We are in a rapidly changing world and much of this comes from the fact the digital realm is advancing at a radical pace.

The world of bits moves exponentially quicker than that of atoms. It is probably the major lesson of the last 40 years.

With the advent of email, we saw this mostly replace "snail mail". Notice the terminology. Speed is key.

We are even seeing that in the stodgy world of finance. This is a headline that was posted earlier: Börse Stuttgart, ECB cut settlement time in blockchain test. Even the central banks are looking to get into the act.

This means that institutions are going to have to adapt quickly. It is also an avenue for more aggressive countries to step forth.

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Estonia Leading The Charge

Estonia was a country that was born just as the Internet was emerging. The former Soviet state decided to bet on technology, making it a centerpiece of the government.

This is compared to more established countries that stuck to their old way of doing things. When we think about what Estonia did compared to the rest, we see the stark contrast.

Estonia’s transformation became known as e-Estonia — a digital society built on the foundations of the internet. This past 30 years hasn’t just been about adopting new tools and platforms. It was about using the internet to create a more democratic, transparent, and efficient society. Citizens have been given the ability to vote online, pay taxes, sign legal documents, and access nearly all government services (except divorce filings). This digital infrastructure increased transparency and accountability, while making government services more accessible to all citizens. And it made Estonia one of the most technologically advanced societies in the world.

While many countries have adopted some of this, there is another facet which Estonia stands out:

More importantly, Estonia established a legal and regulatory framework that encouraged innovation and reduced friction for technological development. By creating policies that favored innovation, Estonia fostered an ecosystem where both public and private sectors could thrive in the digital age.

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Compare this to have many nations, including the United States are approaching things. We have to look no further than Gary Gensler and how the SEC approached cryptocurrency. He is applying securities laws that were written during the Great Depression. We are dealing with 90 year old laws when we have an advancing technology that is around 15.

In this regard, the small country of Estonia is usurping the United States.

The AI Race

The situation with crypto is dire enough. Unfortunately, when it comes to speed, this is a turtle compared to the rocket ship that is artificial intelligence.

California, the largest state in the U.S. and home to Silicon Valley, just passed a bill to regulate AI. Fortunately, Governor Newsom vetoed the bill. It was simply another move to try and regulate innovation.

Government certainly loves to be in control.

This goes counter to AI. Actually, it is the case for all technological development. We cannot forecast exactly how things will unfold. This makes it impossible to regulate.

It is also coupled by the fact that most of the leading politicians, at least in the West, are not adept at technology. The United States Congress if full of Baby Boomers (or the Invisible Generation which is even older). These people did not grow up in the technology era. Sure, Bill Gates is a boomer. That said, for his age group, he is the exception.

According to Jensen Huang, the CEO of NVIDIA, the pace of AI is going at 1,000 times that of Moore's Law. If governments could not keep up with the digital world, how does anyone expect them to stay on top of AI?

It is simply impossible.

The situation is further deepened when we consider there is not only a race among companies. Countries are looking at this as a national security issue. For example, the U.S. is not keen on the Chinese advancing. I suppose the reverse is also true. Each wants to be the leader in the field.

We are seeing another topic of discussion regarding geo-politics. Trade and other such discussions are being accompanied by the idea of limiting access to chips. It is the battle for the early 21st century.

Decentralization

Then we have the ultimate in government killers: decentralization.

This is simply not compatible with governments. For them, a door to knock on is required. Without this, there is little that can be done.

What happens when the business structure of tomorrow is decentralized autonomous organizations (DAO)? This is something that countries are leery to regulate into existence because it opens up a can of worms.

If something is truly decentralized while also being automated, what need does it have for regulatory adherence? Who is in control that can even begin to comply?

This is the problem with many blockchains. Those that are truly decentralized, with servers all over the world, cannot be regulated. Even if those that are located within a country can be shut down, there are others that are out of reach.

We are also looking at another issue as infrastructure gets smaller and less expensive to operate. What happens when blockchain nodes, as an example, can be run on a PC? This could mean thousands operating around the world.

Technology is the great equalizer. It uplifts the lower end of the scale simply by providing more to them. The smartphone is the prime example. Due to this innovation, more than 5 billion people not only gained access to computing, they can tap into the global knowledge base. In other words, they have access to more information than when President Clinton was in the White House.

Estonia showed how it used the Internet, along with focus upon technological training, to advance itself. While there are many areas where it still trails larger, more established countries, it did leapfrog them in a number of ways.

With the technology that is emerging, we are going to see this put on steroids. Those countries that are mired in their old ways will get surpassed. It does not matter how well intentioned the politicians and bureaucrats claim to be, they are going to ensure their nations fall down on the scale.

Of course, the same is true at the individual and corporate level.

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