UN Security Council non-permanent membership. Do you know why? Do you think it is just nice? I mean, I look in the mirror in the morning and say, wow, I am going to chair the UN Security Council. No, it is tedious work. Seeking compromises is never easy, so I would rather not do it, if I could afford to. But I cannot. Because our analogue law should apply in cyber sphere. However, it does not. We have lots of academic work done, which gives us more or less the understanding that it could work in digital. However, we do lack the international legal space, which will define the rights and obligations of governments towards protecting their people's human rights and their sovereignty. This needs to be taken to the Security Council. Small countries do not have time for small objectives, they need to focus on what really matters. We want to contribute. In brining all things cyber and digital to the table. That is why we are running. We want to contribute, but of course, it makes our own people safer.

Making digital nations more numerous is in our interest. Sometimes I am asked, why do you promote others to follow your example and take the competitive advantage away from you. First of all, I say that you cannot, because even if you are a quick follower, you cannot catch the original. This of course is an old economic rule, and it still applies. Second, our economy is export-oriented, 80 per cent of our economy is export. I mean, it is very boring for our businesses that as soon as they cross the border, they are back to paper. Having an understanding that it can be done differently makes them even more impatient. The paper bureaucracy they have to face everywhere, they do not want it.

In addition, we continue to innovate, so we are not afraid of competition. For example, we are now discussing how to regulate the relations between human beings and algorithms, in tech-neutral way. Preparing for artificial intelligence. Yes, I know there is only automated, autonomous and narrow AI out there and the gurus say that in half a century we have 50 per cent of a chance that singularity appears. It does not matter. If you regulate for the AI, all the lower levels automatically are covered and regulated.

We want to create a human-algorithm law, so that it would be tech-neutral. We have elections next year, but I am sure AI law will happen, whoever wins, because it is a citizen-driven process. Our citizens are now asking that systems turn pro-active towards them. If the state has the information that I have just had a baby you know that I am entitled to child support, because it is universal in Estonia. Sometimes I am also entitled to some family support, depending on the number of the children and their age. The state knows all this too and my bank account number. Why do I have to log on and apply for this service? Just give me the money. I am not joking this is true.

We already have one of these services, because we pay retired people who live alone, which is expensive and precarious situation to be in, the top-up on their pensions. They do not have to apply. No action is needed on the part of the retired person, because they maybe even did not know that there is such a service. We simply pay.

People demand that algorithms make the decisions and do something for them, so there is no choice. You have to expand the legal space.

Even if the politicians will suddenly get afraid or think they are too lazy to do it. They have to, because people demand it. That is why we are also not afraid of spreading our knowledge, hoping to turn more states into digital societies.

It is not only this. Frankly, I feel very strongly about less developed parts of the world, like Africa. We want Africa to leapfrog, and other poor places. We see that there is a huge potential in digital. To kill also the unnecessary migration or human trafficking.

Yes, there are traditional ways to do it. I mean, open the African job-market, so trafficking dies down, because legal jobs become available. However, African countries do not even know who their people are sometimes. Some are quite tech-advanced, but some are not. The same applies to other developing nations. Small island developing states have this problem that their paper registries always drown. They need resilience.

Digital is the answer. We want to spread the knowledge that we have. We have signed the memorandum of understanding with African Union to develop digital. We have a long-standing e-governance academy with UNDP helping developing nations to understand tech-transition. We have companies who are ready to build these services, who have a track record of export in our public services building electronic tax-board, for example in the gulf countries who can pay and buy the system. So we know we can help the developing world, otherwise we would not do it.

Because we regained our independence 30 years ago and we were helped by other countries. By being accepted in the multilateral organizations, and for the first 10 years we were not donors but receivers of international aid. Now we are donors. However, just giving money will not tidy anything.

We can do something much bigger. Develop the digital knowledge of the governments globally. Again, if we develop and promote digital states globally, we have to take the responsibility for security and protection of sovereignty. Hence again the Security Council. It is a hard work, but we do it.

Thank you for listening!