How Nations Can Cope with Digital Transformation

Adam Ward

Right, well, good evening and welcome to everybody in attendance today, as well as to those who are joining us via a livestream for this event, on How Nations Can Cope with Digital Transformation, and it’s a particular pleasure to welcome our speaker, the President of Estonia, Kersti Kaljulaid, to Chatham House. The President, as many of you will know, assumed her position in October of 2016, becoming the first woman to be Head of State of Estonia, and she’s also, I think it’s worth pointing out, a member of that generation which came of age in the immediate aftermath of the dissolution of the Soviet Union, and the full restoration of Estonian independence, and which then began to set out a modernising vision for the country, and this vision was not only to embrace and to catch up with European neighbours and Western allies. But to aspire to some important forms of international leadership too, and this leadership and this vision of modernity is particularly evident in the sweeping initiatives that are captured under the rubric e.Estonia, a raft of measures that harness digital innovations to connect the citizen to the state and to public services. They place technology really at the heart of governance, but also intended to encourage important economic objectives, like bureaucratic streamlining, productivity gains, inward investment and a fostering of an entrepreneurial economic environment.

So, we have a tremendous opportunity, I think, this evening, to learn about how digital transformations of this kind can be effected and what lessons have been learned, in the case of Estonia, that might be transferable to a range of other societies, and perhaps we’ll also touch on the question of risk and risk mitigation that are sometimes entailed in these changes. Estonia is pursuing, I think, very much a 21st century governance and economic strategy and model, in a security and geopolitical environment, where the residues of the 20th century still loom large, as we’ve recently been reminded, and as the centrality of technology and the dependence on technology in societies deepen, what are the measures that those societies need to take to reduce vulnerability to subversion or the breaching of various information systems?

So, Madam President, we look forward very much to hearing your remarks and your thoughts, welcome.

Kersti Kaljulaid

Thank you for these kind words about me, myself, and Estonia. Indeed, maybe it would be good to start with the statement that, digital is not the first big wave of legally permissive environment creation, which has brought investment to the country. I would think the first one was actually in the early 90s, when our cost levels were the dream of everybody, and then you really could easily attract money to our country by simply having a much easier tax system, and we did it, later it was copied quite a lot.

The next time, indeed, was already digital, but also, digital was not alone. Also, at the turn of the century, we created permissive environment for genome, population level genome investigations, and this is now giving us the situation where, with the cost of hopefully, not more than €25 per capita, we are able to provide quite soon, for 10% of our population already, information on how easy it is for them to get diabetes type two and other common genetically hereditary diseases. So, why I’m telling this, is because it demonstrates that if you do not have money, but you want to provide your people with services, then there is a way to do it, and this is create legally permissive environment.

Right now, we are indeed already thinking, and I will talk about it later as well, and we are thinking about how to regulate artificial intelligence, and even if we know that we are very far from creating artificial intelligence, probably farther – further away than Elon Musk is thinking, but we do have lots of automated systems, and regulating for one will also cover the other reliability issues, etc. So, we are indeed, thinking of how to make sure that this wave of technology will not pass Estonia by.

For example, our traffic code can regulate for a situation of a car and a robot having an accident, and we’ve already had such an accident with a package where a robot and a car, the car driver was found guilty. So, it shows you that it’s more general, it’s not just that we happened on a goldmine in digital, we do it systemically in Estonia.

70 years ago, we wanted to really, to provide our people with digital services, like Industry 4.0 is thinking, we thought that if we automatize the processes and remove people from the chain of providing the services and delivering goods, then we can afford more with our small workforce in public sector, low tax burden on – of the GDP, which has never exceeded 35%, but with a population, which is looking towards Scandinavia for public services to be really at a good level. And now our people count online as part of the everyday life.

Actually, last year, we had a hiccup because of a technology provider and some people had to go to a Government office to restart their digital identities, and we almost had a riot. I mean, people had to wait for an hour, in a Government office, shock and horror, and this is when we realised that the societal disruption is complete. We have digitally disrupted the society. It’s not anymore digital, which needed paper alternative, it’s now digital, which needs digital alternatives. Luckily, we have several ways of digital identification, so we could continue with the digital Estonia.

So, we have this digital disruption in present, but I think you have it too. Curiously, it has passed most Governments, but if you think of your people and your businesses, then actually, there is not much difference, compared to Estonia, or an English person or French. We all partially start and end our transactions online. And I am often asked, why people trust banks online, but not, for example, university applications, which is a Government service, and here, I have to say, I have no answer, because Governments need to really think seriously, why their people do not trust their services? Why they are perfectly at ease when the other partner is private and deals with, let’s say, with their money?

We cannot answer it, our people trust our Government service provision, and part of it is because, of course, we have proven to people that you cannot nose around the databases and systems. It’s offence if you do it and you will be punished. So, we know it’s not okay if you are a Police Officer and in principle, you have technical access, and you can check your ex-boyfriend’s new girlfriend’s salary level or whatever, in wherever system, it’s an offence. You will be taken to court for it.

