Digital expert: Metadata and ID keys to unlocking e-government
Digital expert: Metadata and ID keys to unlocking e-government
Digital expert: Metadata and ID keys to unlocking e-government
In this VISION by Protiviti interview, Ghislaine Entwisle, Protiviti Managing Director and leader in the Technology Consulting and Business Performance Improvement practice, interviews Dr. Ian Oppermann about e-government, AI, digital ID, the equity gap and more. Oppermann is co-founder of ServiceGen, a firm that helps global governments achieve digital transformation. He is also an Industry Professor at the University of Technology, Sydney, and is considered an expert on the digital economy. Prior to co-founding ServiceGen, Oppermann was Chief Data Scientist for the New South Wales government.
In this interview:
1:15 – ServiceGen and scaling the NSW e-government model
2:36 – Government-specific digital challenges
4:50 – Use cases, AI and the digital divide
7:52 – Digital identity vs. personal data
12:10 – Ten years out—"data as electricity"
Digital expert: Metadata and ID keys to unlocking e-government
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future government and we’re joined by Dr. Ian Oppermann, cofounder of ServiceGen, a firm that helps global governments achieve digital transformation. He’s an industry professor at the University of Technology Sydney and is considered an expert on the digital economy. Prior to cofounding ServiceGen, Ian was chief data scientist for the New South Wales government. I’ll be turning over the interviewing today to my Protiviti colleague, Ghislaine Entwisle, managing director and leader in the Technology Consulting and Business Performance Improvement practice.
Ghislaine, I’ll turn it over to you to begin.
Ghislaine Entwisle: Thanks, Joe. It’s wonderful to be here with you again, Ian, and talking about a great topic today.
Ian Oppermann: Great. Great to be here. Thanks, Ghislaine.
Entwisle: Ian, you spent many years helping radically transformed government services in New South Wales by building the state’s digital capabilities to deliver excellence. Now, you’ve shifted to a new endeavor called ServiceGen, which is aiming to help global governments do the same thing. Can you tell us a little bit about why ServiceGen and its potential impact?
Oppermann: Yes. Thanks, Ghislaine. Yes, it was a very long time in government, eight-and-a-half years in total. It feels just like a moment when I think about it now.
Now, ServiceGen, the tagline for ServiceGen is Government Services Profoundly Reimagined, and it really is trying to take all of that transformational activity that we did in New South Wales, bottle it, and point it towards other jurisdictions. Some of that transformation was about greater customer service. Some of it’s around greater personalization. Some of it was just around making government easier to access. Of course, it’s all underpinned by data, digital, and, in some cases, identity. The ServiceGen offering really is the New South Wales model but adapted and redirected in other jurisdictions, and hopefully it helps other jurisdictions get through the really hard part of that transformation because very often they just don’t know where to start.
Entwisle: That’s very exciting indeed and no doubt, there’s demand for that service globally. What do you see are the main issues that governments are struggling with as they go digital on that journey and equally, what are the biggest impediments to e-government and how can governments overcome that?
Oppermann: That’s a really, really big question and that is, in fact, why we got the whole ServiceGen activity kicked off. Very, very often, people expect their engagement to government to look like their engagement with their bank or with a social media platform with any now very truly natively digital service offering, and governments struggled to do that. Partly, it’s legacy. Partly, it’s the cautiousness of government, but partly, it’s the fact that it’s different. Government is different. It’s not optional to deal with government. You have to, in many, many different ways. That technical debt, that legacy, that conservatism all roll up into the need for pretty profound transformation attitudes and technology and in terms of capability.
Also, the way of thinking about doing government, very often governments get elected promising transformation and then they get into government and realize just how complex the whole system actually is, how many parts there are, how many dependencies there are, how much technical debt there is. Part of the challenge is just the reality of what’s already in place and the fact that if you’re going to transform, you still have to keep delivering essential services—in some cases, really genuinely essential services—wanting to do that transformation. There’s a lot of elements to pointing or redirecting the ship in terms of transitioning to e-government or transitioning to more personal.
There’s also the challenge that there’s a lot of interconnecting factors related to the different parts of government trying to work together. If you deal with your favorite online provider, you expect them to understand you when you’re a customer or when you’re raising a complaint or you’re paying a bill. There are so many different parts of government that when you engage with health or transport or education, it’s very, very difficult for those different parts to come together. Government genuinely is different but people expect that same sort of personalized experience when engaging with government.
Entwisle: On that note then, artificial intelligence and how does that impact these issues that governments are struggling with?
Oppermann: Yes. Thanks, Ghislaine. It’s still a very, very hot topic and it has been almost—in fact, it has been more than two years now since we were all taken aback by what the new generative AI could do—but now governments are actually starting to find really powerful use cases. Those powerful use cases broadly come down to personalized delegations, so making sense of all the complexity that’s out there and intelligent summarization. I think it’s still now quite a long way to go in terms of process automation, joining together processes that don’t quite fit together, and there’s normally a human being in the middle there somewhere as a necessary step. We are starting to see more of those use cases actually come to light and be deployed, and there’s still, of course, also the really cutting-edge use cases in New South Wales of course, there’s a whole lot of work that’s being done around use of AI for image recognition, for things like are people wearing seatbelts? There’s the work that’s being done around health, around wound management. There are still those really cutting-edge cases but the main office and back office work is increasingly becoming more mainstream as people try, test and learn and start to join together some of those disjoint processes or start to do some of the work around making sense of large amounts of disparate information.
Entwisle: Yes. That’s really interesting. Do you also find that as governments become more sophisticated in their use of technology that—what impact does this have on the digital divide between citizens, countries, even continents? Do you think that e-government can close the equity gap?
Oppermann: That’s a really, really good question. My initial response would be yes, absolutely, it will help close the gap because it means more people could get more personalized services targeted at them. The reality, of course, is there’s always a proportion of society who either will not or cannot be on the other side of that digital divide, so there are people who don’t work online, can’t do online, don’t have connectivity. They just don’t feel comfortable engaging in a digital world. It’s interesting. I think it makes the divide more obvious. It makes the divide more clearly defined, and I think there’s a proportion of the community we always need to bring along in non-digital ways.
Having said that, for the majority of people, I think currently it’s looking good. It’s looking like more services get delivered to more people in a more joined up personalized way, but that’s all dependent on some pretty important things like identity and systems connected to other systems actually working together in a seamless way. I think the jury is still out.
Entwisle: Yes, fair enough. It’s good to be optimistic but as you said, a number of challenges to overcome to get there. As we move towards a more digitalized government environment, you mentioned a little bit about identity. How concerned should we be about the government’s ability to protect data? The private sector, as we know, have had their fair share of struggles with cybersecurity issues. Are you confident that global governments might get that part right?
Oppermann: You’ve touched on what I think is the most important issue about all of the digital government, all the digital everything, and that’s what do we do with the data? How do we protect the data? We need to stop thinking about building data sets in the way we did in the 20th century. It’s not a relational data set that all comes together in one big blob. It’s really important that we stop thinking about that. It’s really important that we start to think instead about identity, which is a form of data, identity being managed by individuals in a Web3 sort of way as opposed to building a honeypot data set where you credential yourself at some level against that data set. If we build honeypot data sets, we will continue to have the sort of breaches that we saw last year and the year before, and then we’ll accelerate and it will become actually much, much more significant as we put more of our services into the digital world. We need to think about data fabrics, we need to think about virtualization, and we need to think about people hanging on to their own credentials and allowing people, governments, to say does A equal B rather than tell me what A is or tell me what B is? Is A greater than B? Is A less than B, rather than actually revealing those underlying components? That sounds really simple but it actually means that we need to turn our thinking inside out, and it’s not just in one system. If all these systems connect together, so you have your seamless engagement with government, all the systems need to start that transformation.
I think there are good arguments for doing it differently. Increasingly, there are good tools, frameworks, and even standards for doing things differently, but we really have to shake ourselves out of this 20th-century thinking.
Entwisle: Yes, absolutely. That honeypot approach should be in the past and the more governments move out of it, the better. Australia is in the process of rolling out the digital ID which as we understand it includes facial verification technology and also liveness detection. Can you explain a bit about how this will work and what really are the key advantages of that technology usage?
Oppermann: Yes. It’s a really important step, and facial verification is different from facial recognition. Facial verification is, are you the person that’s being put up as being you? Can we actually verify that it’s you? As opposed to who is this person who’s staring at the camera? That’s a really important distinction because it means that you’re using your biometrics to unlock information that you should have access to through verification. The liveness test is simply try to avoid that simple spoof where you can say, “Well, here’s a photo of someone or he’s me with a mask, and I look something like that person,” and unlock the liveness test prove that you’re real, prove that you’re animate, prove that you’re somewhere in context that you should be when you try to do this verification.
It’s a really important step forward because it does mean that you’ve got a really powerful and unique way of identifying yourself. It’s better than a signature. It’s better than, in most cases, a flat document, static document because you are real and you’re alive and you are the bearer of your identity. Potentially, it means that far more sensitive and personal services can be accessed in a simple intuitive way through this way of representing yourself in digital identity. The important thing about all of that, of course, is you’ve got this powerful key to unlock. It absolutely needs to be powerfully determined that that really is you when you registered in the system in the first place. If we get that right, then there’s a whole lot of really intuitive access to services that we will unlock, pardon the pun, through use of all that sort of biometric verification.
Entwisle: Yes, fantastic. Thank you for talking us through it. If we fast forward into the future, maybe a decade out, let’s say 2035, where do you envisage we will be on this journey, the journey towards digital government services, and how do we get there? Do you have any bold predictions to share with the audience?
Oppermann: It’s really, this is exercise of what does the world look like in 10 years out, this exercise of talking about what the world looks like 10 years out is something we’ve been doing for quite some time, and it’s really interesting that you say 2035 or 2034 as a decade out. Time really seems to be ticking away. A lot has happened in the last five years or 10 years, a lot has happened. We’ve really started to realize the value of data or digital, but we still got some fundamentals that we need to sort out. We still need to treat data as well and as carefully as we treat electricity. We still need to wrap our heads around all of the effort and frameworks and tools we need to deploy in order to safely and appropriately unlock the genuine value of data.
Ten years out, I hope, fingers crossed, 10 years out, I hope we’ve actually sorted out the fact that data is not just something to play around in Excel spreadsheet on your laptop. Data is actually something you need to take really seriously if we’re to use it in a general way. Data has an infinite number of uses for everybody and in many, many different contexts. Every single bit of data needs to come with information about where it came from, how it got to you, its fitness for the purpose you want to be able to use it for, and after you use it, the data product needs to come with guidance restrictions or prohibitions. All of that is metadata. All of that metadata or all those frameworks are ultimately the safety standards, just like electricity, the safety standards we need to put in place in order to appropriately use data for those infinite possible future use cases.
