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President Kaljulaid at Columbia University

02.11.2018

Dear students and everybody present,

First thank you for the introduction and for creating a link between this wonderful university and Estonia. Indeed, we cooperate a lot and we are grateful and happy that you keep coming to our country to seek inspiration for the 21st century. Frankly speaking, globally there is no other digital nation that has a state, or the full support of a state the way Estonian people have. Therefore, Estonia is indeed the place to come.

You mentioned Skype, which is a very old-fashioned way to talk about Estonia. That is the ancient time when Estonia only had one unicorn per million people. That is roughly the density you have in San Francisco. Now we have four unicorns per million people – we have three more. While we are one million. Something in Estonia is breeding these unicorns, and obviously, this cannot be simply because it is our fate. There has to be a specific reason.

I am asked a lot what this specific reason is. Everybody knows that Estonia is digital. That may be the reason why we breed unicorns. On the other hand, it does not tell anybody anything about why Estonia of all places is a digital state. Moreover, why nobody else is.

This goes back to the time when we regained our independence thirty years ago. We had been occupied for fifty years, during which time this wonderful country never recognised our occupation. Our Prime Minister in Exile, who was also a former ambassador from the viewpoint of the Soviet Union, but the ambassador forever from the viewpoint of the government of the United States, became the dean of the diplomatic corps here, because he remained the oldest for a long time, to the chagrin of the Soviet Union. We are very proud of this part of history.

Getting back to when we regained our independence—we had lost fifty years. We always compare ourselves to the Scandinavian countries – Finland is our closest neighbour, we speak almost the same language and they are one of the most developed countries globally by every index. This was our benchmark and this is where we thought we would be if occupation had not happened. Of course everybody tells you when you have freshly regained your independence and you are very poor – our average income was about 30 dollars per month, thirty years later it is 1300 – everybody tells you to do like we did and you will catch up. I accept that if we are talking about liberal democratic values, freedom of speech and rule-of-law-state all of this applies. However, for the economic catch-up this is deeply wrong. Because if you do what others have been doing before you, you will never catch up. This was common knowledge that the IMF, World Bank and all other advisers did not preach.

Nevertheless, we were sane enough to see for ourselves that the early industrializers gained the most jobs and income; late industrializers gained fewer jobs and less income. So what is the point of doing exactly as everybody else has been doing? Instead, we did a monetary reform, which the IMF strongly advised against. They said that you cannot succeed, nobody has done it this way. We said: “Exactly, we would be the first do it this way.” We did. Guess what? Two years later, what does the IMF do? Well, it trots around the globe and says: “Do it like the Estonians.” It is very rare to have experiments in social sciences, but we did. There are three Baltic States. Latvia and Lithuania accepted the IMF’s suggestions. Two years later they realised they had lost two years. We had given our people a stable currency more quickly and foreign direct investments started to come in more quickly, because they believed our pledge that we have a currency board and a law which ensures a balanced budget. Therefore, the currency board became sustainable; otherwise, the currency board is unsustainable in long term. We made it sustainable by a simple innovation.

Next came the tax system. Well, there the situation was such that everybody was advising everyone to do a proportional tax system and tax all kinds of income – rents, salaries, capital gains – in a similar way. However, nobody was implementing it. Therefore, we did. We implemented it. It has been copied and followed a lot. It led us to scrap corporate income tax totally, which kept foreign direct investment flows coming in.

By now our salaries were rising very quickly and cohering with the European level, because we are part of the European Union and the single market. Then we were not, but we did agree on the free trade agreement, because we were a country acceding to the European Union. However, we realised that there has to be something else. Remember, we were seeking to catch up, meaning we were seeking to leap-frog. We were looking what there was on the horizon for technologies. The way we saw it, the world was moving in two big streams of technological development – one was natural sciences, genetic engineering; and the other was digital. Genetic engineering has not actually reached the levels we thought. I have a degree in genetics myself. In the early 1990s, we and everybody who was writing articles in serious journals thought that by the turn of the century we would be able to clone a dog, and a human being by 2020. Well, this has not happened. That is why I take with a pinch of salt the thought that by 2020 we would have singular artificial intelligence. I do not believe it. I think it will take a lot longer, if we will get there at all. In genetic engineering we still cannot even make a virus properly.