We’ve had a few cases on that and people learn very quickly not to do. So, we demonstrate that Government does actually protect people’s data and also if, let’s say, Estonian Police checks my tax record, then I would get a notification, and here comes my second puzzle, which I cannot solve for people of other countries, but I’m constantly asking myself, how come that people do not trust, let’s say, eHealth database, which will warn me if somebody checks my data, but they do trust the paper in the Doctor’s office where you don’t know who last read it and made copies?

So, the problem with digital is, we’re very often try to ask for absolute security, whereas we would simply be looking for a comparison with analogue world security, and there, digital normally trumps it. These might be some explanations why Estonians trust and the others have difficulties in trusting. Anyway, we have something, which I think is vital for digital disruption of a society, and this is where the public and the private sector services all build on the same platform. It’s called Crossroads, and we use the same system for all services, which makes internet inherently safer for users because, first of all, of course, we are not anonymous online. We have passports online as well, it’s our digital ID. So, I know the other partner with whom I’m talking, in addition our talking channel is encrypted, so nobody can listen in, and I think this is extremely important that we provide people with this kind of security that they know with whom they are talking. But it also means that since – the only thing we provide is this communication platform for different parties. The number of services can go up independently from the Government. It can be done by private companies as well. Nowadays, we also have a – on the other side e.residency offer, for people who are not Estonian citizens, but who can join our platform from outside and use some services, which are provided to them and also create new services, and this again, enlarges our sandbox for the new technology testing.

It is very important to also stress that, at no point in time we have created any cutting edge technology. Estonian technology of digital identity is something, which private companies know a long time and we didn’t invent it. The Finns had it before us, for example, actually knew they had it, we took and used it. It’s widely available, but, after all, it’s very similar with most things in the world, if you think how much the, I don’t know, that we landed on the moon, changed your everyday life, I don’t know how much it did, but I’m quite sure that the washing machine helped much more. So, low level technology, in the hands of the whole population with high penetration rates, is much more beneficial than cutting edge, in the hands of 1% of the population. This is another lesson. Estonian ID and digital identity system is wholly inclusive. We achieved it by simply sneaking it on our world travel document within the European Union, so everybody had it and everybody had the right to and the possibility to start using it.

It is also maybe good to say what was the first service, which we offered, and it’s the traditional one. We actually – we knew that you had a saying, and the Americans too, that nobody wants to see the taxman, so Estonian Tax Board, online Tax Board is first online service, which we offer, so that you don’t need to see the axman. And in March 2000, for the first time, physical persons got the possibility to submit their electronic income tax returns via internet banks, and by 2003, 63% of VAT tax returns and 53% of income and social security tax returns, were submitted by electronic means, because people are lazy, inherently, and if they realise it’s safe and easy, they use it. Of course, now it’s VAT returns 99.3% natural personal income tax returns 95%, etc. So, everybody is doing this online, and what has the state gained through this, in addition to customer satisfaction? Looking narrowly at the tax collection, in 2004, we spent €1 to collect €100, and in 2013, this is 0.4 to collect 100. So, reduction in the number of employees is quite comparable, 44% of the workforce released.

Luckily, Estonia has always been a low unemployment environment, so it hasn’t hurt us. Instead, it has freed people for more productive work, and coming away from the tax discussion and to more macro level, what we actually say nowadays is, only by signing digitally, not counting all other services and digital development in this, 2% of our GDP and I think, well, compared to, I believe, outside Estonia, in a very developed country in Europe, and compared to my administrative personal load, which I had to carry, to this what we have in Estonia, I think it must be around maybe three/four working days of our – of everybody’s time. So, this new environment digitally disrupted society is also economically much more effective.

But I promised to look around the corner and also, next challenges of digital society. It may be that since we are already around the first bend that we see a little bit clearer what this rating us and the new questions, and before I go into this subject matter, I think it’s particularly interesting that it’s today when we are talking about this, because the whole world is standing at all and discovering what can go wrong in digital, if you do not think that actually, this is what we were seeking for. We’ve always known that giving our personal information means we get free services and somebody needs to make a revenue out of it, and now it’s exposed and we say, shock and horror, you thought it’s about Nike and Adidas, but not about political parties. But this is very important that we don’t confuse things. If you have a safe environment, where people can identify each other, then digital channels technically, they are not bad in any way. I mean, the carrier is never the guilty party. Technology is never the guilty party, it’s only how we regulate or do not regulate, or how we understand or don’t understand, and it all comes always down to identification.

Some people really don’t like big internet companies, but as soon as their people need to talk to businesses, what do they do? In Estonia, I put my state provided signature under these kind of communication. Most people rely on Amazon or Google identification tools, I’m sorry to say, without any state guarantee. It’s, I believe, a bit irresponsible of Governments to leave their people and businesses this way alone, in the digital sphere, where they are anyway.