My bold prediction is that in 10 years’ time, we’ll have realized, that we have put the tools in place. We’ll be sailing along with all these incredible uses of data and data-driven tools such as AI. We’ll be doing amazing things. We’ll have personalized health. We’ll have all these incredible applications we’ve dreamed about for so long, and we’ll be doing it safely because we finally have invested in that fundamental infrastructure associated with data.
Entwisle: Yes. That’s fantastic. It’s great to hear the excitement in your voice and I definitely feel it as well, really capitalizing on the value of data but also doing it in a very safe and secure way, offers such a world of possibility, so that’s great. Thank you, Ian, for joining me today. It has been a pleasure as always. We wish you the best of luck on ServiceGen and your new endeavor and no doubt, you’ll have a lot of success and we look forward to following your journey. Thanks again for your time today, Ian.
Oppermann: Thanks, Ghislaine.
Entwisle: Over to you, Joe.
Kornik: Thanks, Ghislaine, and thank you for watching the VISION by Protiviti interview. On behalf of Ghislaine Entwisle and Dr. Ian Oppermann, I’m Joe Kornik and we’ll see you next time.
Dr. Ian Oppermann is co-founder of ServiceGen, a firm that helps global governments achieve digital transformation. He is an Industry Professor at the University of Technology, Sydney, and is considered an expert on the digital economy. Prior to co-founding ServiceGen, Oppermann was Chief Data Scientist for the New South Wales government working within the Department of Customer Service. He also headed the NSW government’s AI Review Committee and Smart Places Advisory Council and is considered a thought leader in the area of the digital economy. Ian is a regular speaker on the topics of big data, broadband-enabled services and the impact of technology on society.
Ghislaine Entwisle has over seventeen years of experience in the Professional Services industry. She has undertaken a wide range of business consulting, IT consulting and IT audit assignments during this time. Ghislaine has broad experience across industries and within both the public sector and private sector. She has provided business and IT consulting and IT audit services for a number of international clients and local clients including a number of large private sector clients.
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The World Bank's Ed Olowo-Okere: Let's reimagine government for good
The World Bank's Ed Olowo-Okere: Let's reimagine government for good
The World Bank's Ed Olowo-Okere: Let's reimagine government for good
In this VISION by Protiviti Interview, the World Bank’s Ed Olowo-Okere, Senior Advisor, Equitable Growth, Finance and Institutions, and Director of The World Bank’s Future of Government report, sits down with Charles Dong, Global Public Sector industry lead for Protiviti and Joe Kornik, Editor-in-Chief of VISION by Protiviti to discuss the World Bank’s new social contract and call to action for governments around the world to reinvent themselves as they face unprecedented health, economic, and fiscal challenges.
In this interview:
1:16 – The Future of Government report
2:54 – The biggest problems of governance: Corruption and participation
6:45 – The role of government in the future
11:00 – The role of the private sector
13:25 – Will governments seize the opportunity, or miss it?
The World Bank’s Ed Olowo-Okere: Let’s reimaging government for good
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of government, and we’re thrilled to welcome the World Bank’s Ed Olowo-Okere, the former Global Director of the Governance Global Practice, and now Senior Advisor in Equitable Growth, Finance, and Institutions. Ed is the director of the World Bank’s Future of Government report, a call to action for the governments around the world to reinvent themselves as they face unprecedented health, economic and fiscal challenges. Today, I’ll be sharing interview duties with my colleague, Charles Dong, Global Public Sector industry lead for Protiviti. Charles will join us in just a few moments, but now I’m going to welcome Ed. Thank you so much for joining us today.
Ed Olowo-Okere: Glad to be here, Joe, and thanks for having me.
Kornik: So, Ed, let’s start at the beginning. This Future of Government report is not an annual or regular report. It was your brainchild. So, why did you and the World Bank think a Reimagining Government for Good report was necessary?
Olowo-Okere: Thank you, Joe. You’re absolutely right that this is not a regular report or an annual report. In 2020, we discovered that governments across the world were facing multiple crises, including health, social, fiscal, and economic. As you know, these crises were triggered or exacerbated by the COVID-19 pandemic. They were also coupled with the climate change crisis. So, we know from history that crises have often driven reforms in governments, and we reckon that the 2020 crises were not going to be an exception. So, the real question was, what kind of reforms would be undertaken by governments? So, we wanted to be able to help or support governments to make reforms that are truly transformational, reforms that are well-coordinated, and also draw on lessons about what has worked and what has not worked in the past decades.
Kornik: Right. You make the point in the report that many governments can’t meet just the basic needs of their citizens because of unresolved governance problems. So, what do you see as the biggest problems of governance, and how do we solve them going forward?
Olowo-Okere: Okay. So, let me clarify that the basic needs that we’re talking about, really, are things like basic health care, clean water, basic education, shelter, social safety nets, and simple kind of security of lives and livelihood. So, when we talk about the governance problems that are responsible for this, there are many of them. In the interest of time, I will just focus on two, and the two I’ll focus on are corruption, and lack of voice and participation. So, if you look at these two problems, you will see that they are responsible to a large extent for the legitimacy and trust deficit that most governments suffer. If you look at a number of countries as well, where there are violent conflicts and fragility, you will see that these two problems are really the main contributors to these issues of fragility and conflict.
As to your question regarding how we can solve these problems. We know, if we take the case of corruption, corruption is an age-long issue. It has been around for a long time, but we know also that there are countries that have effectively managed to be able to control corruption. So, the problem can be solved. Now, the question then is, okay, how do you solve it? This is really about countries deliberately ensuring that there is greater and enhanced transparency and accountability, and undertaking reforms to block all possible avenues for corruption. Strengthening institutions, and the institutions to be strengthened are institutions for accountability and justice. Then we need strong country leadership. I must say, in the case of corruption, there is also a need for international collaboration, because we know that corruption doesn’t just take place within the borders of a country. You have the international dimension to it.
Now, with respect to lack of voice and participation, what governments need to do is to deliberately go about educating citizens on how they can participate, and the needs to participate in the democratic process and decision-making process. In addition to that, governments also need to open the civic space up for citizens and civil society organizations to be able to express their minds, and to be able to contribute to the decision-making process. We know that governments can facilitate this by using tools and approaches that have worked and are known to have worked, including, for instance, leveraging on technology.
Kornik: Thanks, Ed. I’m now going to welcome in my colleague, Charles Dong, to ask the next few questions. Charles.
Charles Dong: Thanks, Joe. Thanks, Ed, for the time today.
Olowo-Okere: My pleasure, Charles.
Dong: In the report, you talk about governments renewing the social contracts with the citizens and highlight some key questions governments should ask themselves. What is the role of government? How can government deliver? How can government be more productive? How can governments build trust? So, let’s talk about them briefly. So, what is the role of government in the future?
Olowo-Okere: This is a big question, and the most fundamental question. It’s a question that every government needs to work through a process to come at, and this will be different in different contexts. Really, it is about the governments moving from the old assumptions about their roles, and listening to what it is that citizens expect them to be able to deliver, and then adjusting their roles accordingly to that. This is also about them looking at their capacity to be able to deliver what the citizens are expecting from them. It is also about redefining the roles across levels of government. I will say that in this process it is important that governments not just look at their roles in terms of service delivery only, but also look at the roles that they’re supposed to play in terms of regulation, leadership, and coordination.
Dong: How can government deliver?
Olowo-Okere: This is really about rethinking how governments deliver public services. So, for example, how can governments deliver social outcomes with support from non-state actors like the private sector, religious-based organizations, and community-based organizations? Okay. It is also about governments developing new capabilities, collaborating, and ensuring equity and quality in the service delivery process.
Dong: How can government be more productive?
Olowo-Okere: We know that citizens’ demands are high, and their expectations are ever-increasing, but then public resources are limited. So, there has to be a consistent quest for efficiency. So, this is really about how government can use scarce resources efficiently to meet citizens’ expectations, and it involves developing capacity, using appropriate tools, improving their systems, and leveraging technology.
Dong: So, how can governments build trust?
Olowo-Okere: How can governments build trust? We know that currently most governments suffer from trust deficit. So, this is really important because lack of trust in governments affects government effectiveness. So, three aspects of this. The first one is really having a new social contract that can then form the basis of citizens having a really deep level of trust towards governments. So, a renewed social contract is fundamental. We know there are two critical factors for securing and maintaining trust. The first one is really delivery of services that meet the expectation of citizens, and the second aspect is transparency and accountability in the service delivery process. So, the question is, how can governments meet those two factors? Then the important element in terms of securing trust is for a government to be able to identify those factors outside of its control that may impact on trust, and then determine how it is going to be able to manage that.
Dong: So, the report highlights building a coalition of teams. What role could business leaders in the private sector play in helping governments to solve the challenge of reimagining itself?
Olowo-Okere: This question is important because of the criticality of the private sector to any economy. Now, there are two different roles that we can envisage for business leaders and the private sector. The first one is really for business leaders and the private sector to take the lead in building coalitions for change. This involves reflecting on where their government is, their role in the government of the past, the potential roles that they could play in the government of the future, and then it’s also about reflecting on the parts that they can play in the collective journey to make happen the reimagining of government. These, for instance, involve them thinking about and identifying who they share interests with, who they can influence, who they can have conversations with, and then start building that coalition for change. So, that’s the first part.
Then the second part or the second role that business leaders and the private sector can play is really participating in a process that governments may lead to build coalitions for change. If you look at the four questions you asked me earlier on about how the new social contract can be developed, governments cannot really renew the social contract without listening to and having conversations with non-state actors like business leaders and the private sector.
Dong: Thanks, Ed. I’m going to turn it back over to Joe now.
Kornik: Thanks, Charles. I have two more questions from me, and they both require you to look out to the future, maybe a decade or more. I know that you did that in the report, so you’re the perfect person to ask. First, what are the implications if governments don’t heed this advice? What if we get this wrong? What are the implications of that?
Olowo-Okere: That will be a terribly missed opportunity to take advantage of a serious crisis to make transformational changes, and to begin to build capability to be responsive to the expectations of citizens. So, if that were to be the case, we can imagine a future where governments will launch from crisis to crisis, will not be responsive to the needs of citizens, will be unprepared for crisis, with suffer legitimacy and trust deficits, and will not be as effective as they should be. I really hope that will not be the case.
Kornik: You and me both, Ed. So, let’s end on a positive note, if we could. What are the possibilities for the planet and for the people of the planet if governments do get this right? What could be the ultimate impact? Take us out a decade or more and talk to me about that future.
