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Speaker 1: As large democracies become modern digital states, they'll get inspiration

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Speaker 1: from their smallest allies. That is a premise for today's conversation.

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Speaker 1: I'm as Emazar, Welcome to the Exponentially podcast. AI is

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Speaker 1: not only changing the way we live, it's forcing governments

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Speaker 1: to reinvent themselves to become digital natives. But how can

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Speaker 1: large countries like the United States reform without becoming vulnerable

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Speaker 1: to the digital downside of cyber attacks and polarization. Estonia,

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Speaker 1: a tiny ex Soviet republic that successfully turned to the

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Speaker 1: West having joined NATO, the EU, and the World Trade Organization,

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Speaker 1: might just offer a guide. The country is voraciously digital.

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Speaker 1: In two thousand and five, it became first to offer

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Speaker 1: online voting, and despite suffering the world's first sovereign cyber

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Speaker 1: attack two years later, trust in the government's digital infrastructure

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Speaker 1: is so high that a majority of voters cast their

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Speaker 1: ballots online in this year's election. So I went to

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Speaker 1: the capital Talent to discuss the digital success story with

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Speaker 1: Kaya Kallas, the recently re elected Prime Minister, at her

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Speaker 1: official residence, Stenbock House. Prime Minister Pallas, thank you for

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Speaker 1: being with me today. Thank you for inviting me into

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Speaker 1: a wonderful place of works with so much history.

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Speaker 2: Welcome to Steenberkers. Nice to have you here.

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Speaker 1: Just a little over thirty years ago, Estonia was under

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Speaker 1: Soviet oppression, and Estonia's own journey has been an exponential

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Speaker 1: one in just three decades. I'm very curious to learn

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Speaker 1: from you initially how distant or close to those times

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Speaker 1: of Soviet rule and rule from Moscow feel to you today.

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Speaker 3: Well, they feel distant, but at the same time not

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Speaker 3: so distant. I mean I was born under Soviet occupation,

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Speaker 3: then we restored our independence. I was in university when

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Speaker 3: we rebuilt our economy and all the legal system, and

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Speaker 3: then I was already lawyer, really using those laws and

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Speaker 3: seeing this all develop over thirty years, and the development

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Speaker 3: in our economy, I mean, our GDP has risen by

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Speaker 3: three point five times over the times, and our salaries

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Speaker 3: have risen forty five times compared to the beginning.

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Speaker 2: So it has been a remarkable journey.

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Speaker 3: But we are a small country, which means that we

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Speaker 3: have also a lot of possibilities to use that size into,

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Speaker 3: you know, being so flexible regarding the fertunities that are coming.

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Speaker 3: And of course when we restored our independence, we had

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Speaker 3: to build everything from scratch because so many things that

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Speaker 3: the Soviet occupation normalized, for example, like corruption, and so

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Speaker 3: we had to start from zero evens up zero right,

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Speaker 3: and therefore going to digital was one of those tools.

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Speaker 2: That we use.

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Speaker 1: But it's interesting that you use the word Soviet occupation

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Speaker 1: about the fifty year period that Estonia was part of

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Speaker 1: the USSR, because of course Estonia had been an independent

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Speaker 1: country before then, but it was quite a unique republic

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Speaker 1: in the context of the USSR because of its proximity

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Speaker 1: to the Nordics, because it's so close to Finland, it's

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Speaker 1: a twenty minute plane ride. I guess you must have

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Speaker 1: had access to finish media growing up as well, in

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Speaker 1: a way perhaps that other Soviet republics couldn't access.

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Speaker 3: This is true, but we know were fit under that occupation,

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Speaker 3: so it is belonging to the Western world, and was

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Speaker 3: also why all the Russians wanted to come to Estonia

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Speaker 3: during that time. And you know, the nineteen twenties, our

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Speaker 3: Russian population was about three point two percent, but as

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Speaker 3: they deported Estonians and brought in Russians in the end

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Speaker 3: of Soviet occupation, it was thirty percent, of.

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Speaker 1: Course, and your family was affected with the deportations. I

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Speaker 1: think some mems of your family were deported by Stalin.