Anyway, if I think about what is to come, then why here we’re scrappling with taxing in the analogue world and trying to understand that who gets the tax revenue or their Starbucks Coffee delivered somewhere in Europe. I think we already see that we need to rethink totally our tax system and also, for that matter, our social services delivery system, because the jobs are changing because of technology, which is something I like to call Alice in Wonderland problem. You know, when the cat was disappearing and the green was staying on, and, you know, if the industrial job is disappearing then, of course, our social model, which is based on the tax river coming in from big company where people have gathered to work more effectively, and therefore, it’s been an easy model for us. It has really made it easy to collect taxes because people work in one company. They have contracts for life or for a certain period of time and it’s all very organised and very simple to understand and follow, but I don’t think that technology will allow us to stay with that solution.

First of all, I think that the – as we saw, in agricultural sector, the jobs disappear and we provide our food with 3 to 5% for the workforce. In a modern world, I think in industry, quite soon, we will similarly see that, we will provide all the goods we need with a similar proportion of workforce. So, the rest will be doing something else and this will be very different. What it would be, we do not know exactly, but we have some hints.

First of all, we know it’s not going to be terribly hi-tech. There has been long this thinking that vulnerable classes are those who are – were working in blue collar jobs, and I think it’s Jerry Kaplan from Stanford University, who has mentioned that automation is blind to the colour – of your colour, and, as I gave you the example of Estonian, well, taxmen, it is indeed true, and also, the new job creation is more democratic than we might think, because you can be a travelling YouTuber making money out of this and it’s not very – doesn’t take you a degree. Similarly, for example, we have, in Estonia, it’s a real-life example, somewhere in Mustvee, in a Southern Estonian county, of a couple of thousand people, there lives a man, he came from South Africa by the way, so he’s not Estonian even, he’s Afrikaan, and he makes bows and arrows and they’re world class and his market is global. So, none of his customers live closer to him than 1,000 kilometres, probably. So, all these kind of handicraft jobs, they are liberated from the need to not only to travel around the markets surrounding you, but also, trying to agree with souvenir shops.

So, you see, the new job opportunities actually, are being created. Some of them can also be quite specialising and specialised and also, help quite a lot of those people with, let’s say, difficulties in living in our socially very demanding world. For example, an autistic person, who agrees to knit only red socks, can nowadays, make a living, because probably, globally, among the billions of people online, he will find enough takers for his red socks and he doesn’t need to talk to anybody in the process of doing so.

So, I don’t agree with those who say that these new jobs will be all for PhDs, narrowly selected people. I think the change is actually quite democratic, but the problem of course is that during this transition, if we think back to the industrial transition, it was painful indeed, for people who had lower financial [inaudible – 19:25]. Why it was painful? Because there was no social system and there was no education. Now we need to keep providing these to people while our tax base is being eroded, because jobs are changing and we need to rethink totally, how we gather our taxes.

Take this example. I work in the morning. I have a MBA and I’m a Financial Manager by education, and in the morning, I work for somebody here in London, and then in the afternoon, I work for somebody in Australia, and I choose to live three months a year in Tallinn and six months a year in Sydney and somewhere else. So, globally, I work globally, I have a narrow set of specialised skills, which I can sell globally. Wonderful, I don’t need an enterprise anymore, I can sell directly. This is also, already happening here. The number of self-employed people is growing very quickly in UK and in Netherlands and elsewhere in Europe. So, narrow specialisation, independent work, in different places, who will get my taxes? How? Who will provide my social services?

I want my children to have Estonian language education. I want it online, living in Australia. This is how we need to think about how digital disruption is really changing our society, and this is no CV. I mean, this is already happening. If you look at the macro statistics, you can see, self-employed people’s numbers are rising. The basis on which people make a living, I mean, think Airbnb and all those, it’s widening.

Our understanding of the work, as being something from nine to five in one country in one company, fixed home address, fixed job address, it’s going, and it’s good because people have more freedom, and they have better work life balance and it is easier for many women to manage babies in high demand and high reward jobs this way. So, it’s not bad. It’s good, but we need to understand today that this is happening and we needn’t discuss Starbucks only. We need also to solve the Starbucks tax issue, but we need to really think about the digital environment.

So, I think this will trickle down to the whole society, and much more people will work independently, and the education system needs to adapt as well because, of course, one thing we know for certain is that going once through all the pain of getting a Master’s degree or even a PhD, will not take you to the retirement anymore, probably, and this quick technology can change, and you need to therefore, radically, also change how you teach people.

We already see universities responding to this challenge of very short-term courses, which doesn’t give you a degree, but gives you a skillset. But I think we need to really observe our kids, see what they are doing and achieving before they enter the school system, and think, do really can afford to continue educating these kids the way you have been doing? I mean, children in the kindergarten, they try to enlarge the window panels to make their mum to come closer, or try to do this way, so that the mum will come from the door to – so, this is a new skillset, which we need to teach to people. I mean, differences between digital and analogue, but, at the same time, these kids, if they are not English, they learn actually, already a second language before they enter the school because, I mean, YouTubers mostly speak English.