We realised that these are the technological streams and we thought, how could we, as a nation, benefit from that? Therefore, we created the Estonian Genome Law. Iceland has it, Estonia has it. This made it possible to analyse people’s genetic information, make sure that the data is private, nobody can access it in personalised format, but in an impersonalised format, scientists and businesses can use it. Why did we do it? Because we thought that everybody would soon be doing it, because there has to be preventive medicine and some medicines do not work on everybody, you have to know your genetic code. Also, we were poor. We knew that if you wait until everybody starts doing it, we cannot provide this service to our people. So we decided that we would be smart in the legal space-setting, which has been our strength since the monetary reform. We created the Estonian Genome Law and the Genome Foundation. Now there are no countries globally where the government finances from the state budget the opportunity for people to know their risk markers and therefore act accordingly. It saves lives in cancer treatment, hypertension, cardiac risks, all this. You have to do it without knowing what the benefits would be – economic benefits, social benefits. We were able to do it, because our back was against the wall. We had to do it, because what if this big thing would be the next big thing and we are not able to offer it to our people?

Same with digital. Digital is simply better known because it is more widely spread and digital technology development has been considerably quicker than biotechnologies. It is easier to understand as well, because it comes to our fingertips, whereas this laboratory stuff is in laboratories and we know less about it.

Digital was the same. We had to innovate, because our people were not used to many things, for example paying taxes. They were not used to paying taxes because in the Soviet Union you did not have a salary and you did not have to pay taxes. So there were no tax offices and people did not know how to do it. One option was to create a tax office in every small town, which might still be a hundred kilometres for some people. After all, Estonia is a country the size of the Netherlands but with one million people. The other option was to do the same as what was being done in banking. Banks were already offering online services in 1997. So we thought, as everybody knows in America—nobody wants to see the tax man. You have not yet got there, but we decided in our country not to introduce the tax man to anybody. We did not know him before and you did not have to. The tax board went online in 1997, because we wanted to raise the proportion of people who happily pay their taxes. They are able to do it without the administrative burden. Taxes are not high in Estonia, for heaven’s sake. Still, you do not want to take the trouble to queue, file your declaration, whatever, and then pay. In addition, of course, we built our system up this way that most people actually get some money back when they declare their taxes. We made a promise that in five days you would get your money back if you have declared online, which got people flocking online, because they knew they would get money back. You have rebates for children, rebates for home loans in Estonia, all this comes back to you as soon as you declare your taxes. Later on, if you have declared wrongly, I mean, these things have to be dealt with and settled separately. However, if you are honest and you cannot make calculation errors, because the electronic tax board, every time somebody pays you something, salaries, it is always there. I can look now, in September, and see what my tax declaration as of January to November looks like. I mean, exactly everything is there, nothing is missing, all royalties, salaries, everything is visible. So all I do is sign. Nothing else. The only thing I have to decide is who gets the children’s tax refund, my husband or me. If we declare together, even that does not apply.

This is what we wanted to give our people. We also save many personnel costs and administrative costs from doing this. The cost of gathering taxes is extremely low in Estonia. This was 1997.

Our banks noticed that this government for unknown reasons is not falling behind the private sector technologically. The unknown reason was that we simply did not know that public sectors are expected to fall behind the private sector technologically. I was there, I was advising the Prime Minister and we created the paperless government. This is more visible to foreigners than the tax board. It was a simple file management system every private company had—intranet and file management system, nothing else. It was called a paperless government and the government meeting room had no papers whatsoever. Journalists from foreign media came in and asked questions that sounded stupid to us, for example who is pushing buttons for the ministers. I mean, come on, a minister is not supposed to be stupider than a CEO? We absolutely did not understand.

Maybe that is why there were the right things in technology for us. In Estonia we have not created an artificial divide between the public and private sectors. You do not get a pension from the private sector for staying there for 30 years. The pension system is universal. We do not have corporate pensions either, we have stay-as-you-go and second and third pillars run by private banks but organised by the state as a system. Nobody loses out by going from private to public. I was advising the Prime Minister, as I said, but I came from investment banking. Our digital adviser also came from the private sector and we did not really think that the government is expected to be slower. At that moment we did not think that all the governments would be as backwards in digital uptake as they really are. We thought that we might get five years of advantage. In addition, if we play it as we were playing it with our Genome Law, we may get private sector companies interested in developing digital stuff in Estonia for a fraction of the cost they would later demand from the other governments to set these services up in other countries. So again, what we did was we created the legal space necessary to offer digital services. To remind you—we already had one public service online. Many governments either left digital things alone or they regulated it for somebody external. We were regulating for ourselves while we were creating our legal space for digital technologies.

