The next big industry to face digital disruption will be our nations

Children born today will grow up with a radically different understanding of how governments should serve them.

I’ve been thinking a lot about the future recently.

Partly because it’s a requirement for my job — as the head of Estonia’s e-Residency programme — but more importantly it’s because my wife has given birth to our first child.

My wife and I grew up during the collapse of the Soviet Union and the rebirth of Estonia as a free country, followed by the rapid reforms that led to it become the world’s most advanced digital nation. However, I firmly believe that our son is going to grow up through even more interesting and transformative times in the years ahead.

Despite much of the negativity in the news right now, the overall trend appears to be positive for the opportunities that await him and other children entering our world right now.

The internet and other advances in digital technology are enabling more people to live and work globally with greater freedom, independent of any fixed location. As a consequence, governments like ours in Estonia are evolving fast into borderless digital nations in order better serve and benefit from the rise of these new world citizens.

Back to the future

It’s completely understandable if you are wary of any attempt to predict the future though. Most are not usually very accurate.

Consider the movie Back to the Future 2, which I’m looking forward to watching with my son soon. It’s a prediction of 2015 that was made in 1989.

In their vision of the future, all technology has advanced to the next level — so cars can fly, skateboards can hover and clothes can talk — but people’s lives are actually still stuck in the 1980s.

The problem is that we tend to focus on how technology will advance, but not on how that new technology will alter the way we live our lives in more fundamental ways.

In one scene for example, a family is sitting round a dinner table while the children are absorbed with their devices, including one that looks like Google Glass. So far, this is quite well predicted — as people with more parenting experience than me will know too well.

However, all of the devices suddenly start ringing together and the daughter then looks up to say “dad, it’s for you.”

So the movie correctly predicted the proliferation of (what seem to be) internet connected devices, but couldn’t imagine the transformative impact they would have. It’s obvious to us today that there wouldn’t be a single home phone line anymore because our communications are now individualised.

As if to reinforce my point, the future Marty McFly then says he’ll take the call next door before trying to hide messages coming through on the family’s ‘futuristic’ fax machines.

This demonstrates how we keep projecting our existing ways of thinking onto our visions of the future and fail to see the most significant changes before they happen.

So to predict the future we need to think less about advanced new technology and more about new ways of thinking, enabled by technology. We must embrace the reality that concepts we consider entirely normal now could rapidly change — or disappear entirely.

Back to the Future 2 didn’t foresee the changes to our communications industry as a result of the internet and yet the full impact of digital disruption has only just begun. Many other industries have already been radically changed too, such as the media, retail and commerce, while others are facing it now, such as banking and financial services.

I believe we haven’t fully appreciated how the internet is about to change our world in other ways too.

Perhaps the most important industry about to undergo digital disruption is governance. Our concept of nations might seem permanent to us now, but they are relatively new concepts and they are not immune to disruption either. It is this change that I believe will have the furthest reaching impact during my son’s lifetime.

The evolution of nations

For millions of years, humanity was restricted to small groups of nomadic hunters and gatherers until new innovations enabled us to farm in fixed locations.

As a consequence, human settlements began to grow and yet more innovations were required — such as currencies — to govern these communities and enable people to diversify into different societal roles.

Those settlements grew by trading and interacting with each other and then even larger structures of governance emerged to oversee this. The biggest reorganisation then took place with the industrial revolution, which further concentrated our communities in ever-growing cities that could manufacture on a large scale to meet the demands of large populations. From this, our nations were born.

This is where we are now — a very small period in human history in which the world’s population has been restrained by geographic boundaries. A nation is assigned to us at birth and then it usually stays with us for life. This random allocation of the world’s population determines our life opportunities more than almost any other single factor.

That wouldn’t make sense for any other aspect of our lives though.

Take Facebook groups, for example. There are Facebook groups for almost every area of interest in the world (my favourite is Estonian e-residents by the way), but imagine if you were assigned a Facebook group at birth then had to remain within that specific online community for the rest of your life — unless you went through a lengthy and expensive process to switch to a different group. The abundance of Facebook groups is undoubtedly a good thing, but they work better when everyone has the freedom to choose which ones they want to join and contribute to. Personally, I wouldn’t want to be stuck in a flat earth group!