I had a child, not only fluent in French and Estonian, his smaller brother was fluent in English as well, not because of internet, but kindergarten. He realised he had a deficiency in his education, took him a year, he’s now fluent in English as I am. No lesson, nothing. Okay, he was French speaking, so the vocabulary is the same, the grammar and pronunciation is different, as you know, and it’s probably easier to come from French to English, but kids know a lot more than we did and they know different things than we did, yet they go to school and start the same curriculum more or less what we do.

We also still have artificial borders in people entering different education systems. Well, when I was 15, I had a discussion where I cannot listen to the university courses, if I’m able to understand them. The problem’s still there. I think we need to make all kind of learning levels available to people, never mind their previous educational experience and never mind their age. Particularly the age, because, as I said, no-one, and I say it always when I speak to students graduating from university, no-one here in this room today will still be making their money from the same things in 30 years’ time. Doctors probably have the best chance, even there think of eHealth developments.

Here your national medical system, you are so proud of here, I know, and rightly so, they are testing diverting calls, which they have identified as not being life-threatening to an automatized system that will help – which will help you to diagnose and then take the right decision on where to go. Also looking at the people’s behaviour online, if somebody is ill, what they do? They normally Google. I think it’s our obligation to make sure that they also find real factual machines, which are able to help them to take the right decision, whether to call the Doctor or not. Right now, mostly, they find – what they find is voodoo and, kind of, weird alternative stuff. I think we need to understand that also this profession, which I think is the most stable, is changing.

So, we have a lot of things, which we need to do, and I have not even come to the artificial intelligence. I know that Elon Musk says, “here is a 10% chance that by 2025 we will have a singularity and a 50% chance by 2050.” My first education, from university, is genetic engineering and, I have to say, that when I was studying, then everybody was sure that by 2010 we will clone the dog, and by 2020, we will clone human beings without any problems, and we all know that this has not at all happened. So, it might be that we say, if I now read the fuller scientific analyses of the apocalyptic future, I take them with a pinch of salt because it might not ever realise. But again, it doesn’t matter, there are systems which can learn to the extent that they seem intelligent to us already now in the existence, and we absolutely need to think what to do with them.

I very much like the example of a security question, for example, we know that in the history there has been a case that somebody sent a worm to somebody else’s nuclear reactor to make it less useful, for bad use. What if you send this worm now, and it has learned quite a lot, and is able to take decisions not independently, but automatically, so it’s not singular, it’s not thinking? But what it is doing, it is analysing the data, what it has, and you think you control and predict the outcome because you know it’s not a singular AI, but you know it’s smart enough to use the data, what it is finding, and to think it finds a certain information in such a nuclear system. But let’s take now, another system element, and this is somebody who has used a contaminated computer in the system. Just look, the same computer went online and read, let’s say, news from last week, and the traces of these news are now in the system, so our AI, or seemingly AI, very clever automatic worm, sees this information and it knows it’s in the nuclear system, and it knows it’s military and the news, what it is reading is, United Nations is planning to ban artificial intelligence use for military use. What will it do? It doesn’t need to be singular, can be devastating.

And some people say that AI will have no reason to act unreasonably, when we have finally created it or something similar, but it will not make our world into paperclips, which I believe is the most common example used. That it will use all our resources to make the world into paperclips because it got the wrong sign, and this will not happen because, I mean, such a stupid signal will not be acceptable for an AI.

Now I’m asking what we are currently doing today, less than a couple of months ago, but we are using real resources, electricity, cooling, brain power, computing power, to do what? To mine Bitcoin. Is Bitcoin real money linked to any real economy? I don’t think so. Did we know that something will definitely go wrong with it? Yes, we definitely did. Did it keep us from wasting resources, making huge amounts of resources into Bitcoin? It didn’t. So, I mean, we can do it and we are fully singular, according to the definition of AI, then why wouldn’t the AI do it?

So, in Estonia, what we are trying to do is, indeed, we are trying to pilot, in 2018, a proactive state model. This should be able to use closed block chain-based data integrity platform. It will be able to detect and solve all cyber incidents on public ecosystem within one second, but it will also try to do different things. It will try to pilot traffic accident resolution, and our objective is, that from incident, in 30 minutes’ time, the resolution will be there, if it’s only an insurance case. So, if this accident happens and you log it in the system, then in 30 minutes’ time, all necessary formalities will be handled automatically.

For this what you would need? You need fully digitalised insurance system. You need fully digitalised car registry and you need people to trust the system to look for different data in different databases and server. For this again, we need to look at our legal space. We need to do something, which I don’t think any country has even attempted. We need to regulate not technology, but something wider, where human and algorithm interaction, an interaction between a human person and an algorithm. We want to regulate precisely this and we don’t want to regulate any specific technology. Something akin like, you are not allowed to destroy the world, not that you cannot use more [inaudible – 30:43], and this is what we are discussing, how to do this. For that, we’ll probably need a separate legal entity for AI or AI similar system, automated system, which to most people, look like AI. I noticed that when you go – when I go to forums where AI is discussed, then the panel normally, quite quickly, falls down to automated systems, without actually recognising. So, I think, legally, at least, luckily, we don’t need to make the distinction.