Olowo-Okere: Yes. Thanks for that. We will have a new social contract that governments and citizens are really excited about, and we can then look forward to governments that will increasingly meet citizens’ expectations and deliver on their promises, will be better prepared for crises, and governments that will be innovative and productive. This will lead to a situation where governments will be trusted by citizens, and they will have high legitimacy, which will further help their capability to deliver on the renewed social contract. So, you can call that a virtuous cycle, and I hope that this is really what we will get. [Laughter]
Kornik: Yes, I think I speak for everyone when I say, we all agree that I hope that’s what we get. Thanks, Ed, for the time today. I really enjoyed our conversation and your insights.
Olowo-Okere: Thank you very much, Joe and Charles. Thanks for the opportunity to discuss the Future of Government initiatives with you.
Kornik: Thank you for watching the VISION by Protiviti interview. On behalf of Ed and Charles, I’m Joe Kornik. We’ll see you next time.
Ed Olowo-Okere, a Nigerian national with three decades of experience working on development issues around the world, is the Senior Advisor in the Equitable Growth, Finance, and Institutions (EFI) Vice Presidency at the World Bank. Previously he was the global director for the Governance Global Practice where he led the practice to support client countries in building accountable, transparent, and inclusive institutions. Mr. Olowo-Okere joined the World Bank in 1998 and has held various positions in operations, including Director of Governance overseeing Africa, MENA and ECA regions, and Director of the Core Operational Services Department in the Africa region. Before joining the bank, Ed held public- and private-sector positions in Nigeria, Britain, and New Zealand.
Charles Dong is a Managing Director with Protiviti and serves as the firm’s Global Public Sector industry leader. He has significant experience in providing accounting and financial advisory, risk consulting and business transformation to both public sector and commercial clients. Charles is a Certified Public Accountant with a bachelor’s degree in accountancy from Baruch College and a master’s degree from New York University.
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From democracy and digitization to risk and regulation, we explore the future of government
From democracy and digitization to risk and regulation, we explore the future of government
From democracy and digitization to risk and regulation, we explore the future of government
Democracy is in decline. And it has been for eight straight years, according to the latest Democracy Index from the Economist Intelligence Unit, the research division of The Economist Group. In fact, democracy around the globe is at its lowest level since the index began in 2006.
To measure the state of global democracy, the index assesses each country across five categories—electoral process and pluralism, functioning of government, political participation, political culture and civil liberties. Alarmingly, the categories that have recorded the biggest drops are civil liberties and electoral process and pluralism.
According to the report, almost half of the world’s population live in a democracy of some sort (45.4%). Only 7.8% reside in a “full democracy,” down from 8.9% in 2015. (The United States has been listed as a “flawed democracy” since 2016.) Almost two-fifths of the world’s population live under authoritarian rule (39.4%), a share that’s risen in recent years.
The age of conflict
The report, titled “Age of Conflict,” is daunting. The authors point out, “The world’s democracies seem powerless to prevent wars from breaking out around the globe and less adept at managing conflict at home.” While wars rage on in Africa, Europe, and the Middle East, “U.S. hegemony is increasingly contested, China vies for global influence, and emerging powers such as Saudi Arabia and Turkey assert their interests, the international order is becoming more unstable.”
The authors question if the democratic model developed after World War II is still viable. It’s a fair question; and one with no easy answer. But amid the growing global conflicts, and just a short time removed from a global pandemic, we thought it was a good time to explore the future of government and government services.
VISION by Protiviti, our global content resource exploring big, transformational topics that will alter business over the next decade and beyond, is embarking on a journey to assess where government is today, where it’s going and how it’s performing its most important task—providing essential services to its citizens.
"Government for good"
Fortunately, we’ve enlisted some impressive leaders and luminaries to help us do just that. The World Bank’s Ed Olowo-Okere, senior advisor, Equitable Growth, Finance and Institutions and director of The World Bank’s Future of Government report, sits down with Protiviti’s Charles Dong, Global Public Sector industry lead. Olowo-Okere offers a call to action for global government leaders to adopt a new social contract with its citizens to ensure we’re cultivating a “government for good.”
Over the next several months, we will explore how complex problems are challenging governments around the globe as they try to provide responsible, impactful, innovative, and sustainable solutions for the citizens they serve. We’ll examine the evolution of e-government, the digitization of services, data privacy, cybersecurity, national security, regulation, risk and compliance. We’ll also investigate the changing nature of public-private partnerships as well as how business leaders can navigate an ever-changing geopolitical landscape.
“U.S. hegemony is increasingly contested, China vies for global influence, and emerging powers such as Saudi Arabia and Turkey assert their interests, the international order is becoming more unstable.”
We ask Heidi Crebo-Rediker, former chief economist in the Obama Administration and international affairs lead for the Biden transition team, to lay out a plan for leaders in the C-suite and boardrooms to future-proof their business amid all this global geopolitical risk. She is a former CEO and current partner at International Capital Strategies, an executive vice president at America’s Frontier Fund, as well as an adjunct senior fellow at the Council on Foreign Relations.
We also talk with Tom Vartanian, former federal regulator and executive director of the Financial Technology & Cybersecurity Center. Vartanian, a futurist, lawyer, board member and author of The Unhackable Internet, offers a dire warning about the U.S. government’s readiness for a cyber attack.
Part of that vulnerability revolves around the race to quantum and its ability—perhaps sooner than we think—to break encryption of highly classified materials. So, we sat down with Protiviti’s Konstantinos Karagiannis, director of Quantum Computing Services, to discuss the global race to a post-quantum world and what impact, both positive and negative, it will have on governments and government services.
Speaking of government services, we also shine a light on the growing e-government movement and how digitization could be a real game changer for governments. Mauro Guillen, futurist, vice dean of the Wharton School of Business at the University of Pennsylvania, and author of 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything, says governments have issues—everything from trust to tech equity to transparency—and imagines how digitization could be a fix.
Former president of Estonia and current digital pioneer Toomas Ilves doesn’t have to imagine. Ilves has been on a decades-long crusade to digitize government services, and his innovative policies as president from 2006 to 2016 accelerated Estonia’s journey to a parliamentary democracy after it regained its independence in 1991.
The road ahead
Over the next several months, we’ll continue to unveil new insights and perspectives as we ask policy experts, executives, political leaders, academics and Protiviti’s own subject-matter experts to help us make sense of it all. Stay tuned for an exclusive interview with Julie Bishop, former Australia Minister for Foreign Affairs.
On April 29, we’ll unveil our exclusive findings from our Global Executive Outlook on the Future of Government research with the University of Oxford. And on May 9, tune into VISION by Protiviti’s Future of Government webinar keynoted by the World Bank.
Finally, in case you were wondering, Norway remains the globe’s most secure democracy, followed by New Zealand, Sweden, Iceland and Finland, according to the EIU Democracy Index. The United States ranks 29th, right behind Malta and two spots behind Estonia.
Ilves has been on a decades-long crusade to digitize government services, and his innovative policies as president from 2006 to 2016 accelerated Estonia’s journey to a parliamentary democracy after it regained its independence in 1991.
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Nardos Bekele-Thomas, CEO of the African Union Development Agency and United Nations resident coordinator, to talk about what the continent needs to thrive in the future; namely, investment and infrastructure. Bekele-Thomas lays out her vision for the future of the continent and how both the public and private sectors will play key roles in turning Africa into a global powerhouse over the next decade and beyond.
In this interview:
1:00 – NEPAD’s big agenda
3:42 – The Program for Infrastructure Development in Africa
6:34 – Public-private collaboration opportunities
9:10 – Harnessing Africa’s people potential
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of government, and we welcome in Nardos Bekele-Thomas, CEO of the African Union Development Agency, commonly known as NEPAD, the New Partnership for African Development.
Endorsed by African Union Heads of State and Government, including 33 prime ministers within Africa, Bekele-Thomas became the first woman to lead the Africa Union Development Agency when she took over two years ago. She is a powerhouse who has influenced growth and development in Africa for nearly 40 years, serving in prominent positions with governments of multiple countries, and for more than two decades with the United Nations.
Nardos, thank you so much for joining me today.
Nardos Bekele-Thomas: Thank you so much for having me, and for this opportunity to converse with you.
Kornik: Now, I know NEPAD aims to transform Africa with regional and continental priority development programs and projects. Can you highlight a few accomplishments since you took over, and then maybe talk a little bit about what’s the next big one on the agenda?
Bekele-Thomas: Yes. Thank you very much. Actually, I’ll start by saying that the NEPAD has transformed itself to being the African Union Development Agency, which is really an expanded mandate of making sure the development activities in the continent. There are many, if you go country by country, actually, development cooperation is overcrowded. The space is overcrowded. But how do you coordinate these activities and make sure that they are impactful? This is one of the mandates that was assigned to NEPAD.
Also, to identify the gaps and make sure that these gaps are filled in and that the requisite resources are mobilized for the realization of the agenda that was put in place. So NEPAD actually is really, it’s monumental, has monumental tasks and responsibilities. Therefore, I’m just humbled to being the CEO of this organization.
Now, coming to—when I came to NEPAD, of course, this whole transition took place in 2018, and 2019 being the COVID year, we have to subtract like two years of our time. The two years were really more into COVID and responding to the challenges of COVID. Therefore, in reality, the operationalization of the African Union Development Agency came into effect with my coming into this position in 2022.
Since then, the first thing that came to my mind is, if Africans coordinate its activities, its development cooperation, its development activities at national, regional, and continental level, then we need to have a common framework. We need to have a plan. Therefore, the first thing that we started doing is the review of the 10-year implementation plan. How are we fairing? How did we perform? Where did we go wrong? What are the best practices and how can we build on the best practices but also address the deficiencies? Then, come out with the design of the second 10-year implementation plan.
In terms of infrastructure, which is the bedrock of African integration and industrialization, we had a big conference in Dakar last year in February. This conference was different from the conferences we used to have before. In the past, we used to have politicians come, ministers or whatever, and make statements after statements, commitments after commitments, and sometimes they still remain to be unfulfilled promises. Therefore, we wanted it to be different.
We brought the program owners—these are countries, of course, the project owners—but we brought also the development finance institutions that could do a guarantee fund, that could come out with guaranteed funds, and also the private sector and investors together. We had the rules project by project, we brought them and went into deeper discussions and understanding. This yielded concrete result to the surprise of so many. We brought $800 million for feasibility studies of our pipeline projects under the Program for Infrastructure Development for Africa. More than that, the $86 billion were mobilized for the construction of roads, transport, energy, water, dams and all this, and also on digital infrastructure.
Kornik: You mentioned infrastructure, which I think is interesting. I know that’s one of the priority areas, and I think there’s eight priority areas that you focus on among others of course. Those are, I guess, political, economic and corporate governance, agriculture, infrastructure as we mentioned, education, health, science and technology, market access and tourism, and the environment. I’m just curious what are the biggest priorities for governments in Africa to better serve their citizens? I mean, what are the biggest ones that you need to address?