In a similar way, different nations have different values and opportunities too.

It’s only relatively recently that large numbers of people on our planet have gained the power to travel, communicate and trade across borders. I take this freedom for granted now, but my parents could only dream about these opportunities when they were my age. Now I’m the one dreaming about the even greater freedoms ahead of us if we can choose nations as easily as Facebook groups.

Our nations are now undergoing a digital revolution, which will radically reshape them once again — this time into borderless online communities with services that can be accessed anywhere there is an internet connection. Consider the fact that Estonia already offers almost every public service online. As Estonian President Kaljulaid recently pointed out, Estonia is the first digital society with its own state, although plenty more will follow.

That’s why we launched e-Residency in order to scale up our digital nation by offering our services to even more ‘users’ around the world. The main advantage of being an e-resident right now is the ability to start and run a trusted location-independent EU company with minimal cost and hassle so we are essentially exporting our business environment to those who don’t have the same advantages as us.

However, this is only the start. I recently asked what would happen if Estonia offered ‘estcoins’ to e-residents for example (and you’ll be hearing more about that proposal shortly) and the Head of our Tax Board recently speculated that e-residents could one day be offered services paid for through personal taxation, such as health cover and pensions.

In addition, we now receive frequent visits from policy makers in other states who are interested in learning from the success of ‘e-Estonia’ and even launching their own e-Residency programmes. Azerbaijan will be the second country to launch one, while others are in various stages of discussions about what they intend to offer to their future e-residents.

If all countries could attract members online as easily as Facebook groups then they can develop unique selling points for their own e-services. We wish Azerbaijan all the best for their programme because they are not actually trying to replicate Estonia’s offer, but instead want to focus on their own unique advantages.

As the new e-Estonia website proclaims, we have built a digital society and so can you. This digital development is good for everyone, everywhere because it will improve the quality of governance globally if people can freely choose which nation they want to access e-services from.

For a glimpse of that future, let me tell you about my son’s experience.

Welcome to Ruufus’ world

Our child was given his ID number almost immediately after he was born into our advanced digital nation of Estonia. This forms the basis for his secure digital identity, which he will use throughout his life for authenticating himself online and accessing e-services from both the public and the private sector.

While we were busy admiring our new child at the hospital, the doctor was busy entering the first data about him into our state’s Population Registry — such as his name, sex, date of birth and the fact we are his parents.

This information is really useful straight away because various parts of government would need it to better serve us as new parents, such as by scheduling health checks, supporting with child care and allocating our parental leave allowance. This would generate added hassle for new parents in most countries, but in Estonia the information begins flowing automatically between departments and agencies along our secure, decentralised information network known as the ‘X-road’.

When we got home from the hospital and finally took our eyes off our child long enough to open up a computer, we logged in using our own secure digital identities and used our permission as parents to add one more vital bit of data — his name, Ruufus.

This is his story so far, but it’s going to get far more interesting.

By the age of 7, Ruufus will be starting school to learn to read, write and code like all other children. That doesn’t mean we expect him to code an app one day, any more than we expect him to write a novel, but these are the basic skills that he will need to understand the world around him.

Ruufus’ time at school will coincide with rapid advances in the development of artificial intelligence and blockchain technology and this will be used by governments to make smarter decisions and deliver vastly more efficient public services. Ruufus probably won’t have the option of a career in the civil service ahead of him, but he will instead prepare for new jobs that we can’t yet begin to imagine.

His schoolwork will be set and completed digitally and — unfortunately from his perspective now— that means we’ll always know if he has homework to do.

Ruufus won’t just grow up in our digital nation, but also in a truly digitalised world where e-services are trusted by everyone and offline concepts like ink signatures, scanning and posting will seem absurdly old fashioned. I know this seems scary to many people around the world now, but our experience in Estonia has given us the opposite perspective.

Storing important personal data on paper isn’t just inefficient. It’s also dangerous. In contrast, we can see exactly who is accessing our digital data and then challenge any use that we consider to be unjustified. Blockchain-like technology is already being used to protect our health records by providing a public ledger, which can never be altered or erased.