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Speaker 3: This is not a unique story in Estonia. I mean

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Speaker 3: every family has a story like this. My family, My

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Speaker 3: mother was only six months old baby when she was

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Speaker 3: deported to Siberia in a cattle wagon with my grandmother

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Speaker 3: and great grandmother, while my grandfather was sent to prison camps.

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Speaker 2: So this is the sad history.

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Speaker 1: It's a sad history in fact, But there might have

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Speaker 1: been some resentments, and yet you manage to have a

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Speaker 1: country that doesn't seem to have even now a lot

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Speaker 1: of ethnic conflagration between these two groups. And I say

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Speaker 1: even now, of course, because we're sitting more than a

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Speaker 1: year into Russia's illegal invasion of Ukraine. How has the

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Speaker 1: nation itself managed what could have been a cause for

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Speaker 1: a fracture?

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Speaker 3: As we say here, we might have a different past

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Speaker 3: with our Russian speaking minority, but we have a common future.

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Speaker 3: And our Russian speaking minority, especially those who are living

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Speaker 3: closer to Russia, they can see that life on the

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Speaker 3: Russia side is so much worse than it is on

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Speaker 3: the Stonian side. So they are clearly with us and

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Speaker 3: they understand what is going on in Ukraine.

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Speaker 2: But why this.

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Speaker 3: Is so clear to us is that what we are

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Speaker 3: seeing in Ukraine unfolding is the same atrocities that our

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Speaker 3: grandparents went through, and that is why it is so

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Speaker 3: black and white, and we want to avoid those for

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Speaker 3: anybody else. But on the positive side, I must say

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Speaker 3: that when we celebrated our thirtieth anniversary of restoring our independence,

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Speaker 3: then I as a Prime minister, asked the young people

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Speaker 3: to write me essays about those times when we restored

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Speaker 3: our independence. And while I was reading those essays, what

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Speaker 3: struck me was that our young people nowadays are exactly

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Speaker 3: the same as the German or the French young people

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Speaker 3: because they take freedom for granted. And for me, I mean,

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Speaker 3: I'm of the lucky generation that didn't have freedom and

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Speaker 3: has the freedom now, so I'm not taking this for granted.

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Speaker 1: There's something in that word, the phrasing you use that

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Speaker 1: you're in a lucky generation who didn't take freedom for granted.

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Speaker 2: Because it's vice versa.

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Speaker 3: That means I was born on the Soviet occupation, we

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Speaker 3: didn't have anything, we didn't have candies in the shops,

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Speaker 3: we didn't have any choice, and now we have all

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Speaker 3: that right but why I was saying that I was

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Speaker 3: happy to read their essays to understand that we have

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Speaker 3: done something right because they don't have the fears that

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Speaker 3: my generation has, who remembers that it can all fall

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Speaker 3: apart again.

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Speaker 1: I suppose maybe it's a it's an unvarnished opinion from me,

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Speaker 1: but I picture Estonia and Estonian society is more resilient

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Speaker 1: than my experience of the UK or the US is.

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Speaker 1: And I wonder whether I build that picture because of

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Speaker 1: your proximity to Russia. Because in two thousand and seven

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Speaker 1: you were the first country to suffer a sovereign cyber attack.

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Speaker 1: You're largely believed to emanate it from Moscow.

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Speaker 3: It is clear that we were at in two thousand

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Speaker 3: and seven, and we after that concentrated on, I mean,

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Speaker 3: building our resilience and the foundation. It was a cyber attack,

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Speaker 3: Yes it was a cyber attack. But this is also

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Speaker 3: during this war, we see the conventional war in Ukraine,

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Speaker 3: but there's also a hybrid war, an information war, a

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Speaker 3: cyber war going on, energy war going on. In two

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Speaker 3: thousand and seven, we established this computer Emergency Rescue Team

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Speaker 3: that is also helping not only the government but also

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Speaker 3: the companies because it is about the weakest link. We

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Speaker 3: are so connected everybody, so even you know, hospitals a

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Speaker 3: few years ago they only had to worry about some

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Speaker 3: drug addict coming and stealing the morphine. Now they are

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Speaker 3: a security risk because if they are cyber attacked, you know, there.

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Speaker 2: Could be civilian casualties.

