On The Digital Life podcast this week, we chat about Estonia’s E-Residency program, which encourages entrepreneurs to become virtual residents of the country, so they can have a European company. It’s a really interesting and innovative way to think about citizenship, basically ignoring geography, but leveraging it at the same time. It’s not unusual for countries to sell their citizenship, including the US, but this is slightly different. If innovators and entrepreneurs can go anywhere they want in the world to find the best deal, best benefits, or the like, what does that mean for the future of nation states? Join us as we discuss.
Republic of Estonia E-Residency
Jon: Welcome to episode 246 of The Digital Life, a show about our insights into the future of design and technology. I’m your host, Jon Follett, and with me is Founder and Co-Host Dirk Knemeyer.
Dirk: Greetings, listeners.
Jon: For our podcast this week, we’re going to chat about digital citizenship. Now, what the heck is digital citizenship and why should I care about it? Well, it’s relevant, I think, to our larger theme of the future of work, which we like to talk about on the podcast.
In this particular case, we’re talking specifically about the idea that we’re approaching a time when you might be able to do just about anything online including … A lot of people’s work lives are largely spent online, and the geographic borders that we have of nation states are going to maybe no longer be as important. Now, one country that has sort of led the way in this kind of thinking is the little country of Estonia. They’re located in Northern Europe, and they’ve got a little bit over 1.3 million inhabitants so pretty-
Dirk: In which city? Which of their cities has more than 1.3 million inhabitants?
Jon: Yeah, I have no idea.
Dirk: Well, no. I was setting you up, man. I was setting you up. The answer is it’s not city, the whole country only has 1.3 million.
Jon: Yeah. No, it is a small country but they are very innovative in their thinking. One of the policies sort of coming out of the Estonian Government is this idea that you can become an e-resident. They’re encouraging sort of creative entrepreneurs to become these virtual residents of the country so you can … They’re part of the EU, so you can have a company in the European Union and sort of take advantage of that because you’re an e-resident of Estonia. Their sort of marketing around that is join the digital nation of Estonia, and a lot of people have taken them up on that.
Dirk: But Estonia is a real nation, right?
Jon: Oh, yes indeed.
Dirk: There’s land and infrastructure?
Jon: Sure, and they want to sort of leverage that sovereignty into sort of a digital sovereignty as well, a digital nation. Now-
Dirk: So they have meat residents, what about the e-residents? What’s the difference between the meat and the E?
Jon: Right. The e-residents, there’s a certain set of criteria that you have to go through to apply, and then I know that you have to sort of pick up your e-Residency ID at the Estonian embassy. The nearest one to us is in New York City. But you actually have to go through a process there. The idea is that if you’re an entrepreneur, say you’re doing work in multiple countries in the EU perhaps, then you could have a bank account. You could have a mailing address. You could have all of the things that an online company would have and then be subject to the laws of Estonia, so presumably you are also paying taxes and these things for Estonia. Whereas if you’re a resident who’s actually living there, of course, then you get to take advantage of their social services, their voting, their other rights that you may not necessarily have with this e-Residency.
Dirk: Okay. So, at least superficially, it sounds like just a branding exercise. What I mean by that is … Over the years I have incorporated companies in the United States, in the State of Delaware, in the State of Nevada, because of the laws that they have for governing LLCs and/or because they are exempt from state income taxes. There’s a process where you fill out paperwork. You have to get a physical address there. You pay a service … I don’t remember what it was. It was pretty cheap, hundreds of dollars a year, and then that’s a mailing address that sort of meets the legal requirements. You can set up a bank account and go. It sounds similar to that, but they’re just spicing it up with e-Residency. Is that correct or am I sort of missing part of what makes this interesting?
Jon: You know, I think there are a lot of similarities to that. Maybe from our perspective here in the United States where we’re setting … you could very easily go and set up a company in another state. It sort of obfuscates the complexities of the international network of sort of laws and systems that you’d have to navigate if you’re trying to do business in say London and India and Canada and the US all at the same time. I think the advantage of the e-Residency is that, unlike if you’re solely going abroad as a United States-based company, I think there are a number of advantages from a legal perspective by being based within the EU that you could take advantage of.
Dirk: And it’s just substantially easier to get an e-Residency in Estonia than whatever the equivalent non-E would be in Germany or France-
Dirk: … or-
Dirk: I guess England has pulled out of all this now so-
Jon: Yeah. Yeah. Well, they’ve-
Dirk: … they’re their own separate thing.
Jon: Yeah, with Brexit, you’ve got one less player there. But I think this is interesting because we’re talking about considering the digital residency as something overlaying the physical borders that we’re all so used to. The reason why this is so interesting to me is because we’re still in this transformation stage between the 20th century organization structures, methods of work, et cetera-
Dirk: The meat methods.
Jon: Right. Those things that … well, even that were just based around the Industrial Revolution, like all of the things that were built up around that way of doing business.
Dirk: It sound like meat to me, Jon.
Jon: And now we’re moving into this digital life, this digital way of working-
Dirk: The E way.
Jon: Right. Ultimately, that means that we’re going to rethink the way we operate with one another. Our workspaces are already different. The times and the times of days that we’re working, it’s sort of a 24-hour system now.