By the age of 15, Ruufus might want to start earning his own money for the first time. He won’t need to restrict his employment opportunities to local businesses however as it will be just as easy to collaborate with people (and instantly get paid by them) on the opposite side of the planet. Cryptocurrencies currently show no sign of disappearing so it is more likely that they will have evolved by then into viable decentralised currencies in which he’ll want to receive payments. That means governments will have needed to figure out how to accept (and tax them) by this point too.

But perhaps governments don’t have to ‘tax’ Ruufus by then anyway. Governments can instead earn their main source of income by selling their services globally in the form of monthly subscriptions — much like how Netflix currently delivers its service.

We would have to ensure that this is done in a way that improves the welfare of everyone, such as those in need of healthcare. By using smart contracts based on blockchain technology for example, Ruufus could start allocating his money directly to those that need it with greater transparency and efficiency, without the need for government middlemen (like me!).

At age 18, Ruufus might want to go explore the world for himself. Fortunately, he won’t have to save up his money or do too much planning first because so much of his life will already be location-independent, including his source of income. This is already the reality for an increasing number of ‘digital nomads’ today, but Ruufus will have the added opportunity to choose which nations that he wants to serve him globally.

The rise of Estonia as a leading digital nation came as a surprise to many so perhaps Ruufus will also choose to be an e-resident of nations that seem surprising to us now because developing nations that embrace digital disruption could quickly overtake developed countries that don’t.

Like me, I hope Ruufus will always be proud to be Estonian, but everyone benefits from increased engagement with other countries. He could choose to run a company in Botswana to access the emerged African business environment. He could choose to pay personal taxes (or a subscription) to South Korea to benefit from their world leading health cover and social protections.

While travelling at this age, Ruufus will also be legally allowed to have his first drink in a bar across most countries. He won’t need to prove his age though as he can just use his government-backed digital ID if challenged to show that he is legally allowed in. An important principle that we already have in Estonia is that organisations are only allowed to access the minimum amount of data that they can justify needing. The bars have no reason to know Ruufus’ date of birth because they merely want to request the answer to their question about whether he is over 18.

During his 20s, Ruufus might want to settle in one location or live across many. One very important difference to most people today though is that he can make this decision more freely without the need to live next to his place of work or study. Remote work is already acceptable in many industries and it will soon become the norm. This will help alleviate some of the biggest challenges of modern life today, such as the stress and expense of living in crowded cities, as well as the pressures caused by migration.

Consider the disruptive impact of elevators, for example. Before they were introduced, the upper floors were the least desirable because they were the least accessible, but that is now the opposite. In a similar way, Rufus might not feel the need to migrate away to London or Berlin in order to find work. I do hope he has even more freedom to travel than me, but he could also enjoy the freedom to access opportunities from around the world — while living in our beautiful Estonian countryside if he wishes.

In 30 years, Ruufus will be a bit older than me and this is around the same period into the future predicted in Back to the Future 2. By this point, Ruufus will have been building up his pension through his subscriptions to Japan but he may also have enough money to invest more heavily in a country of his choice. Right now, ‘investing in a country’ just means investing in property and businesses within a particularly country, but Ruufus might have the option to literally invest in a country.

After examining white papers from various countries, Ruufus could choose to invest in crypto tokens issued by the one with the best plan for the future. Perhaps Ruufus enjoyed visiting the tiny island nation of Fiji during his travels and now wants to invest in their digital development. In the digital era, there will be no reason why nations can’t scale up and achieve vast growth in the same way that great startups do today. If a nation like Fiji can use the investment to deliver services that solve people’s problems globally then the country could achieve astronomical growth.

Ruufus has an enormous head start in this emerging digital world where far too many people currently face financial exclusion because the services they need are either unaffordable or unavailable in their location. By the time he is older than me though, I hope those advantages that we enjoy as Estonians are available to everyone. Our job at the e-Residency programme is to help make that happen and I hope you will sign up and join us.

Thank you for reading my thoughts. My final questions are for you. What services would you choose to access right now from another country if you could? And which country do you think could best offer those services if they were to evolve into a borderless digital nation too?

Let me know in the comments below …or contact your government directly and ask them what their plan is for the digital disruption ahead.