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Speaker 3: And that's why the NATO Center of Excellency regarding the

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Speaker 3: Cybersecurity was established in Estonia and we are sharing the

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Speaker 3: experience and trying to build or help build the resilience

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Speaker 3: in other societies as well.

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Speaker 1: There is this point about the integration of a public

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Speaker 1: and private sector in developing a sense of resilience because

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Speaker 1: a kinectic attack, do you depend on your air force

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Speaker 1: or your army to respond. And the cyber attack, it

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Speaker 1: can come in through the bank, or the primary school,

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Speaker 1: or someone's insurance company and then it can reach national

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Speaker 1: infrastructure straight after.

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Speaker 2: Yeah.

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Speaker 3: What I always tell regarding the cybersecurity is that when

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Speaker 3: companies are cyber attacked, they feel ashamed.

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Speaker 2: You know that we.

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Speaker 3: Let our guard down and we didn't I mean, and

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Speaker 3: it went through and we paid ransom or something like that.

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Speaker 2: And they don't talk about this.

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Speaker 3: But the good guys should share information because the bad

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Speaker 3: guys too share information. So in order to prepare for

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Speaker 3: future cyber attacks, we have to share this information if

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Speaker 3: something happens, because then others can build on that experience

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Speaker 3: and build their resilience on it.

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Speaker 2: And this is extremely extremely.

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Speaker 1: Important, super interesting. If a firm believes that being cyber

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Speaker 1: attacked is a bad thing, they will really do the

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Speaker 1: minimum reporting they need exactly, which then makes the next

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Speaker 1: cyber attack more likely.

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Speaker 2: And more likely and other companies more vulnerable.

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Speaker 3: And why we have this computer emergency rescue team is

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Speaker 3: now also helping the companies to find their vulnerable places.

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Speaker 3: It's not anymore that you know, the security of a

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Speaker 3: country only depends on government. It's it's also the private companies.

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Speaker 3: And I think what is also maybe different here is

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Speaker 3: that our p well trust government and government services regarding

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Speaker 3: digital issues, whereas maybe not so much the private companies, right,

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Speaker 3: Whereas in some other countries it's more like people give

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Speaker 3: away a lot to the private companies and there's like, oh,

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Speaker 3: I'm not giving it to the state. But I think

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Speaker 3: what is important that I've always stressed is the digital identities.

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Speaker 3: I mean, in the real world country issues of passport.

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Speaker 2: You are who you say you are. Absolutely in the

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Speaker 2: online world.

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Speaker 1: On the internet, no one knows your dog exactly exactly.

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Speaker 3: It's my famous famous cartoon is like that's right, well,

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Speaker 3: and the digital identity solved that issue.

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Speaker 1: Estonia is also so well known though, for its private

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Speaker 1: sector and its entrepreneurialism in the digital space. In fact,

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Speaker 1: the first time I came to Estonia and twenty years ago,

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Speaker 1: it was to come and look at some private companies

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Speaker 1: and I saw a company called Privador out of the

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Speaker 1: University of tATu. It's now known as God's Time, which

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Speaker 1: is quite a successful security and encryption company. And of

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Speaker 1: course you had the tremendous success with Skype, and Skype

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Speaker 1: gave birth to a new ecosystem, and companies like transfer

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Speaker 1: wise known as wys and Bolt and pipe Drive and

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Speaker 1: pact them and Starship which makes little robots that deliver food.

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Speaker 2: I host every year the student companies.

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Speaker 3: And what is interesting about this is that our market

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Speaker 3: is so small that all the students think about the

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Speaker 3: global problems that they want to solve, right, and that's

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Speaker 3: why we have most startups per capita, and a lot

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Speaker 3: of good ideas well.

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Speaker 1: Most startups are capita. I think amongst the highest venture

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Speaker 1: capital are capitas, the funds that are required to get

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Speaker 1: these startups get But I was curious about why do

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Speaker 1: you think Estonia has that special source. Is it about

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Speaker 1: strong technical education? Is it about having to rebuild an

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Speaker 1: economy because the Soviet Union hadn't left a robust economy here.

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Speaker 3: First in the Soviet Union you didn't have any private property,

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Speaker 3: so you didn't have any market economy. So when you

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Speaker 3: haven't had those opportunities, you are so willing to use

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Speaker 3: those opportunities that unfold. So that is the first thing.