So, I think that in two years’ time, we have taken another bend around the curve and we will be able to explain to the rest of the world, how the world then would look like, but I seriously hope that the first bend, of safe personalised internet use, will be available for much more people than it is now. It’s not only Estonians, it’s also, I believe, Luxembourgish, Finns, Latvians, Danes, many countries who are seeing some success with providing people with digital identity. But the worry sometimes is, that sometimes we are held back with really ridiculous problems and, for example, I know of a country in Europe, which is really worried that using digital identity and digital space for state people communication, has bankrupted their Post Office, which is, of course, true. Most Post Offices in the world struggle because nobody is sending their emails.

I don’t know whether you have noticed, but my Christmas cards mostly tend to arrive in February now, because there’s a capacity issue obviously, in the Post Offices, so they cannot deliver, but this is the way of problems we – the problems we tend to see, that we need to tackle with, and I think it’s totally wrong. I think we need really, to be thinking more in the way as we, indeed, Estonia, are looking at, and I’m really worried, because if you think that in the previous days new technology, when it was developed, it was normally, I don’t know, mass ordered, or Government supported, and somehow public – publicly controlled and public pay. If you look at the digital, it’s much more diffuse. So, my bet that if there will be something, which will fool most of us into thinking that it’s AI, even if it might not be, it is not going to be Government development. Where it will happen, we don’t know.

It’s quite easy to recognise if somebody has really created a singular system because for that they would need a neuro network, like computer model piece technology, it’s physical, it’s easy to detect and probably, also detect an energy hole somewhere, because if energy was very secure, but I’m still worried that our decision-making process, at multilateral level, particularly if I look, for example, how UN has not managed to come to an agreement on how we apply the international law in digital, despite lots of work being done by the working group led by Marina Kaljurand, another Estonian, or despite the fact what the NATO CCDCEO, NATO Centre of Excellence in Cyber Defence in Tallinn has been doing in creating Manual 1 – Tallinn Manual 1 and 2, trying to broaden our understanding of how international law should apply to digital.

We are taking much longer to regulate than it is taking technology to develop, and this is the new situation. For nuclear arms, we had – we knew who had them and we still roughly know who has them and we’ve had 70 years to try to come to terms. As I demonstrated, AI could soon solve the problem, I mean, as Patricia has said, and as discussed before, AI might actually solve the problem, but will it solve it the way we want it to solve it?

That would be all for now, but I’m ready to answer all your questions [applause].

Adam Ward

Excellent, thank you very much. I think a lot of us in this room would probably feel a lot more confident if other Heads of State had a similar fluency and literacy of technological issues and the challenges of the future as you do. I’m, sort of, interested in the origins of this. I mean, what do you – to what do you attribute Estonia’s particular successes? How – did it have particular advantages to begin with? What explains this coming to grips with these successive waves of innovation and adaptation?

Kersti Kaljulaid

Lack of money and obvious, trying to have modern western society and having really, I mean, in this sense, neighbours like Finland and Sweden and Norway, so all our people look for that level of living standard, and they knew they had lost 50 years in occupation and they wanted something radically different. So, right from the beginning, right from the creation of Estonian tax code, we realised that if we do it like everybody else started leapfrogging, it’s not going to happen. So, we got into habit of looking for leapfrogging and also, well, if your people are poor and desperate, they tend to care less about the sensitivities, which you are facing, I give you that. I mean, it was easier definitely in Estonia, but it also took a concerted effort.

But the private sector came to our aid actually, very much. We didn’t do it alone. Like, they paid for a lot of – big parts of our Tiger Leap Program, which educated people digitally. They offered free services for entire people on online banking. So, people, instead of taking bus and going to the bank, and Estonia is not that densely populated places, it’s the size of Netherlands and 1.3 million people, so next bank office is 50 kilometres away, then it was possible to make everybody use these services, even retired and even elderly people. Me, myself, I don’t have a personal Facebook account because I’ve realised, I don’t want to trade my information. I’ve had several false identity ones though, I have to say, but my mother is fully Facebook compatible. She’s 77, and she does online banking and so does every other retired person. Actually, retired people greatly benefit from the – all kinds of people, who have difficulties leaving their home, actually greatly benefit from a digital service offer, because you can – I mean, I can go and declare my taxes when my kids are in bed, most people can. So, I think this readiness of our society to work is coming.

Adam Ward

And how exportable do you think the model is? Do you think there are other countries that can essentially, use you as a template, or is each case a bit sui generis?

Kersti Kaljulaid

Many African countries think they will try to do it our way. We have signed a Memorandum of Understanding with African Union, and we have already – I think more than ten years ago, we created the Estonian e-Governance Academy. It’s a joint venture of Estonian Government and UNDP and there are takers. There are also – there is Oman, who claims that it has risen, in the Ease of Doing Business Index, by 100 places, and it’s one Estonian company who built their online systems.