Bekele-Thomas: All of them are important. I truly believe that we need to do everything. We can do that if we come out with catalytic approaches, catalytic programs, because these programs are intertwined and they can bring all the different sectors together. For us, for example, what we have chosen for the coming five years is infrastructure is very important.
Kornik: You’ve touched on this a little bit in your some of your answers, but can you talk to me a little bit about how the public and private sector companies either inside or outside Africa even can collaborate and work together to move Africa forward?
Bekele-Thomas: Thank you very much. I think this has been really one of my, should I say forte, but I’ve been dealing with the private sector in my past in the UN, that’s an area where I have been working, and I think it’s so critical. No one country can do this alone, and we need all the support that we require. Especially the private sector because they have—it’s taking all this, the development of country or the development of the continent in general, it will offer them more opportunities to expand their businesses so the public-private partnership is critical.
Today, I just finished—actually this morning—a meeting with the Indonesian government where—when I was in Bali for the G20 last year, it was very interesting to see how the private sector and the public sector work hand in hand, and we were having discussions with them. Therefore beyond, also, in our private sectors, we’re going beyond that to the ones that are outside, like Asian Business Council, the American Business Council, the Corporate Council on Africa, the European Business Councils and Chambers of Commerce, we work hand in hand with them. Especially in investment, when we talk about infrastructure. I mean, we really need this.
We need them also to team up with African investors so that together, they build equity and they meet the challenges that Africa has to offer. It’s not a challenge actually. It’s a big opportunity, it’s a huge potential. I think working hand in hand, we can perfect the conducive environment, the environment that they require to thrive, but also make sure that investment flows are smooth and directed in the growth areas that are identified by Africa.
Kornik: Right. That investment is so key, obviously. I’m going to zoom out a little bit and take a 30,000 foot view here and talk a little bit about the continent itself in the future. It is the fastest growing population of any continent on Earth. By 2050, the UN estimates one fourth of all people on the planet will live in Africa. My question is, how can African governments navigate that rapid growth and are there ways that countries can collaborate to help lift the entire continent as it goes through this next two-to-three decade rapid growth period?
Bekele-Thomas: Africa is showing confidence in itself for the first time. You go to the G20, you go to the COP, you go everywhere, Africa is standing, Africa is talking, Africa is taking a space, which it didn’t do before. Therefore, that is foundational, it’s fundamental, and I’m glad that is happening. The second thing that is very important and clear is that Africa has its own vision. Africa started believing in itself and understanding that it’s sitting on a wealth. Wealth in terms of natural resources, but wealth in terms of the human resources and capital.
Therefore, I think for Africans, this is really a time to build on this confidence level and implement the programs that would make them be the powerhouse, the global powerhouse, which I am sure and I am so confident. When I am sitting with heads of states, when I am sitting in the EU Summit, I see so much, so much energy that I leave inspired but also encouraged. We hope that the rest of the world will support us in making the dream, the African dream to be a reality.
Kornik: Well, Nardos, thank you so much for joining me today. I really appreciate the time and the conversation.
Bekele-Thomas: Thank you so much. Much appreciated.
Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit vision.protiviti.com to view all of our latest content. Until next time, I’m Joe Kornik.
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Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Matthew Le Merle, managing partner and CEO of Blockchain Coinvestors, which provides a broad coverage of the fastest growth blockchain companies and crypto projects, sat down with Lata Varghese, Protiviti Managing Director, Digital Assets and Blockchain Solutions, to discuss the dichotomy between regulation and innovation in government as it relates to fintech.
Varghese: Blockchain Coinvestors, and in fact, the whole space of blockchain investing, might need a little more explanation. Can you tell us a little bit more about it and your role at Blockchain Coinvestors?
Le Merle: Along with Alison Davis, I'm the founder of Blockchain Coinvestors. We have been investing in internet and fintech here in Silicon Valley for about 20 or 20-plus years. And about 10 years ago, we saw those two innovations converging on something new. And so, the internet and fintech came together to create something called Bitcoin, which was put on top of an innovation called blockchain. And we were very taken by the arrival of the world's first digital money, and we thought that that was a transformative moment. So, we pivoted to be 100% focused on investing in blockchain. And we've done that ever since. We've backed more than 800 blockchain companies and projects at this point in Europe, North America and Asia. We do not trade; we're are early-stage venture investors.
Varghese: I know your position is that the move to digital money, commodities and assets is inevitable. That will, of course, require new infrastructure. I’m curious, who do you think should lead that effort? Is it the public or private sector? Do you see this as similar to the internet and its iterations after, which was driven in large part by government investment and mandate?
Le Merle: I’m not sure I agree that the rollout of the internet, particularly the digital communications and content that followed on a global basis, was driven by governments at all. While the government created the internet, it’s widespread adoption was driven by the world's most innovative companies—Apple, Microsoft, Amazon, Google, Facebook—those were the companies that brought digital communications and content to the mainstream. It actually took a while for the incumbents, the large telcos to embrace the internet. And in fact, if you go back to the 1990s, most of them were resisting it because it was disruptive to their current business model.
Any government that purposefully tries to slow down innovation always regrets it later. They discover they lose ground on a global scale. In my opinion, the role of government is to create pro-innovation regulation because innovation drives jobs, GDP and economic growth everywhere in the world. And I could be talking about life sciences, I could be talking about clean energy, I could be talking about enterprise software. It's true across all areas of innovation.
Any government that purposefully tries to slow down innovation always regrets it later. They discover they lose ground on a global scale.
Varghese: OK, fair enough. But I think my question was more about government setting the conditions for innovation to occur with active investments in infrastructure and other related things that allow private companies to innovate...
Le Merle: Governments do not create the backbone or the innovation infrastructure upon which innovators build. Time after time, we see governments waste enormous amounts of money, billions and billions of dollars on infrastructure that the private sector ends up not using. All governments need to do is set pro-innovation regulation and get out of the way—the private sector will make it happen. Look, Tesla created the fast-charging infrastructure of America; the government didn't do it. They could have done it, but they didn’t. Imagine if they had and required it for every transportation mode in America? What a different place we’d be in right now. But they didn't do it, and Tesla's had to build it itself. That’s just one example. I just don't think government is good at innovating. I also don't think large established companies are very good at innovating—a few of them are. I think innovative companies are very good at innovating, and then the rest of us try to figure out how to take those inventions and embed them into business or the public sector.
I also don’t think you can standardize innovation. If in the Betamax-VHS moment, the government had picked a standard, which one would they have chosen? The answer is Betamax; it was the superior technology at the time. So, from an objective perspective, if you had chosen to stop innovation in that moment, we would all be on Betamax, and we wouldn't never have had CDs, DVDs, or downloadable content because we would have made a rigid set of standards that said the chosen way of storing and sharing data is on Betamax tape. Governments make that mistake all the time—you can't set a standard in a moment of time when you have rapid innovation occurring because the next innovation may be superior to anything you understand today. Standards are very dangerous in a world of innovation. A regulator has to create a dynamic, flexible regulatory structure that provides some clarity, but still permits additional waves of innovation. That’s not easy.
Varghese: Right. So, it’s government’s job to provide the regulatory clarity so that innovators can do what they need to do?
Le Merle: Yes, that’s preferable but it’s also very difficult for a regulator to maintain regulation of today's industries, businesses and activities while at the same time trying to figure out what new innovative regulation would be needed for a future that hasn't yet arrived. And so, we always have that tension. As an investor in innovation, my preference would be, of course, to have regulatory clarity, but I understand that’s not easy. The thing we don't ever want is anti-innovation regulation
Standards are very dangerous in a world of innovation. A regulator has to create a dynamic, flexible regulatory structure that provides some clarity, but still permits additional waves of innovation. That’s not easy.
Right now, almost every other country in the world is busy establishing pro-innovation regulation for digital moneys, commodities and assets. And unfortunately, in America, we have some people who believe we should be killing this innovation, and they are working hard to create anti-innovation regulation. And it's holding us back. America has always been an innovation leader, and America has also been the world's financial leader. The real danger here is that America ends up being neither innovative nor a financial leader. For any country, it's never a good strategy to be slow on innovation; and the danger of anti-innovation regulation is that all the innovators go somewhere else, and you lose your competitiveness.
Throughout time, the most innovative countries have captured the lion's share of the global economic trade and value. If I was running the UK, the U.S., the EU, Switzerland, Abu Dhabi, Dubai, Singapore, Hong Kong, I would be passing pro-innovation regulation right now for digital moneys, commodities and assets. But America has been, and I believe still is, the world's greatest concentration of talent. And all we're really asking is for government to help America continue to maintain that position.
the danger of anti-innovation regulation is that all the innovators go somewhere else, and you lose your competitiveness.
Matthew Le Merle is Managing Partner and CEO of Blockchain Coinvestors. Launched in 2014, Blockchain Coinvestors’ vision is that digital monies, commodities and assets are inevitable and all of the world’s financial infrastructure must be upgraded, and its mission is to provide broad coverage of the fastest-growth blockchain companies and crypto projects. Matthew is serves as Managing Partner of Keiretsu — the most active early-stage venture investors backing over 300 companies a year. Matthew’s career has spanned being a global strategy advisor, professional services firm leader, corporate operating executive, private equity and venture capital investor, and board director. His board work has included Chairman or Non-Executive Director roles in 15 public and private companies and active Advisory Board roles in fast growth companies.
Lata Varghese is Managing Director in Protiviti’s Technology Consulting practice and Protiviti’s Digital Assets and Blockchain practice leader. Lata is a seasoned executive with over 20 years of experience in helping clients successfully navigate multiple business and technology shifts. Prior to Protiviti, Lata was one of Cognizant’s early employees when the firm had less than1,000 employees, and she grew with the firm as it scaled to a $17Bn, Fortune 200 enterprise.
Will quantum computing be a game changer for governments?
Will quantum computing be a game changer for governments?
Will quantum computing be a game changer for governments?
In this VISION by Protiviti Interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Konstantinos Karagiannis, Protiviti’s Director of Quantum Computing Services, to discuss quantum’s impact on the future of government, where the U.S. stacks up with the rest of the world, and how encryption and protecting sensitive and classified information will be paramount in the quantum era. Karagiannis has been involved in the quantum computing industry since 2012 and is the host of Protiviti’s popular podcast, The Post-Quantum World.
In this interview:
1:00 – What is quantum’s potential to transform governments?
2:30 – When will quantum become reality?
3:40 – Practical use cases – quantum and AI
5:58 – U.S. and other countries – who’s leading?
7:00 – The quantum threat and protecting encryption
8:35 – Quantum skill sets and capabilities
9:55 – The state of quantum in the public and private sector
11:15 – The post-quantum world in 2035
Will quantum computing be a game changer for governments?
Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of government and I’m happy to be joined by my Protiviti colleague Konstantinos Karagiannis, Director of Quantum Computing Services, helping organizations get ready for quantum opportunities and threats. He’s been involved in the quantum computing industry since 2012 and is the host of Protiviti’s popular podcast, The Post-Quantum World. Konstantinos, thank you very much for joining me today.