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Speaker 3: The second thing is the education, definitely, so trying to

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Speaker 3: focus on stem subjects. And the most popular cartoon in

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Speaker 3: Estonia is a cartoon of a girl dog who is

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Speaker 3: an inventor and all the you know, the songs are

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Speaker 3: about you know, math is great, chemistry is interesting, you know, physics.

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Speaker 2: Yeah.

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Speaker 1: I would have loved this cartoon.

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Speaker 2: Yeah, yeah, yeah, So I can send it to you.

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Speaker 3: There are both no, no, it's it's in English as

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Speaker 3: well as so, you know, they do all these lists

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Speaker 3: and apparently in terms of if female entrepreneurs or inventors,

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Speaker 3: we are in the top.

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Speaker 2: Of the world.

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Speaker 3: I was like, Okay, this cartoon is really great, yeah

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Speaker 3: driving it?

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Speaker 1: Can I unpick something you said earlier? You said we

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Speaker 1: had no market economy, and that very hard for many

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Speaker 1: of us to understand. What does that mean?

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Speaker 3: The Civil Code of Estonia was really really small because

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Speaker 3: it didn't have a lot of paragraphs because you didn't

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Speaker 3: have any property.

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Speaker 1: To so you didn't need any laws to.

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Speaker 3: You didn't and you didn't really have all those agreements

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Speaker 3: and everything had to be built from scratch. So the

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Speaker 3: ones who were writing the laws, picking up all the

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Speaker 3: good examples around the world were the law students because

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Speaker 3: they spoke languages and so first thing we understood back

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Speaker 3: then was that what makes investors trust your country is

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Speaker 3: the rule of law. So building the laws and the

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Speaker 3: legal system was very important in order to attract investments

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Speaker 3: and also keeping that and getting rid of corruption.

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Speaker 1: And you must have just missed the opportunity to be

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Speaker 1: one of the students to work on these laws.

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Speaker 3: No. Actually, I was in a university and I started

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Speaker 3: in a law firm when I was eighteen and giving advice.

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Speaker 3: Because the clients were young, the market was young, the

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Speaker 3: laws were young. A lot of things were forgiven, and

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Speaker 3: I think this mentality has remained, you know, the startup

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Speaker 3: mentality that also for the government, so that is okay

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Speaker 3: to fail because you learned something on the way and

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Speaker 3: you can you know, rebuild on that something new.

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Speaker 1: If I sum up what this journey looks like, there

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Speaker 1: is a sense of nationhood that delivers a national resilience,

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Speaker 1: and that resilience comes from having not had freedom perhaps

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Speaker 1: and then having freedom and understanding its value living next

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Speaker 1: to a threat, which leads to also to the development

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Speaker 1: of the framework for opportunity. Right, you build these new laws,

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Speaker 1: these institutions that enable a democratic and market economy, connected

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Speaker 1: to a strong education system that had a focus on

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Speaker 1: STEM and then perhaps a little bit of good fortune

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Speaker 1: that this happens around the time the digital revolution is

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Speaker 1: taking place.

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Speaker 3: We introduced the digital identities already two thousand.

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Speaker 2: I mean many didn't have internet yet.

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Speaker 3: That is also the leadership from the government's side, because

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Speaker 3: people didn't know that they need identities. But building the

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Speaker 3: framework and starting to build this e governance and also

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Speaker 3: the data that you get from this and making it

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Speaker 3: open to the companies and using that I think was

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Speaker 3: one of the fundamentals being a small nation.

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Speaker 2: By being digital, you can be much bigger.

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Speaker 3: We have the E residence program and we are having

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Speaker 3: all the services that.

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Speaker 2: We can use.

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Speaker 1: The E residency program is so clever. It allows someone

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Speaker 1: who's not an Estonian citizen to get an e residency

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Speaker 1: in Estonia so they can start to build a business

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Speaker 1: that can work in the digital marketplace, but have the

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Speaker 1: benefits of Estonia's relationships within the EU and Estonia's legal system.

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Speaker 1: Even if they don't necessarily come physically physically here, what's

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Speaker 1: that actually done?

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Speaker 3: So that means the tax money eventually, and it also

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Speaker 3: means that you have a lot of friends around the world.