My son is working in a company, which is going to build an online tax board for another Gulf country and so, we do export. So far it’s been easier to export to those who can pay, but I’m sure we can put development money and our expertise together. Now, if I come to developed countries then many of you actually inside the Government and inside the private sector separately, have many similar processes. What you lack only is this single backbone, and the single backbone will also make your use of digital services much safer, because when people will not have to have the same password for every site they use, they will have fuller secure digital identity, which they can always use, and the problems of QWERTY and 123456 and those things will go away, simply.

Adam Ward

And how do you persuade people that that unified system is not a single point of failure, and how do you structure it in order to develop resilience and the ability to resist challenges?

Kersti Kaljulaid

Because it’s not the single point. Databases are numerous. You can take one off maybe. We also – we have actually an agreement with Luxembourg on data Embassy, so there is not only Estonian copies, but soon in Luxembourg as well there will be, and it’s an Embassy. They cannot enter it. It has all the rights, so anything like that. Luxembourg is great at digitalisation as well and they have digital ID, by the way, as well, already for ten years. They have singular services, but it is also not that we only have this digital ID card for identification. We have smart ID, we have mobile ID, and there are other ways and means of developing.

For example, a couple of months ago, because there’s this Bitcoin money, one of our ideas to issue to every Estonian a token, let’s say a million tokens, which they can then use to identify themselves to state systems, somehow morphed into the idea of estcoin creation, which got us in big trouble and lots of explanations with Central Bank, you can imagine, “Are you really a country sharing a cryptocurrency?” This was not the plan and the plan is everybody has a million tokens they can use as identification tools, for example. So, there are numerous ways to make the system more difficult to attack.

On the other hand, nothing is globally safe and secure, but then, again, come back to analogue, what if your archive burnt down?

Adam Ward

Yeah.

Kersti Kaljulaid

So…

Adam Ward

And how confident are you about the capacity to stay ahead of this innovation curve? You alluded to a number of different ways of innovation. You talked about the rising public expectations in an environment of an erosion of the taxpayers at the same time, where resources are tight, how well are you doing and how confident are you by keeping ahead of this game?

Kersti Kaljulaid

Well, even digital empires will see a decline at some point. We don’t know. Life is complicated, but what I know is that we don’t want to stay that far ahead of everybody else in Europe, because problem is, we’re tiny, and 80% of our economy is exports. So, we’d like Europe to have a digital single market and a single identification needs and possibilities. So, we don’t want to sit alone on [inaudible – 41:15] while you are still on a – in fact, we are trying – we are doing everything to try to spread this knowledge, because I think that we will all economically gain and we will remain ahead, simply because we are thinking of a proactive state, while you are thinking of a digital reactive state. So, it shows that we have quite a distance, and well, of a spare space to develop services and then offer them to you as well.

Adam Ward

We’ll open it up to questions from the floor. If you’d like to ask a question, please keep your hand up, wait for the microphone to reach you and, for the President’s benefit, identify yourself please, and keep it nice and brisk. Yes, please.

Member

Hi, you’ve spoken about the digitalisation of Government and being a proactive Government, and I’m thinking of the most recent manifestation of Digital Government, the most forceful manifestation being the social credit system in China. I’m wondering if you think there’s ever an appropriate extent to apply that paradigm?

Kersti Kaljulaid

As I said already, part of our digital success, as a democratic country is, that the state has set itself limits. For example, it has made promises that it will not nose around the data of their people. It has also promised that if it does look for some certain needs, which people normally have agreed that this will take place, people will be notified. You have to. Similarly, as you protect democracy and human rights and personal data and privacy in an analogue world, we have to come to an understanding that all this similarly applies to the technology and digital world. This has to be our promise to our people, otherwise, indeed, the big brother like systems are possible technologically, because whatever we do in analogue, we just do it quicker in technological world. So, if you think about the Chinese society, then the social scoring is a normal manifestation of the development of society and the use of technology for that type of society, not that I’m approving it, but it’s perfectly understandable why it is there and why it can never happen in a liberal democratic environment like Estonia.

Adam Ward

Patricia Lewis.

Dr Patricia Lewis

Thank you very much. Patricia Lewis from Chatham House. You spoke very well about the international problems that we’re seeing, in terms of reaching agreement on things like international law, but the other place where we’re seeing a lot of problems is in the fragmentation of the internet, or the splinternet as it’s increasingly being called, and I wonder if you could say a few words about the dangers that this pose and the way in which we might be able to, if you like, reach out beyond the governmentally imposed borders to the citizen connections that we can make?

Kersti Kaljulaid

We think we are overcoming this with the single platform and universal digital identity, which comes with your passport. So, everybody has access, so there shouldn’t be a socially divisive element in it, but I don’t think it will happen without work. We should actually put resources and emphasis and energy in making this inclusive, but there is even more important element, to make it hygienic. I don’t like to call it cyber defence, I prefer for civil society to use the term ‘cyber-hygiene’.