Jon: Additionally, you can not only be working at all hours of the day, you can work with anyone anywhere. Right? So why are we sort of married to these corporate and national structures that were really meant to facilitate the industrial-type companies-
Dirk: Meat work. Meat work, Jon, is what it’s [crosstalk 00:07:56]-
Jon: So that’s totally why I’m interested in this. Secondarily, this idea of residency that you can buy into is not a foreign idea to, say, the one percent of the one-percenters. Right? This is a technique, a tactic, that is used by the ultra wealthy all the time. There is a really interesting chart on the World Economic Forum website just sort of showing how much money it costs to become a resident and potentially a citizen of any number of countries, some of those in the Caribbean and some of those in Europe. Even the United States has certain programs where if you’re a big-time investor, you can buy things in the … properties and things in the US and pay a certain amount of money. After a certain amount of time, if you’re living in the US part … I think it’s like six months a year, then you have opportunities to become a citizen. This is available via very expensive but nonetheless still possible bureaucratic systems.
Dirk: Some are more affordable, right? I mean, there’s some little principalities where it’s actually … you and I could afford it. We wouldn’t like paying the amount that it would cost, we could easily afford doing it. In some of these cases, you can also buy prestige, right? You can buy knighthoods, you can buy titles. It goes pretty deep. You and I probably couldn’t afford those things though, Jon.
Jon: Yeah. As much as we’d like to be a Knight of the Round Table-
Dirk: Sir Jonathan Follett.
Jon: Yes. As much as I’d like to be a sir, I’m afraid I’m going to remain a peasant of some kind. I think what this raises here are just opportunities for interesting sort of models for citizenship and entrepreneurship that, number one, get divorced from geography, and secondly, are making it possible to have … I don’t know, trade work, that whole system, much more lubricated, much more easy to handle work on an international scale really from your office just about anywhere. Or if you don’t like an office, maybe you’re working out of a café or hotel or something like that.
Dirk: And you might be sitting in New York, but you’re actually in Estonia.
Jon: Yes, you’re actually an Estonian e-resident. This is just the very beginnings of this. Kudos to Estonia for sort of taking some innovation risk here and trying to be relevant to this economy even though they’re a relatively small player. Nonetheless, here we are talking about it. They have lots of other big ideas on the way of how to build-up this e-Residency.
Dirk: Yeah. You know, as a parallel to business, the fact that they’re small … it’s like they’re a startup and so they’re innovating, right? I mean, here in the United States, there’s so much bureaucracy, politics, bullshit, so much sort of vested old infrastructure and interest that we could never get here from an innovation perspective.
But Estonia, with the 1.3 million people that are being governed there and looking for more prominence, looking for more success, hungrier, smaller, more nimble, more lean, they’re able to give it a try. It’s interesting. I don’t think it’s world-changing at this point, but I do think it’s a path with intelligence that larger companies … companies, I’m even conflating it out, larger countries can slowly see the merit of and move into hopefully, unless Theron prevents it.
Jon: Yeah. I mean, there’s an interesting question, which is if you do look at Estonia as the startup in this instance, how long will it be before the EU at large starts to offer something like this? With our current set of politicians in power, I don’t know that the US would be necessarily open to that. But how long before like New Zealand or Canada or some sort of more progressive-type governments take a look at creative entrepreneurs, smart people who can go to school anywhere, who are going to be sort of starting up their own companies, and they’re going to say “Sure. Why don’t you become an e-resident to start off and then come visit us?”
Jon: You’re talking about global talent base. You’re talking about certain areas, certain countries, that are starting to reject people because of either the way they look or their religion or whatever, so you’re making an environment where competition for global talent is going to become that much more fierce. If the United States is closed off to global talent, what are other smaller countries going to put on the table to attract that kind of talent?
I think this is an inkling of what we might see. We haven’t seen a global talent war necessarily yet. The United States has always been a magnet for global talent, and I don’t think that will change. I think that will always be there, but I think the competition’s going to get much, much steeper. Estonia’s e-Residency, I think is just an example of how other countries are going to compete in this arena.
Dirk: Yeah, totally agree.
Jon: Listeners, remember that while you’re listening to the show, you can follow along with the things that we’re mentioning here in real time. Just head over to thedigitalife.com, that’s just one L in the Digital Life, and go to the page for this episode. We’ve included links to pretty much everything mentioned by everybody, so it’s a rich information resource to take advantage of while you’re listening or afterward if you’re trying to remember something that you liked. You can find The Digital Life on iTunes, SoundCloud, Stitcher, Player FM, and Google Play.
If you want to follow us outside of the show, you can follow me on Twitter @jonfollett. That’s J-O-N-F-O-L-L-E-T-T. And of course, the whole show is brought to you by GoInvo, a studio designing the future of healthcare and emerging technologies, which you can check out at goinvo.com. That’s G-O-I-N-V-O.com. Dirk?
Dirk: You can follow me on Twitter @dknemeyer. That’s D-K-N-E-M-E-Y-E-R. Thanks so much for listening.
Jon: So that’s it for episode 246 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett, and we’ll see you next time.