Konstantinos Karagiannis: Yes, it’s great to be back. Thanks.
Kornik: Konstantinos, the last time we talked for VISION, I think it was back in 2022, and since then the quantum drumbeat I think has certainly gotten louder and we continue to hear more and more about its possible impact. I’m curious about quantum and its potential to transform governments. Is there a quantum game changer for governments that you sort of see coming?
Karagiannis: Well, it’s best summarized in how the White House put it when they did the NSM-10 memorandum a couple of years ago. They said that in order to maintain our leadership position in the world, we have to make sure that we get ahead of the quantum technology space. There’s a lot there, right? To maintain being a scientific and technological leader, you can’t let go of the thing that’s going to be the biggest technological advance. This and AI are pretty much the twins that are going to take us into the future. Since I’ve been on, of course, AI has stolen a little bit of the thunder but it’s funny because one of the big pillars of quantum is machine learning.
You’ve got optimization, machine learning and simulation, and these three areas are going to affect all aspects of the private sector and the government sector as well. It’s partly about maintaining leadership, which is what a government wants to be able to proclaim in the technological field. That’s part of it. But then, it gets right down to the grassroots level of what’s actually happening. You have energy sectors being revitalized, chemical manufacturing, all types of optimization. Obviously, if you have a government, there’s all sorts of little cogs in the wheel that that could get in the way if you’re not optimizing right. It’s a technology that will just transform all aspects.
Kornik: Realistically, when do you think it’ll have the impact? When do you think some of that could become reality?
Karagiannis: The industry is changing all the time and the timelines of the machine quality is changing and there’s some exciting stuff that’s happening right now. So, the timing of this interview is pretty good. For the first time, we have what are called logical qubits appearing, and these are quantum bits that are error corrected. You usually need some number, large number of physical qubits that you correct for errors and then you end up with these like pure ones that you could do amazing things with.
We’re about two years away from having more logical qubits than we could ever simulate with a classical computer, which means we will have physically the capability of working with these entities that we never could before. If we could only simulate 50, we’re going to have about 100 in two years. Once you have that, you can prove instantly, well, we’re in uncharted territory here. Any advantage that we get, any quantum advantage could be as short as two years away in gate-based, what we call gate-based quantum computing.
Kornik: Where do you see those impacts taking place within the government? What’s quantum’s impact going to be?
Karagiannis: Yes, we’re going to eventually talk in this interview about the threat to cryptography so we’ll put that aside. Before scary things like that happen, there will be an impact in more practical use cases. Right now, with AI becoming more and more important, I think the first thing you’re going to see is that quantum will help certain processes that are either AI or AI-adjacent. That will be some of the first use cases like optimizing information that will be fed to AI, compressing artificial intelligence so it runs better because these machines will always work in tandem, and we’re going to see that most likely in the AI world, too.
Quantum computers are not going to replace classical computers. They’re always going to be that, like extra device that’s really, really good at specific tasks and they’re always going to be in the data center alongside your classical clusters. I think government will, first, take advantage of that aspect of it before they were able to proclaim where the first government that can crack encryption – although, let’s be real, I don’t think any government will proclaim that. I think they’ll keep it as like a secret advantage.
Kornik: Right. We’re going to talk about encryption and sort of protecting classified information in just a minute. Before that though, I do want to ask you, you mentioned earlier about the US sort of m.a.intaining its leadership position. Where is the U.S. government on its quantum journey in terms of funding and R&D compared to other countries? Is it really a leader on the geopolitical landscape?
Karagiannis: Yes, actually we are in some ways. In 2018, President Trump signed a national quantum initiative, and it was supposed to be a five-year act to help boost funding to all aspects of manipulating and using information with quantum. So, quantum information science, basically. That was renewed in 2023. We have the path forward for new money to be given to areas. Two regions in the U.S. were deemed tech hubs for quantum, in Colorado and Chicago, which means there’s going to be extra money in research dollars for developing workforces and coming up with new technologies. So, that’s great. That’s all good. We have these little heartland areas where you can have stimulating quantum growth happening, which will help us as a country. That’s one way the U.S. is leading.
Some ways that we are facing slight challenges. There are other countries where, we’ll pick one, for example China, where we’re being outpaced in terms of scientific papers that are being published and cited. It’s an interesting time where some other countries are obviously generating enough QIS advancements that the world is taking note. It’s possible that we’ll see advantage in some areas come from another country too. Then, it’s a matter of can we reverse-engineer or can they reverse-engineer and how much of it will be scientifically shared with the world like we’re used to seeing in science, or how much of it will be instantly behind locked doors kind of like a secret, that kind of thing is impossible to speculate on.
Kornik: When it comes to encryption and protecting sensitive data, classified information, how important will quantum be in terms of our national security?
Karagiannis: It’s a two-edged sword here. This is all covered also in that NSM White House Memorandum. It’s the idea that we have to maintain our leadership in using quantum computers for things and also in defending against the quantum threat. Eventually we’re going to cross that line of about 4,000 or so logical qubits that can crack encryption. When that happens, overnight, certain secrets will be exposed, and you can’t just flip a switch and rewrite everything. We can’t just overnight have everyone be set up with new encryption standards and all that takes time. So right now, we’re working towards this new deadline. They’ve set one of about 2035 to be ready, and that’s what the federal government’s going to be following.
However, private sector should be getting a little ahead of that because I think 2035 is not really a great deadline. I’m seeing 2030 as being when we have a potential for machines being able to crack encryption. That’s the other aspect that governments have to be ready for and at least the U.S. is making some clear inroads there right now in establishing the things that have to happen. Once NIST publishes the new standards for post-quantum cryptography this year, probably around summer time, there’s certain actions that federal agencies are going to have to take, and regulators, we expect, will copy that.
Kornik: Yes, you mentioned regulators. I’m just curious about skill sets and capabilities. Where do you think the U.S. government stacks up in terms of its quantum talent versus the rest of the world?
Karagiannis: Well, there’s definitely a talent shortage for what will happen as this industry keeps growing. That said, we are doing pretty well on the academic side. We do have a few solid programs here in the U.S. and universities and sort of like groups that are helping develop talent, like the Chicago Quantum Exchange is a great example which is obviously part of the University of Chicago too. We have that kind of growing talent approach, but we’re still not able to very quickly create teams and companies.
It’s still a little challenging to say, “We want to explore quantum. Let’s just build something.” It’s very hard to then go quickly find all the levels of technical skill you need to build something like that out. That’s why right now it’s still very much beneficial to have consulting when it comes to quantum sort of like help you work on your first use case and then start doing the educational path internally. Who can you train up? Who can you hire and bring in? So, there’s still a little bit of a challenge there when it comes down to the private sector.
Kornik: Right. I know you spend a lot of your time doing just that, right? You mentioned the private sector, and I’m curious how quantum in the public sector could impact the private sector. What do business leaders need to know or what should they be doing to sort of prepare for this future?
Karagiannis: Yes, that path towards post-quantum cryptography is a beautiful example of this. It literally says, okay, once these new ciphers are available, federal agencies have to create inventories. They have to show a timeline for how long it will take them to migrate, hopefully before 2030, but they have to establish that. They have to take very concrete actions as a result and we expect that private sector is going to copy that and that’ll be good for everybody because they’ll do the very same things.
They’re not going to do all the R&D required to understand the migration to post-quantum cryptography. We expect they’re going to do the exact same things with rolling out the new cryptography and not breaking anything. It’s that breaking thing that’s dangerous, that’s what we call crypto agility, the ability to implement new primitives and ciphers without destroying everything. The private sector is benefiting.
Kornik: You’ve already sort of taken us out to 2030 and 2035 and talked a little bit about that, but I’m wondering if you could sort of take us out that far or even farther, and talk to us about a post-quantum world and how that will have transformed global governments, or more specifically, the U.S. government or both.
Karagiannis: Yes. When you go out to 2035, of course, you’re in the realm of post-quantum cryptography needing to be rolled out. We’re going to have machines that can reverse RSA, other PK and even other types of cryptography like blockchain and things that we’re using right now. Hopefully, all that will have been replaced, but these machines will be so amazingly powerful by then that it’s hard to even imagine some of the use cases we’ll come up with in 10 years because we are very much scratching the surface right now.
In 2035, I don’t think we’re going to recognize it. I don’t think we’re going to recognize the world by 2030, maybe by 2027 quite frankly, with the acceleration we’re facing so it’s hard to imagine. Let me give you an example of how optimization can change many, many aspects of life. The more data we have to deal with, the more data points, the more moving parts. It starts to become an exponentially out of control situation as you try to make sense of these things. We’ve seen it with supply chain disruptions, the more moving pieces in the supply chain, if something goes wrong with one of them, it affects everything else with like a domino effect.
It all goes back to the traveling salesman problem. How can you visit every country, every city in the country without repeating. That starts to become an exponentially difficult problem to solve. Imagine optimizing the delivery of all sorts of services. They could be physical services like trucks getting to you or trucks getting to you in an emergency. We’ve already seen quantum edge in that. Imagine also delivering much needed resources to people more like digitally or delivering, let’s say things that people count on. For example, the right to vote, how are we going to protect that?
Can one day quantum computing make it more possible to better predict when people will show up, how to have the right amount of folks on hand physically. This isn’t even touching the voting machines. It’s just predicting when people will arrive and the flux and things that will occur. You can really get down to the nitty gritty like that, that things that really impact physical boots on the ground rather than some abstract like algorithm running in the distance, it’s all very visible.
Kornik: Right. Well, we’ll keep up with all those changes by listening to The Post-Quantum World. Thanks, Konstantinos, for your time today.
Karagiannis: Thanks.
Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit vision.protiviti.com to view all of our latest content. Until next time, I’m Joe Kornik.
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Cybersecurity expert: The U.S. is facing big challenges
Cybersecurity expert: The U.S. is facing big challenges
Cybersecurity expert: The U.S. is facing big challenges
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Tom Vartanian, an author, lawyer, futurist, board member and executive director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based nonprofit. Vartanian has more than 50 years of experience in the financial sector and served as a regulator in both the Reagan and Carter Administrations. He is the author of nine books, including his latest, 2023's The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Here, he discusses U.S. readiness when it comes to cyber warfare with our adversaries.
In this interview:
2:20 - Cyberattacks and national security by the numbers
3:53 - Who is running the technology parade?
9:36 - Quantum computing, a game changer
12:50 - A cautiously pessimistic look forward
Cybersecurity expert: The U.S. is doing almost everything wrong
Joe Kornik: Welcome to the VISION by Protiviti Interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource examining big themes that will impact the C-suite and executive board rooms worldwide. Today, we’re exploring the future of government and I’m joined by Tom Vartanian—an author, lawyer, futurist, board member, and former federal bank regulator. Currently, Tom is the executive director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based non-profit that advocates for dynamic financial services and public policies. Tom served as a regulator in both the Reagan and Carter administrations and he is the author of nine books including his latest, 2023’s The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Tom, thank you so much for joining me today.