We need to teach our people that they need to be responsible for their own safety in the internet world as they are in the analogue world, and we need to teach people also, that everything which manifests in the internet, exclude and making them somehow feeling left out, is also something for which they need to know where to look for help. This is very important that we do this. Technology will never take care of that, it will always be people and sometimes, I’ve been told, “What are you talking about, cyber-hygiene? How can we teach it to everybody?” When I first say that, “Look, we have had a generation who grew up in digital environment and WannaCry didn’t pass, even once, in Estonia,” not beta passed for Estonia, it manifested itself in one system of one company, which actually managed internationally, whole – of the whole of its technological environment. So, it was not really integrated in Estonia, which shows that it can be taught. Cyber-hygiene can be taught and also, I mean, we taught people to wash hands, not to fall ill, and we had far worse communication means and skills then, so don’t tell me cyber-hygiene is hopeless. I think it’s possible, and what you are talking about, for me, is part of a cyber-hygiene.

Adam Ward

Yes, please, in the front row. Just wait for the microphone, and there you go.

Euripides

Thank you. Madam President, thank you. My name is Euripides and I come from Cyprus. Fascinating, thank you very much for your leadership and for your vision. I mean, we take inspiration, down South Cyprus takes good inspiration from you. Please, what are some of the downsides of what we’re talking about, number one? Number two, cyber-attacks, which seem to be, you know, the coin of the day, how do you fight against that? Backup systems, I suppose, because if you put all your eggs in one basket something can go frightfully wrong and the whole system comes down, I do not know, but perhaps my generation is working overtime, and if we are at this stage also, if you care to address very briefly, the issues of the spin, the hype, false fake news that seem to be moving – having a life of their own, they’re virtual, but they create reality. Thank you.

Kersti Kaljulaid

First, I just said, in my speech, that we are aiming at the proactive protection for the system, so that for their own communication with each other, within a minute, they solve every problem, which falls on them, cyber-attack wise. It’s not enough to keep your – let’s say, your electricity degree where you need a ten-millisecond solution up and running, but it will be enough for most systems. Second, there is no whole system, as I said, it’s a distributed system. There are several databases and the only thing which we have different from the rest of the world is the identification platform called Crossroads, and it’s – you should never build – and this has been the most common error, that people start building Digital Governments and they do it like a train. The person enters the first wagon and then has to walk through all wagons to get to a necessary service. It’s cumbersome and it will just collapse under the traffic. It needs to be a star. You have the single platform of identification and then you have millions of interactions, possible interactions, can be services, can be to people, can be people and Government, and if any one of them is down, then it doesn’t in any way affect the other part.

But, as I said, I mean, death and taxes are probably the only things which are secure. The only thing which I am quite sure at least, that it’s much more secure and much more 24/7 and 365 than a paper system and it doesn’t have the vulnerabilities of the paper system, it has its own ones. We need to fight with them.

Cyber-attacks, Estonia was in 2007 under cyber-attack. Nowadays, I can guarantee you, that if you have one single digital system in your country, it’s under these kind of cyber-attacks, several times a day and nobody blinks an eye. So, technology can take care of some, but again, you need technology plus cyber- hygiene. It cannot be the only one, and I think it is of course easier if you had entered the internet when it was just some homepages and some viruses and Kaspersky. It was easier, I admit, to then start learning and now joining internet of things. So, I mean, those societies, who are very far behind, the great downside is that now it’s very expensive to educate them, but this needs to be done because you cannot take away technology.

Adam Ward

Thank you. Yes, the gentleman on the aisle just there with a blue blazer.

Hardy Catalan

Hi, Hardy Catalan and I’m a Chatham House member. You touched very tantalisingly on the economic and social transition, and I was wondering if you could share some thoughts with us on, what you view as the, sort of, policy options that Europe has in front of it?

Kersti Kaljulaid

I think Europe has a certain competitive advantage at least to deal with these problems, because we have free movement of people. We are, to a certain extent, used to that people may work in one country, carry their benefits with them and change rapidly, their working environment and addresses. So, we should have a competitive advantage over other developed areas. Are we able to use it? That I do not know.

There is another element, which we need to keep in mind. Everything I can today think of, of how to solve these issues, will be in one way or another, in contradiction with OECD rules, on how we treat our international business and taxes. So, it has to be global and there is no point of making it European. Europeans have certainly, much more understanding and we can help with clearly demonstrating that this is happening, but the problem is, one side problem, but the other way, why I’m confident it will happen, because otherwise, younger people they will not accept our way of living and working. We may say them, but no, no, you have to have an address and work and then we will provide you with services. The best part of their earning years from 25 to 35, maybe 40, if they don’t have kids early, they will not pay into the system, but all our systems, bar our pension system, are free to opt in at later stage without any long-term penal system. So, I’m quite sure that we’ll quite soon realise that we don’t want young people to opt out, and they don’t listen to us.