This legal space is our difference from other countries. The legal space in Estonia says something like this: everybody who has an Estonian passport also has an Estonian digital passport. Therefore, you have a passport in the analogue world and a passport in the digital world. ID, digital ID, digital signature, whichever way you want to call it. It takes the form of a chip or a mobile phone access smart ID. Initially there was just the opportunity to put your card in the computer and get online using your digital passport. Now people ask, why did you think it was safe? We find it a totally weird question, because if you lose your analogue passport and somebody finds it and they are relatively similar or put a falsified photo on it, they can use it. My digital passport does not function as a physical token only—it also needs two passwords. When you present your passport, nobody asks you for any passwords. Our digital ID asks for two passwords. Yet people ask if you think it is safe. Of course, it is safe. It is much safer.

This was what we told our people then. We could not tell them that the whole world of Internet services would be developed globally and they would all be globally accessible and that they would all be completely unsafe. Because in 1999 when we decided to give people a digital ID we did not know that would happen. Yes, we thought it would happen, but we did not think that other governments would leave their people and businesses so alone in the cybersphere.

Why did we not leave our businesses alone in the cybersphere when we were preparing the digital ID? We could not possibly do an e-government without the private sector. Our worry in the public sector was that people only go online for public services, initially only once a year because we had only the tax board online. We wanted other services to come online but we did not know how quickly we could do it. Anyway, how often do you apply for public services? Six times a year? Five times a year? This meant that we had to get the private sector to do it with us, because if people do not communicate only with the government, but also with their bank, with their water and electricity provider and their telecom company using the same digital passport all the time, they get used to it. It becomes mainstream. And guess what? We understood that inclusivity equals mass market depending on which side you are looking at it. We guaranteed our private companies a mass market for digitally provided services, because we gave the digital ID to absolutely everybody.

It is difficult to do. You cannot go to a retired person and say, here is your digital ID, welcome to the cyberworld. It does not work, I can promise you. What we did, was that we were just coming out with the little plastic card which in Europe functions as our travel card as well. You can use it as a travel card and for identification, so you do not need this leafy fat passport. More or less all countries in Europe have it. Par the UK, I think. Everybody else does. We simply decided that this card would be a little bit more expensive for the government if we put this digital ID on it. We would not make it optional, that you can apply and then you have the digital ID, otherwise you can have the ID card without the digital part. It cost us, 64 million Estonian kroons, so it was 8 million D-marks, that would make roughly 5 million dollars. Five million dollars for today being so much ahead, probably 15-20 years ahead of all other governments. But it was not easy. The Minister of Finance, who later became the Prime Minister and is a very strong supporter of the Estonian digital ecosystem—he was demanding, where is the benefit coming from? Next year, five years from now? Tell me, what is this going to give us? We said, we cannot guarantee it, but we think this is going to happen globally and then we would not have the money to buy it, because we are poor. Let us do it now and create this sandbox. So, we went ahead. For that 5 million dollars we could universally guarantee the safety for people online, which is still functional 20 years later. There have been of course new technologies brought in to support access to this platform. Everybody in Estonia provide services through this infrastructure, because it guarantees data safety for private companies and the government. Everybody uses their digital ID to talk to somebody else, and the channel, which we create by signing in, is encrypted. So, if I use my digital ID to query an Estonian travel company for some tickets, booking.com does not come into it selling me my last trip again and again.

Estonians know it. Inherently they therefore know that if I use my credit card, not this safe channel to communicate between the provider and the bank, then I would see these tiresome advertisements from booking.com. This kind of explains to Estonians what cyberhygiene means. Cyberhygiene means that you operate on the Internet safely. Here you may also understand what cyberhygiene means, but you have yet to convince your government to provide the soap and water for this hygiene – the ID card. Because cyberhygiene needs to be taught from an early age and we are teaching it to our people as well. But we say, this is your soap and water, this is your ID, use it, then you are safe and we guarantee that you are safe. You can teach cyberhygiene – keep your passwords safe, etc. – however much you want, but it would not do the trick, for one simple reason. Facebook and Amazon and all others which the political class shame for the fact that they cannot protect people’s data actually cannot do it, because it is not the technology what protects the data. It is the legal system that is protecting the people’s data. In Estonia the technology is such that the info is encrypted, but we also have created a legal space. For example, the legal space says that if you have access to somebody’s data because you are a civil servant, you will have access to a small proportion of the data. Nobody has access to everything, there is no big brother. There are a lot of small databases and to exercise your function you have access to a part of it. For example, a doctor has access to his patients’ medical files. Even within that file I can limit the doctor’s access. The same with genetic data – I can set it so my doctor cannot see it. It is my right. I can do it, because we have a system like that.