Tom Vartanian: Joe, great to be back.
Joe Kornik: Tom, as I mentioned in my introduction there, you are the executive director of the Financial Technology & Cybersecurity Center. Can you tell us a little bit about the center and its mission?
Tom Vartanian: Yes. What I wanted to do after being a regulator for a number of years and practicing law for 40 years is sort of bring to bear the concerns I had about the future financial services and particularly how it’s impacted by technology and security questions. What we wanted to do was set up a center that would focus on cybersecurity, focus on the future of fintech and key on to the issues that we think we need to consider to make financial stability the preeminent and dominant concern in the future.
Joe Kornik: Yes. I mentioned your excellent book in the intro and in it you addressed the threats facing the integrity of our national security and our financial services sector including the possibility of cyberattacks by foreign adversaries like China and Russia. Your book poses a challenge to America to take the lead and create a coalition of democratic nations to implement financial cyber strategies. Why do you think this is so critical to the future?
Tom Vartanian: You can go on to the CISA’s website today and look at the numbers that they have prominently on their website. CISA, which, of course, is part of the Department of Homeland Security, says that one in three, five people in America have malware on their computers, one in three. 47% of us in the country have had personally identifiable information collected about us, 47%. 600,000 accounts are hacked daily. $4 billion in crypto is stolen each year and ransomware attacks are now averaging—the theft of more than 500 million—there are more 500 million ransomware attacks every year, 500 million around the world. What you see is a scale of devastation and destruction that has to be put into some context relative to the enhancement of the human quality of life that technology can provide. And I think we are losing the battle in that balance because we’re irrationally focused on the upside of technology and not very focused on what can happen on the downside. We don’t know so much about technology and we’re playing as if it’s always going to be benevolent and good to us, but the problem is that there are so many people increasingly every year using it for bad purposes and to steal money or to influence elections or bring down governments.
Joe Kornik: Let me ask you a question. As a country, is the United States of America doing enough? Do we have the right people on it? Do we have the right investment pointed at it? I mean how are we doing in that realm?
Tom Vartanian: I think, Joe, that we are playing into the hands of our adversaries. Let me say it this way. If we wanted to build a system to allow our adversaries to take as much advantage of critical infrastructures, money, power, and every possible aspect that our government relies on, we wouldn’t built the system we built online, right? Because it is highly insecure and it is increasingly vulnerable to attack. When the internet started in 1969, the ARPANET, it was established to communicate messages, not to store data, and here we are, all these years later, storing all the data on the planet and all of the value on the planet on a system that was never built to do that, right?
Again, I think it changes the scales and the balance of things. It allows countries that shouldn’t be able to punch above their weight to punch above their weight. North Korea is probably the best example of that. It’s basically running its economy off hacking, right? It’s all of this money they’re making from hacking everything around the world, it’s giving this money to run its economy and run a nuclear program. Right? So, we’ve got to start seeing that we can think in terms of traditional regulations, traditional concepts if we’re moving forward in a world where the scale has changed and the balance between good and bad is now moving dramatically.
My bottom line is, is that we need leaders in this country to basically move forward with an agreement among democracies. Forget the other countries that aren’t going to come in, dictatorships and totalitarian governments, they’re never going to come along because they’re now seeing technology as the way that they can control their people. I mean if we had an hour, we could talk about what’s going on in China with 300 million facial recognition cameras, giving everybody a social score, right? For totalitarian governments and dictators, technology is now the greatest thing in their hands because it will prevent them from ever being out of power, because the facial recognition, they will know when two people are meeting that they think shouldn’t be meeting and that’s pretty scary.
I think the answer to your question, the government hasn’t done enough, isn’t spending enough and isn’t focused enough on these issues because at the end of the day, said very simply, a lot of these issues are not campaign issues you can raise money off of, right? Those are the issues, whether they’re important or not, they tend to draw political donations and that the politicians tend to focus on. The second problem is that I don’t think most people on the hill understand more than—about technology than how to turn on their computers. I mean you can watch any congressional hearing you like, the ones with Mark Zuckerburg and Facebook were interesting, and you realize that most of the questions have been written down and the people asking those questions really don’t understand the broad significance of the questions and the answers that they’re getting.
The sad thing is that Bill Clinton in 1996 nailed the problem. He identified critical infrastructure. He had great people working on his cybersecurity proposals and he nailed the problem. And he laid out the fact that we need to protect critical infrastructures because of the inherent vulnerabilities of the systems that they’re on. 25 years later, probably 27 years later now, we really haven’t made much progress. If you compare, as I did in the book, the executive orders of President Clinton, President Bush, President Obama, President Trump, and now President Biden, they look eerily alike as if somebody’s just cut and pasting every four years. Who’s running the technology parade? The technology parade is being run by the private sector: large, big tech companies. At the end of the day, I ask the following question. You may not like the politicians we have, you may not think they’re making decisions, you may not think they’re doing anything, but at the end of the day, do you want them deciding the future of your life as elected officials that you can elect or un-elect? Or do you want Jeff Bezos or Mark Zuckerberg making those decisions, because that’s who’s making those decisions today, the guys that run big tech and that’s not the world I want to live in.
Joe Kornik: Tom, it’s some pretty scary scenarios that you laid out and something that would require cooperation first in this country and then globally among other countries. It feels like a pretty daunting task, to be quite frank.
Tom Vartanian: I’m going to leave you with one example, Joe, just very briefly. Today, RSA encryption, which is the typical encryption being used by financial institutions to protect data, is a 2048-bit encryption which means the key is 2048 bits long and to make it simple, it’s very complicated keys. So, to run a brute force against a 2048-bit encryption data, you probably need 300 trillion years to break it and then you might break it on the first try, but to go through every possible permutation to break a 2048 RSA-bit encryption, you would probably need 300 trillion years. All right? Quantum computing. We are now within 10 years of having high-powered quantum computing, which will be, for some purposes, enormously powerful and enormously useful. A 4099-cubit quantum computer—and we have only now, I think we’re now just approaching 1000 cubits quantum computing— so that’s the ways off, but a 4099-cubit quantum computer can reportedly break that 2048-bit encryption, not in 300 trillion years but in 10 seconds. That’s why it’s being reported that the Chinese are gathering up all of the encrypted information they can today so they will be able to decrypt it tomorrow.
Joe Kornik: Is the United States far behind the rest of the world when it comes to this—making sure that we’re protecting ourselves?
Tom Vartanian: Yes, it’s a great question. I addressed that question in the Unhackable Internet and I said China’s going to have some severe economic problems themselves, but China’s plan is to by 2030 have the largest economy in the world, the most sophisticated technological prowess, be dominant in artificial intelligence and be dominant in quantum computing. If they do those four things, that’s not going to be a good day for the United States of America, and they’re outspending us in each of those areas. They’re outspending us in artificial intelligence, they’re outspending us in quantum computing. They have built bigger quantum networks than we have built. Right? I think we’re thinking like people who have been on top, not realizing it’s harder to stay on top than it is to get there, and everybody else is running fast to get to where we are. We’ve got to spend the money judiciously to guarantee our future in the technological sense.
Joe Kornik: Last question for me, Tom and that’s how optimistic are you about the future when you put it all together and take a look over the next—let’s say 2030 and beyond, how optimistic are you that we’ll get most of this right?
Tom Vartanian: I think we’re getting most of everything wrong today and that makes me pessimistic. I mean, you can talk at any level: social, cultural, financial, political. We just seem to be getting so many things wrong and I equate it to a lack of the ability to prioritize. I think we’ve lost our capacity to prioritize the issues that are really, really important. I think we will continue to muddle along and do just fine as long as everybody else is doing worse, but as other countries and other systems begin to do better, it’s going to shine a light on the flaws in our system. It’s going to shine a light on the archaic makeup of our regulatory system. It’s going to shine a light on the fact that we’re focused on the wrong issues at the wrong time for the wrong reasons. It’s going to focus the light on the fact that we’ve let so much of the financial services business that takes consumer dollars be completely unregulated.
I am what I call guardedly pessimistic. I mean we seem to muddle along and do just fine, but when you look at something over a long trendline, which I look— I tend to look at 25-year trendlines—you can see we’re not going in the right direction on any of these issues and I wrote in one in op-ed that I thought the only solution to those problems was better leadership. I concluded that we just weren’t electing at any level the kinds of leaders we need to confront and solve these issues and that to me is the fundamental problem that we’ve got and unless we were able to stand up as voters and say, “Look, you got to give us better candidates.”
Joe Kornik: Sure. That seems like almost an unsolvable problem. I hope I’m wrong, but that seems like a really, really difficult one to fix.
Tom Vartanian: Yes. No, I agree, that’s why I’m guardedly pessimistic.
Joe Kornik: Well, Tom, you’ve given us a lot to think about today. I appreciate the time, the insights and the conversation. Thanks so much.
Tom Vartanian: Thanks, Joe. Thanks for having me. I really appreciate it.
Joe Kornik: Thank you for watching the VISION by Protiviti Interview. On behalf of Tom Vartanian, I’m Joe Kornik. We’ll see you next time.
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From trust to tech equity to transparency, governments have issues. Is digitization the fix?
From trust to tech equity to transparency, governments have issues. Is digitization the fix?
From trust to tech equity to transparency, governments have issues. Is digitization the fix?
The trend is incontrovertible: Sentiment is at an all-time low when it comes to whether Americans “trust the government to do what’s right almost always/most of the time.” According to the Pew Research Center, only 16% agreed in 2023, compared to 54% in 2001. The all-time high was 77% back in 1964. Yes, there was a time more than three out of every four Americans trusted the government to “almost always” do what’s right. Today, it’s fewer than one in six.
In a survey worded somewhat differently and conducted internationally, only 31% of Americans said they had “confidence in the national [federal] government,” compared to 84% in Switzerland, 69% in Sweden, 61% in Germany, and 43% in Japan.
Yet, we know government is necessary. The market economy does not function well without the public provision of education, pensions, transportation, the rule of law, defense, security, and a host of basic “public” goods such as air traffic control, maritime signaling or weather forecasting. Even proponents of the “minimal state” see a role for regulation to play.
During times of crisis, most recently the coronavirus pandemic—governments stepped up with varying degrees of success to protect citizens from the fallout and to prevent the economy from collapsing. And just as in the private sector, the pandemic invited governments to significantly step up their digital presence. Has e-government lived up to expectations? Has it contributed to enhanced participation, quality, and efficiency? Can the digitization of government service be the panacea for the public sector?