One possibility is, we go all private on the insurance, fragmented and private. I don’t think that would be a good thing precisely because we need to support societies during the transition.

Adam Ward

Yes, gentleman in the blue shirt, just on the aisle again.

Tahar

Hi, my name is Tahar, Chatham House member. You touched upon around education of young kids, you know, and right that you mentioned around, you know, kids learn a lot of things, but then they – as soon as they’re old enough to go to school, they start just like the way we did. What is your Government or your country doing to change the education system to address that? Thank you.

Kersti Kaljulaid

First of all, what we had to do, and you sometimes have to be self- critical, if you are sitting in a country, which together with Finland is highest up in the PISA Tests in Europe and pretty high globally as well, it’s very hard to convince your Teachers that something needs to change, but yet, we do attempt.

I think what we need is, a system which is based on modular learning and entering the modules needs to be on the feedback. So, it’s not like marking, but you test the ability and skills of people and you propose to develop those skills further, and you propose to help with the other skills, which they have not mastered. So, I think this might be a solution, at some point, and I think it would be very good and easy to do in the countries, which currently lack a proper education system and lack access to the schools, because I think big parts of it could be [inaudible – 53:10] or online courses, and since I think that the academic degree, I’m sorry to say, for big parts of working population, will be irrelevant. We could easily teach practical skills to lots and lots of girls in Africa, for example, through these models, and they would be much more flexible in developing these educational services than any of us, including Estonia.

Adam Ward

Yes, Matt.

Matthew Oxenford

Hi, I’m Matthew Oxenford, a Researcher in the Global Economy and Finance Department here at Chatham House. I want to follow-up on the question a few questions ago about Europe. You talk about entrepreneurship, but it seems like the next step is, sort of, scaling up, you know, hi-tech entrepreneurship, and it seems like most of the large world beating companies that have been doing that, have been either based in the United States, the Facebooks, the Googles, etc., and increasingly. numbers in China. Estonia can obviously punch quite a bit above its weight class with Skype, TransferWise and others, but Europe, as a whole, seems to be lagging behind. despite all the advantages you talked about. As a European Head of State, how do you, sort of, explain this discrepancy and do you think that there’s policy recommendations to try and improve it?

Kersti Kaljulaid

First of all, you don’t need a unicorn to actually take your society forward. The services, which you can nowadays create, can be perfectly beautiful and either local, necessary to your local people, or very narrowly specialised, meaning you have a relatively narrow market. You don’t need to become a Facebook, but your specific service might be very valuable for certain people globally. So, I think that there, the future will be more fragmented what we are seeing right now, and indeed, it is true, that Facebook has created a community of billions of people, which is a value, it can now sell, but I don’t think that we should look for future in the past. I think the future is much more diverse and diversified, because it’s becoming cheaper to design these kind of specific services. So, I think that what you need is a vibrant start-up community rather than a unicorn. A unicorn helps, but when you sell it you create a vibrant start-up community, because I mean, they will probably remove their headquarters from your country to somewhere else and all the people will be available for new start-ups and the money comes to the country.

People in Estonia are joking that, we really want Skype to move their development centre finally out of Estonia, because that would release us to deal with much more new ideas. Skype money is still in Estonia and is responsible in a big part to our – to finance our start-up community, but I think that the diverse matters as well. So, don’t despair if you don’t have unicorns.

Adam Ward

We have time for just one more question, yes, and in the red jumper there.

Member

[Inaudible – 56:02], Freelance Marketing Consultant. My question is, do you think that the Government should have a hardcopy of the important digital information as a backup?

Kersti Kaljulaid

No. What is a hardcopy?

Member

Paper copy.

Kersti Kaljulaid

Why? Why do you think a paper is somehow more durable than…?

Member

The thing is, that I’m using internet since 1994 and I’m a bit sceptic about internet security, because it’s not 100% safe and, if something goes wrong, which can happen to everyone, so at least you’ll be having a hardcopies like a…

Kersti Kaljulaid

Yeah, I just looked at…

Member

…failsafe.

Kersti Kaljulaid

I just looked at my work contract signed in 1994 and, you know what, it has faded.

Adam Ward

Touché. Well, thank you very much, indeed. I think you’ve reminded us all that technology and the impact of technology, is not just about what we do and how we do it, but it’s actually much more fundamentally about how we think, and that’s the next step in human evolution I’m sure that we all need to grapple with. I’m also glad that you made several references to artificial intelligence, as this is something where Chatham House is trying to lead, in terms of how you connect AI issues to the questions of international affairs, not just shaping the future of conflict, but also, enhancing human security, and, indeed, a larger initiative, in the next couple of years here, is going to be very much on, how we embrace technology as a provider of solutions to international public policy challenges, and we look forward very much to sustaining the conversation with colleagues in Estonia on that.

Would you please join me in thanking the President for her presentation [applause]? If I could just ask you to remain seated to allow…