Most democratic governments tell their people that they protect their data and keep it safe. However, they are not implementing it, because you do not know who read your medical file in your doctor’s office or made a copy of it. Snooping is prohibited by the law and you would be punished if you look at this data. Yes, but what is the chance that you know who copied it? A huge investigation, etc. In Estonia, if you are going into the system according to your function, accessing my health file, you would leave a personal trace. It is not like a hospital in northern Tallinn was looking at it—it is a person, a specific nurse, a specific doctor. They sign in to the system with their digital ID, and they look. If I think they have done something, I can complain and the state sues. That is what guarantees data safety that can never be done by Facebook or Amazon. So big Internet companies are being treated unfairly globally. Blaming them for trying to give people some ways and means of identification on the Internet, which, in principle, all the governments know these companies cannot back up with legal guarantees. This is the government’s job to give their people an identity. We all act and transact online, we cannot leave our people and businesses alone, it is our job!

I think in Europe we are now getting it. Germany last year gave everybody an ID card with a digital chip, France is starting next year. So, we are getting somewhere. However, we still have difficulties with mutual recognition and do not even talk about mutual use. Estonia and Finland, by the way, we are on the same platform, we call it X-Road. We both use it, Finland and Estonia. Iceland is joining us too. So, there are different sovereign states coming together on one platform as well. For the rest we need to think how to link the platforms up to create a European digital identity. I think it will happen first in Europe and then globally, because in Europe we are used to having our four freedoms and a single market. Adding digital freedom is hard work. We have an Estonian commissioner in charge of it, the Vice President of the European Commission. It is hard and it is painful. When I last year spoke at the Digital Summit of the European Union Council, some people fell asleep because they really do not understand. However we are slowly getting to the governments in Europe realising that you cannot leave your people without the soap and water of cyberhygiene. They are starting to do it.

We are finally seeing some progress. You may ask, why I am happy about progress, which is cutting into our competitive advantage? But it is not. Estonia is a tiny country, 80 percent of our economy is exports. As soon as you exit Estonia you are back to paper or Amazon or Google or Facebook identity. I am very grateful that they have it, but I realise the weaknesses of that system. I am not blaming them for what they have done. They have done what they could, they could not do more. Only a few days ago I had a discussion with Amazon leaders trying to figure out how Estonians could use the identity which we provide on Amazon. I do not know whether we get anywhere with it or not, but we made an offer. All Estonian companies can treat our identification platform as an app store and create services on it, all kinds of services. You can do it as well because it is open to citizens of other countries, you do not have to be an EU national. You can apply for Estonian e-residency, and then you can use our app store to create your own company and to create your own services.

I think that this way we are starting to look much bigger than one million. Because in ten minutes one million Estonians can give ten million signatures or make ten million queries of the registries all over the country. This way we look like we are a ten-million nation. Like Sweden. However, in the next ten minutes we would beat the Swedes, because they now must change offices to make another ten million signatures, queries, etc., whereas the Estonians simply log on to a different site.

We see digital as a great equaliser. It makes the small ones look bigger. It allows new opportunities for example to the women in the job market, because we have our home load. In Estonia we have tried to make it more equal, but childcare is still heavily skewed towards women. I see young fathers running around with prams, my husband would not do it when my first children were born, now this is more equal. But let us face it, most of the burden is still with women. We apply more often for social services than our husbands do. Having it all at your fingertips early in the morning or late at night or when the baby is sleeping is much easier. An Estonian would not imagine having to go to the village council to name a baby. What for? It already has a digital identity, created automatically in the background when the doctor was entering the birth data into the e-health system. The doctor does not know it happens, but it happens in the background. Later the parents log on and add the real name to the digital identity of the baby. So, you do everything online. It is really a great equaliser for the women in society.