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Speaker 3: I mean, when Brexit happened, we had a lot of

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Speaker 3: residents coming from your It's like, okay, how can we

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Speaker 3: still enjoy the European Union and everything that is related

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Speaker 3: to it. I think what we have understood since two

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Speaker 3: thousands is that people are more and more living their

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Speaker 3: lives online, so the government also has to be there

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Speaker 3: with the services. Otherwise the people just alienate from the

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Speaker 3: state because I can do everything online. The only establishment

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Speaker 3: or institution that I can't deal with is my government.

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Speaker 3: And I think the government should be where the people are.

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Speaker 3: But that requires the identities and we could so many

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Speaker 3: issues with this.

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Speaker 1: And so we have this interesting picture that builds up,

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Speaker 1: which is that there's this vibrant private sector and billions

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Speaker 1: of people have used Estonian Company's products and do every day.

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Speaker 1: But underneath that is this digital government infrastructure that in

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Speaker 1: a way is enabling all of this. And there is

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Speaker 1: online voting in Estonia, and I think in your recent

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Speaker 1: elections and majority of votes were cast by people on

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Speaker 1: their computers or on their smartphones.

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Speaker 3: It's not that clear that it will increase the voters,

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Speaker 3: but the young people definitely vote online, and we have

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Speaker 3: more and more people going from the regular voting to

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Speaker 3: online voting because it's so convenient.

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Speaker 1: There's something else there that I found really fascinating, which

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Speaker 1: is as a government, you're only allowed to ask a

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Speaker 1: citizen once for their information, and so every department has

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Speaker 1: to use the information the government already has, whereas if

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Speaker 1: you're in the United States and the UK and you're

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Speaker 1: trying to do something with a different government department, you're

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Speaker 1: in there typing in the same information time and time again. Now,

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Speaker 1: what is that a cultural trope? Is that a design decision?

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Speaker 1: Was that some somebody who thought this is really important

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Speaker 1: for us to get legitimacy.

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Speaker 2: It's all about customer experience really.

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Speaker 3: I mean, we don't use the plastics for your driver's

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Speaker 3: license anymore. So you don't know when it's going to expire,

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Speaker 3: really because you don't really use it. So my state

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Speaker 3: writes me an email, your driver's license is expiring. You

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Speaker 3: have two choices, either to go to a office costume more,

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Speaker 3: or to do it online. You have to get your

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Speaker 3: doctor's approval that you can still drive a car, and

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Speaker 3: is still your signature we have this, is still your address?

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Speaker 3: Is that the picture we can use? We have that

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Speaker 3: picture of you? Yes, check, check, check, it's done. And

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Speaker 3: now we are trying to do like more of this

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Speaker 3: personalized event paced the services, so that for example, your

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Speaker 3: kid is born, so the government says that, okay, you

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Speaker 3: can register here, you can do this, you have to

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Speaker 3: do this, and so you don't have to think that

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Speaker 3: what else do you have to do because you're the

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Speaker 3: first time parent and you.

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Speaker 1: Don't really know, you don't have a lot of headspace.

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Speaker 2: Yeah to be that is true, and yeah, yeah, that

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Speaker 2: is true.

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Speaker 1: Yeah, technology is changing exponentially and we in the last

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Speaker 1: five ten years have seen this incredible transformation through artificial

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Speaker 1: intelligence and many many new risks emerging from it. So

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Speaker 1: what do you do as a forward looking government in

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Speaker 1: terms of addressing the risks of AI.

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Speaker 3: We can't pretend that this is not coming, So we

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Speaker 3: aren't ignoring this, No, we don't do that.

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Speaker 2: But at the same time.

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Speaker 3: We are very cautious of overregulating because if you start

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Speaker 3: to regulate in a very early phase, then you focus

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Speaker 3: on the incumbents because this is what you know, and oh, okay,

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Speaker 3: this way it operates. But every time you focus on

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Speaker 3: the incumbent, you actually make the rules that are made.

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Speaker 2: For the incumbent and not for everybody else.

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Speaker 3: So the balance question is about how to not kill

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Speaker 3: innovation at the same time addressing the risks that there are.

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Speaker 2: I think that very.