The emergence of e-government
Aside from all the misgivings that citizens continue to have about their governments, perhaps the biggest change in the interaction between the two has involved digitalization. Regardless of whether people find government services useful, efficient, or even appropriate, the truth of the matter is that connecting with the government, accessing a program, and getting “paperwork” done has become greatly facilitated by new information technologies.
According to the United Nations’ biennial e-Government Development Index, which takes into consideration online services, human capital and the telecommunications infrastructure in equal proportions, the top ten countries in 2022 were Denmark, Finland, South Korea, New Zealand, Sweden, Iceland, Estonia, the Netherlands, the U.S., and the UK.
Being within this elite group, however, does not mean that every citizen benefits. In the case of the U.S., for example, access to information technologies is much more unequal than in any of the other top countries. Not surprisingly, this digital divide is more prevalent with those groups who have less access to technology, including people who are living below the poverty line, undocumented immigrants, people with disabilities or mental health issues, and seniors.
France Belanger and Janine Hiller, from the Virginia Polytechnic Institute, proposed a five-stage model for an e-government: information, two-way communication, transaction, integration and political participation. Most governments have sought at various levels to offer services within each of these stages, but without fully deploying each of them.
As a result, the current state of e-government is fairly fragmented, incomplete, and in need of rationalization. This situation creates unique security and privacy risks due to the different protocols and standards that characterize legacy and new IT systems.
Regardless of whether people find government services useful, efficient, or even appropriate, the truth of the matter is that connecting with the government, accessing a program, and getting “paperwork” done has become greatly facilitated by new information technologies.
Technological frontiers
The adoption of cutting-edge technologies in e-government is very heterogeneous. Even in an advanced country like the U.S., only about half of federal agencies are on the cloud. The U.S. government is well behind the private sector in the use of blockchain and AI.
Another critical area for the future will be the use of digital tokens in general and cryptocurrencies in particular. In 2018, Ohio became the first (and only) state to allow taxpayers to settle their obligations in cryptocurrency, although the program was suspended in 2019 citing “legal issues.”
Only El Salvador and the Central African Republic accept cryptocurrencies as legal tender. In the U.S., the recent SEC approval of spot bitcoin exchange-traded funds (ETFs) does not necessarily pave the way towards the government’s acceptance of payments in cryptocurrency. Rather, it reinforces the message that the likes of bitcoin are crypto-assets rather than means of payment.
Data security concerns
Looming large in the background of most e-government developments are data security concerns. The use of cloud computing has led to several high-profile hackings, especially the cyberattack on the U.S. State Department in 2023.
Doubts persist as to the security of recent projects such as the Department of Homeland Security’s system to share information across agencies involved in disaster relief and major sporting events; the U.S. Treasury’s system to process payments; the Labor Department’s effort to consolidate case management systems; and the Department of Agriculture’s management of federal lands.
The Government Accountability Office found in a detailed review that only three of 15 government systems had continuous monitoring of their cloud systems, and issued a set of recommendations that most private-sector companies have been following for years. As noted above, the incomplete online migration of government services to the most advanced technologies, which continue to coexist with antiquated legacy systems, poses formidable challenges in terms of data security.
Accountability, transparency and privacy
It is not clear either that e-government has led to greater transparency, participation, and accountability. In general, information technologies tend to give a false sense of improvement when it comes to transparency and accountability. Governments around the world continue to be criticized on both counts. Research also indicates that transparency can be at odds with privacy. The problem is that, on the one hand, e-government potentially makes information more readily available and easy to publicize. But, on the other, privacy can become a huge issue.
Even if security against data breaches were guaranteed, privacy can still be a big problem. Most citizens are apprehensive when it comes to sharing data with the government. The use of IT essentially means that every interaction with a government agency leaves a digital footprint. In addition, companies might be ordered by the government to surrender data about their customers.
Most citizens are apprehensive when it comes to sharing data with the government. The use of IT essentially means that every interaction with a government agency leaves a digital footprint.
In the U.S., the Government Accountability Office has noted that electronically stored information about citizens includes their school and health records, their extensive dealings with companies, and their interaction with governments. No wonder Americans are feeling increasingly “concerned, confused, and feeling lack of control over their personal information,” as a recent Pew Research Center study concluded.
Moreover, U.S. adults are more apprehensive about how the government might use their private information than about how companies may do so. In a recent study, the Center for Digital Government concluded that “efforts to address digital privacy are in the nascent stages.” The most significant threat continues to be data breaches. But data governance more broadly is also a concern.
Does e-government reduce costs?
One of the most interesting issues around e-government is the finding that increased participation leads to a decline in efficiency. Investments in IT are expensive, especially because they also require investments in training and education of both government workers and citizens.
In 1987, Nobel laureate Robert Solow formulated what came to be known as the IT productivity paradox when he observed that “you can see the computer age everywhere but in the productivity statistics.” In this respect, e-government appears to be no different than the private sector. One cross-national study found that investments in e-government increased effectiveness but not efficiency.
Much remains to be done in terms of changing the public’s perceptions about government—in the U.S. in particular, where less than a third of adults express confidence in it. The use of IT can help, but governments must also clarify what the goals are—namely, accountability, transparency, increased access, effectiveness, and efficiency—especially when these goals find themselves at odds with one another.
Americans are feeling increasingly “concerned, confused, and feeling lack of control over their personal information,” a recent Pew Research Center study concluded.
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
There’s certainly no shortage of stories about the de-dollarization movement going on around the world. In late January, retired Wall Street veteran Dick Bove told The New York Times: “The dollar is finished as the world’s reserve currency.” Bove is just the latest expert in a string of stories questioning the long-term viability of the U.S. dollar.
And last August, Brazilian president Luiz Inacio Lula da Silva did more than question when he boldly suggested the possibility of creating one single BRICS currency. The trial balloon was floated shortly after the bloc (with its original members of Brazil, Russian, India and China) had agreed to bring six new countries into the fold—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. The “BRICS+6” account for 46% of the world’s population and 30% of global GDP. The “basket of BRICS currencies” could also be the greatest threat the U.S dollar has seen to its position as the world’s reserve currency for a long time.
Timing is everything: Just a few weeks after President Lula da Silva’s proclamation, VISION by Protiviti launched its exploration of the Future of Money. The theme examines the impact of cashless countries, cryptocurrencies and the digitization of the monetary system on business, commerce, financial markets, the geopolitics of the global economy and, yes, the U.S. dollar. We asked several economic experts to weigh in on whether the dollar could, would, or even should remain the world’s reserve currency— and what could potentially replace it and when.
BRICS currency a “non-starter”
Count The Economist’s Swarup Gupta among the BRICS doubters; Gupta calls a BRICS currency a “non-starter” because the BRICS itself is terribly lopsided.“ Any currency born out of a basket of currencies that make up the currencies of BRIC countries, even with new additions, will be dominated overwhelmingly by the digital yuan, and while that will satisfy China’s ambitions of internationalizing its currency, will other countries agree? India and China, for example, have prickly relations,” Gupta says.
More likely, Gupta envisions the eventual diversification away from the U.S. dollar to a different basket of currencies, one that could include the euro and yuan along with other allied countries. “I do think the gap between the U.S. dollar and other global currencies will decline over the next decade, as will its share of foreign trade, but I don’t see that happening in a significant way any time soon.”
“A race for digital dominance”
At the same time, Gupta says, the U.S. government, along with many governments around the globe, have shown a keen interest in wanting to “take back money and how it’s used as a sovereign tool of governance and policy making.”
This can be done much more easily in a digital world, says Mauro Guillén, Vice Dean at the University of Pennsylvania’s Wharton School, futurist and author of 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything.
Guillén says the race for digital dominance is on amid the uncertainty of a looming financial digital disruption. “The U.S. should be wary of what countries intent on increasing their influence over global financial matters might do,” he says. “China is planning to make a digital yuan accessible to its trading partners. In that case, the dollar, not commercial banks, would be disintermediated,” Guillen says. “Bypassing the U.S. dollar would require interoperability between the digital yuan and the CBDCs of China’s trading partners. That’s a big task, but the incentives for them to do so are huge.”
“The U.S. should be wary of what countries intent on increasing their influence over global financial matters might do. China is planning to make a digital yuan accessible to its trading partners. In that case, the dollar, not commercial banks, would be disintermediated.”
– Mauro Guillén, Vice Dean, University of Pennsylvania’s Wharton School
“A matter of national security”
Meanwhile, Matthew Le Merle, Managing Partner and CEO of Blockchain Coinvestors, asks: How could it make sense for China to do all of its global trade in U.S. dollars? “For the last 75 years, since we went off the gold standard, the U.S. has denominated Chinese global trade in U.S. dollars,” Le Merle says. “If you're the Chinese, or the Russians, you're going to say: ‘We can't have this. It's a matter of national security. We need alternative ways to transact with foreign countries.’”
Tom Vartanian, a longtime regulator who served in both the Carter and Reagan administrations, says we’re beginning to see a walk away from the dollar like we’ve never seen before. “The dollar’s global influence is waning,” he says. “Currently, it’s only used in 59% of global reserve currency transactions. That’s a big concern.”
Vartanian says a weakened dollar not only has enormous economic implications, but political and geopolitical implications, as well. “How does the United States implement economic sanctions on Russia if the dollar isn't the world’s preeminent currency? It can’t. And if we don't have economic sanctions as a tool, that only leaves us the military option. That’s a tough place be.”
“A debt dilemma”
Vartanian says there’s little doubt the dollar will lose its status in the world when someone else steps up to take it away. “Look, in the land of the blind, the one-eyed giant is king,” he says. “For the time being, we're probably okay because no one is all that ready to step up, but the trajectory we're on is simply unsustainable.”
Specifically, the enormous debt the U.S. has is unsustainable. We have a debt dilemma, Vartanian says. “We may not even know when we’ve crossed the line when the dollar is no longer king,” he says. “But once we do, there’s probably no coming back.”
The debt dilemma was echoed by several experts VISION by Protiviti spoke with. David Cowen, President and CEO of the Museum of American Finance, which chronicles the history of U.S. finance all the way back to its origins, put it most bluntly. “Alexander Hamilton famously said ‘if it is not excessive, our debt will be a national blessing.’ Well, it’s excessive and frankly, Hamilton would be spinning in his grave.”
Having the world's reserve currency has allowed the U.S. to run large deficits in terms of both international trade and government spending. If foreigners no longer want to hold dollars for savings, it would force significant belt-tightening at home, Vartanian says
“The U.S. would have to face the economic consequences of the financial pressures it has created over the last several decades from, among other things, gargantuan overspending, if the dollar did lose its status as the primary global currency,” he says. “Business leaders, executives and directors need to prepare for a world where the dollar is less used for global commercial transactions whether the concept of a global reserve currency continues or not.”