Since we have this digital identity, Estonians are more open and our companies are more open to offer jobs, for example outside of the capital, in rural areas, where you can work from a distance. One of our banks, the biggest one by market share, does not put out job offers offering work in Tallinn, work in Tartu or some other town. They say, that there is a job in our bank and you work wherever you are. Face time is not required for most of the banking services and 99 percent of the transactions in Estonia happen online anyway. There are no bank branches in the villages, you cannot go and work there. However, you can do bookkeeping anywhere. In principle, you can book-keep for an Estonian company from here or from Africa. Yet another great opportunity. Imagine you are an African girl who has Internet access but cannot leave home for some reason. In principle she could learn Estonian bookkeeping and work for an Estonian company. But not for every other European company, mind you! Because many countries still demand that all the data underlying the tax declarations have to be kept in the country. By this they mean that it cannot be in the cloud. Ridiculous in the 21st century!

This demonstrates to you very aptly how the people who worry about job-loss and the lack of job creation by the new technology are themselves keeping up the barriers. For example, handicapped people can find jobs on the Internet much more easily than they previously could. If you think of an autistic person, someone who likes to knit. Let us imagine he or she is only knitting red socks, he does not do anything else, scarves or hats, he does not do even green socks, only red ones. 20 years ago such a person would be unemployed, because there would not be takers for red socks in his own town, even if it were a big town. In addition, he would have to have some interface to sell this stuff. Nowadays it is not a problem. The Internet is your market and your homepage is your access to the market, so this autistic person now would find enough takers for the red socks, globally. It is a nice story as well, I am quite sure it would fly. This person, I do not know whether he or she exists. On the other hand, we have in Estonia a man from South Africa. He settled in Estonia and he lives in a county where there are a few thousand people. He makes world-class bows and arrows and sells them online. His closest client lives about a thousand kilometres away.

So, it is not that the Internet creates smart jobs and you have to have a PhD to be an engineer to benefit from what the Internet can offer. It is a great equaliser to all classes socially, craftsmen, handicapped people, young mothers, everybody benefits. But we have to play it right.

Here comes my plea to you, young people in this room. One thing that we have not managed to solve for our children is that if people fluently work everywhere globally, and we still want them to have social services and education and health care – in the European case it is also a public service. How do we now in this new world gather taxes? It cannot be any of the old city-promoted models with their limitations. You would need a safe dock of a country which would guarantee your children education in their own language, your health care globally wherever you are, and if you are working in ten companies simultaneously because you are narrowly specialised, and these companies happen to be in five different continents. What would you do as a tax board? The time where the river flowing in from an enterprise where everybody has an address where they work and an address where they live is over. Address where they work provides for tax flow, address where they live, this is the lottery for social services and education—that is over. More and more self-employed people are stepping out into the job market every day. We are totally overlooking it as governments.

So, what happens? Younger people opt out. Those who are very lucky, they get rich and buy private insurance services. Good for them, but what about solidarity for those who care about solidarity? We in Europe do care. Our people expect solidarity-based education and health care services. We have to care about solidarity. The poorer people who might not be so successful online, they would fall into the precariat. We do not want that. So, we need to rapidly re-think all our tax systems to have this kind of safe dock. We must tell our people that we have an agreement: you work wherever you want, you live wherever you want, we have a contract, you pay us this and we guarantee you the services wherever you are. These people whose job does not depend on physical location, in the summer they may prefer the Baltic States and in the winter the Mediterranean.

This is one problem, which I would now ask you to solve. The other problem I ask you to solve is education. The Internet has changed a lot the way children learn. A nine-year-old was perfectly predictable 20 years ago, regarding what they would know. Nowadays it is perfectly unpredictable. Every child knows a lot, and they need to go to school and somehow, based on the feedback system, develop what they know and be helped somewhere else. Teaching becomes supervised learning. For that you would need a curriculum online, so that the child could find out based on feedback, what he or she can do and already knows and then study it with the support of a teacher. For the teachers there would always be, never mind the technology, one job – to teach our liberal democratic values. How to be a human being, a compassionate human being. When all these mundane jobs are taken by computers, we can specialise in this, being compassionate human beings. That is our future. It is extremely necessary as well, because we do not know whether we would really be enjoying this new world of technology without too many worries, or whether we will be fighting horribly with climate change and have many worries. In both cases it is equally important how to be part of society and a compassionate human being. That is my last word about digital society. Finally, it does not change anything, we can simply specialise in being human beings.

Thank you!