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Speaker 3: Often on the exactly exactly that I wanted to point out,

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Speaker 3: that your opin union is focusing trying to get all

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Speaker 3: the risks, and I think that is not finding and

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Speaker 3: striking the right balance regarding this. I think it needs

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Speaker 3: more of still this startup mentality that of course cooperation

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Speaker 3: with the companies that are working on the AI, but

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Speaker 3: also going to find this balance in between so that

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Speaker 3: you don't kill the innovation on the way, and it

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Speaker 3: is difficult, I must say. In our government, we tried

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Speaker 3: to find ways we can use the AI and we

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Speaker 3: have over one hundred user cases already where we use that.

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Speaker 1: The premise of our conversation was that as we move

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Speaker 1: into these exponential times of radically changing technologies, that legitimacy,

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Speaker 1: resilience and engagement will be critical capabilities for the governments,

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Speaker 1: and that digital capabilities are the ones that will allow

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Speaker 1: that to happen. To what extent do you think that

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Speaker 1: these are lessons that can be learned and should be

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Speaker 1: learned by other countries, in particular larger countries.

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Speaker 3: There are many lessons on the way, and I always

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Speaker 3: say that when we have tested something, you know, it's

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Speaker 3: like a beta version before you go online in a

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Speaker 3: bigger scale. We have tested yes, yes, exactly, so we

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Speaker 3: have tested that and these are the bugs. So we

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Speaker 3: have tried to show other countries what is our experience

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Speaker 3: regarding this. But I think we have to cooperate and

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Speaker 3: I see that there is a difference of mindset. I mean,

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Speaker 3: I bring you one example. We had a debate on

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Speaker 3: the European level and the representative of one country said

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Speaker 3: to something that we were doing.

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Speaker 2: Is like, oh my god, you're doing.

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Speaker 3: This and this is the most sensitive data there is,

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Speaker 3: and I replied that it's also the data that helps

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Speaker 3: the people the most. So it depends how you see it.

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Speaker 3: Do you only see the risks or you also see

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Speaker 3: the opportunities that there are, And of course you can't

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Speaker 3: overlook the risks. I'm not proposing that, but you have

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Speaker 3: to see the opportunities.

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Speaker 2: Again.

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Speaker 3: If the private companies are driving this, then the governments

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Speaker 3: are left behind. And if the tools are there, you

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Speaker 3: can't you know, out regulate them because they are already there.

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Speaker 3: It's like the industrial revolution, you know. You can't say

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Speaker 3: that you can't use the shoeing machine when it has

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Speaker 3: been invented, right, you have to think about what comes

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Speaker 3: with it.

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Speaker 1: Kaya Kallas, it's a very fine balance that you have struck.

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Speaker 1: Thank you so much for sharing with me today.

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Speaker 2: Thank you.

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Speaker 1: Reflecting on my conversation with the Prime Minister, I'm struck

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Speaker 1: by a few things. She really gets digital. She understands

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Speaker 1: what government apps should look like and what citizens need

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Speaker 1: from them. But she also raised the importance of values,

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Speaker 1: the values of public private cooperation, the values of alliances,

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Speaker 1: and the values of protecting democracy, perhaps because a memory

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Speaker 1: of oppression is still so recent in Estonian memory, but

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Speaker 1: I think these are all great lessons for bigger countries

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Speaker 1: as well. Thanks for listening to the Exponentially podcast. If

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Speaker 1: you enjoy the show, please leave a review or rating.

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Speaker 1: It really does help others find us. The Exponentially podcast

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Speaker 1: is presented by me Azeem Azar. The sound designer is

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Speaker 1: Will Horrocks. The research was led by Chloe Ippah and

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Speaker 1: music composed by Emily Green and John Zarcone. The show

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Speaker 1: is produced by Frederic Cassella, Maria Garrilov and me Azeem Azar.

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Speaker 1: Special thanks to Indrek Cassella, Sage Bauman, Jeff Grocott and

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Speaker 1: Magnus Henrickson. The executive producers are Andrew Barden, Adam Kamiski

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Speaker 1: and Kyle Kramer. David Ravella is the managing editor. Exponentially

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Speaker 1: was created by Frederick Cassella and is an Eat the

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Speaker 1: Pie I plus one limited production in association with Bloomberg

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Speaker 1: LC