Either way, Guillén says, companies and governments would be wise to begin diversifying away from the dollar due to increased perceived risks. “American import-intensive firms would probably experience a spike in dollar-denominated prices,” he says. “American export-intensive firms would likely benefit because their products or services would become more competitive.”
"We have a debt dilemma. We may not even know when we’ve crossed the line when the dollar is no longer king, But once we do, there’s probably no coming back.”
– Tom Vartanian, former federal regulator
Execs still bullish on the dollar
Despite the experts’ caution signs and warnings, dollar doom-and-gloom was not detected among global business leaders VISION by Protiviti surveyed as part of our Executive Outlook on the Future of Money research conducted with the University of Oxford.
When it comes to what they saw as the biggest threats to their companies’ financial stability over the next 10 years, executives ranked the decline of the U.S. dollar dead last among a dozen choices. And nearly four in five respondents (79%) believe the U.S. dollar will still be the world’s dominant medium in 10 years’ time.
As we are about to undergo a seismic shift in the global monetary system, we can at least know that executives worldwide have confidence the U.S. dollar will remain the world’s reserve currency for the foreseeable future. And when we asked executives what could, potentially, replace the U.S. dollar someday, they overwhelmingly opted for another stable fiat currency, the euro (58%), with the Chinese yuan coming in second at 17%. Cryptocurrencies barely registered at all.
Crypto’s not ready for prime time
While cryptocurrencies, in all their many forms, are becoming more mainstream (the Securities and Exchange Commission’s approval of Bitcoin ETFs earlier this year signals they are here to stay), they won’t be the reason the dollar tumbles, says Eswar Prasad, Senior Professor of Trade Policy at Cornell University and author of the book, The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.
“The landscape of global reserve currencies may appear to be at the threshold of disruption as cryptocurrencies gain traction, but despite all the hype, the proliferation of cryptocurrencies will not have a substantial disruptive effect on the major reserve currencies, especially the U.S. dollar,” Prasad says. “The dollar could eventually lose some ground as a payment currency, although I think it will remain dominant both in this dimension and as a storer of value for the foreseeable future.”
And Aaron Lindstrom, the Americas region Head of Transformation and Digital Partnerships for Allianz Trade, says since crypto is not tied to a sovereign government, it fails on both the confidence and consistency measures.
Forecasting the future
“While nothing lasts forever, it’s hard for me to rationalize a world where the U.S. dollar is not central to trade finance,” Lindstrom predicts. “The U.S. economy is still the largest in the world and continues to be a net importer; our consumption and economic strength make us the world’s reserve currency now and that will continue well into the future.”
How far is well into the future? Lindstrom took a shot at a bold prediction for what money could look like in 2050. “I would say it will be transacted digitally but likely backed by water,” he says. “I can see a world in which currency is benchmarked to fresh water as the planet’s most valuable asset.”
Presumably, this will put the U.S. dollar underwater in just a few decades. Let that soak in.
“While nothing lasts forever, it’s hard for me to rationalize a world where the U.S. dollar is not central to trade finance."
– Aaron Lindstrom, Allianz Trade
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Tom Vartanian, an author, lawyer, futurist, board member and former federal bank regulator. Currently, he is the Executive Director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based nonprofit that advocates for dynamic financial services and public policies. Vartanian has more than 50 years of experience in the financial sector and served as a regulator in both the Reagan and Carter administrations. He is the author of nine books, including his latest, 2023's The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse.
In this interview:
1:17 – How is money evolving in the digital age?
3:19 – Crypto — a viable financial development, a hoax, or something in between?
5:50 – Regulation of crypto and digital tokens
8:50 – Is a U.S. CBDC a good idea?
13:40 – The financial world in 2040
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m joined by Tom Vartanian, an author, lawyer, futurist, board member, and former Federal Bank regulator. Currently, he is the executive director of the Financial Technology and Cybersecurity Center, the Alexandria, Virginia-based nonprofit that advocates for dynamic financial services and public policies. Vartanian served as a regulator in both the Reagan and Carter administrations. He is the author of nine books, including his latest, 2023’s The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Tom, thank you so much for joining me today.
Tom Vartanian: Joe, thanks for having me. It’s a pleasure to be here.
Kornik: Tom, as an author, lawyer, futurist and former Federal Bank regulator, how do you see money evolving in the digital quantum age that we’re entering?
Vartanian: Yes. It’s a great question, Joe, because I’ve been studying money now for, it seems, most of my life and I’ve written about it extensively, at least in the first two books. It’s interesting. Money is constantly evolving, and it relates to the economy, to the cultures and to the people that we become. Interestingly enough, even in this country, we’ve only had a national form of currency since the 1860s. So, it’s not like we’ve had dollars all of the history of the world. These things are relatively recent, in a historical sense. In terms of what I’ve looked at it in money, and the things that I have seen, which includes digital cash, smart cards, money, credit cards and all the like, what I wrote in my book 21st Century Money, Banking & Commerce is that money tends to gravitate towards four different categories that need to be there for people to accept the money. The first is cost. It can’t be costly to use. So, when we pick up a dollar bill, there’s no cost to using that dollar bill. Second of all, it’s got to be convenient to use. People don’t want to go through a lot of steps to be able to use money. Third, the public must have confidence in the money. If they don’t have confidence, eventually they’re not going to use it; and fourthly, and these are the four Cs, there must be a consistency to the value of the money. If the value jumps all over the place, consumers aren’t going to want to use it.
Kornik: That consistency piece brings me to my next question, which is around cryptocurrency, which has been not consistent in its value. Where do you land in the cryptocurrency debate? Do you see this sort of a viable financial development, hoax, or something in between?
Vartanian: I sort of see it as all of the above, depending on your perspective. If you look at my four Cs, cost, convenience, confidence and consistency, I think cryptocurrency fails all four, and that’s important, right? Because at the end of the day, if you’re trying to use something as money and it doesn’t have the backing of the Federal Reserve or a government entity, you’ve got something that is more of a wish and a hope than actually a form of money. I tend to think that cryptocurrency is never going to be money. It may be an investment. It may be a security. It may be a commodity. I don’t ever think it’s going to be money because, first of all, how can you use something that maybe worth $50 in the morning and $100 in the evening? Right. You’re not going to take that vehicle to the supermarket to buy a loaf of bread. It's got lots of problems, but look, at the end of the day, I’m a big believer in allowing people to invest in things where they lose their money, and if people want to invest in computer code that somebody somewhere threw out into the universe and said this is a cryptocurrency, God love them, but I think the problem we have here is that the government has missed the boat in terms of letting this grow into a $10 trillion business, whatever it is. Whether it’s Las Vegas or it’s actually some important development in the financial services. The government has let it grow into a $10 trillion industry. What I mean by that is, there’s $3 trillion of cryptocurrency out there. There’s $3 trillion of synthetics and derivatives built on that cryptocurrency, and there’s $3 trillion to $4 trillion of leverage and margin in that business. You add all that together, that’s about a $10 trillion business, which is about the size, a little less than the size of the U.S. mortgage market, and the U.S. market mortgage is highly regulated. I think it’s fair to say there’s relatively no regulation of cryptocurrencies, and that’s the big problem we’ve got right now. We’ve got a big part of the universe in the financial services system completely unregulated.
Kornik: Right. I was going to ask you about that. How do you see cryptocurrency and digital tokens impacting financial regulation and deposit insurance?
Vartanian: When it comes to regulation of cryptocurrency and deposit insurance, you really got to step back and wonder where we’re going to go in this digital economy to come up with a better regulatory system. What I mean by that is, the regulatory system we have today was built between 1932 and 1940. It’s the same system we have today. It’s been altered, it’s been modified, but essentially, it’s the same system of banking securities, mutual funds that was set up between 1932 and 1940. And I can guarantee you that there’s nothing about today’s economy that looks like 1932 and 1940. So, we’ve got a regulatory system that I have argued is terribly out of date, terribly misfocused, and at the end of the day, focused on only a small portion of the financial services business.
For example, one of the things I argued in my book is that when the banking regulations were set up and we ended up with this bank-centric sort of financial regulatory system, banks were about 95% of the financial services system in the 1930s. Today, if you take banks and their deposits and compare that to mutual funds, hedge funds, insurance companies, and all the money consumers throw in that direction, including cryptocurrency, you’ve got a banking business that’s about 30% to 35% of the financial services market. What does that mean? It means we’re focusing 100% of our regulatory prudential resources on 30% of the market. Makes no sense. So, looking at crypto, I think the fundamental problem crypto has, if we begin to regulate it, is that it is the number one choice for criminals, terrorists, fanatics and creeps. Right? It has enabled crime in all forms, from terrorism to child pornography, to hit a different scale completely, and so there is nothing out there that we’ve ever seen like this, and we have to decide whether or not we want a system like this to proliferate when it is increasing the scale and scope of crime dramatically. I mean, there’s no doubt that technology enhances the quality of our lives, but the scale of the damage that can be done is also monstrous.
Kornik: How about central bank digital currencies? We’ve heard a lot about them. Certainly, there’s a race for digital dominance as governments try to maybe perhaps use the shake up in the monetary system right now to maybe gain an advantage. Where do you see central bank digital currencies factoring into the future of money over the next decade or so?
Vartanian: Yes. It’s a great question because a lot of countries are running out there to do it, and the United States is lagging behind. I think the concern is, should we be lagging behind? I think it’s got to be the answer to the question. I think the Federal Reserve board concluded after a pilot program through the Federal Reserve Bank of Boston, that yes, it’s a good thing to lag behind here so we can see all of the warts and the problems in the system. The folks at the Federal Reserve Bank of Boston were working on this. I know and I’ve known some of them for a while, asked me to give my views. I did give my views and I said, “Look, there’s two threshold issues when you’re dealing with CBDC. First, what’s the overall economic impact? Because it’s going to change the way money moves. It’s going to change liquidity. It's going to change capitalization. So, what’s the impact?” What I referred them to were the 1980s when money market funds took over the market, and for those who were around then or don’t remember, in 1982, interest rates hit 21%. Banks were still paying 5% interest on deposits until they were deregulated around that time, but what happened was necessity was the mother of invention; money market funds began paying a market rate. So, when I was General Counsel of Federal Home Loan Bank Board, we were dealing with 1,500 failing thrifts from a lack of liquidity to an interest rate risk problem. You could see the money just draining out of the banking and savings and loans system because money market funds were paying 12%, and banks and savings and loans were paying 5%. So, you’re not going to stick around even if it’s FDIC or FSLIC insured for 5% yield when you can get 12%. So, the money just flowed out of the system and overnight, we were remaking the business of financial services in America and partly because of that, partly because of the interest rate risk, and partly because of the asset quality risks that emerge in the 1980s, we lost 3,000 banks and savings and loans. And there wasn’t one moment, as I recall, that I dealt with the Federal Reserve Board and all of our failing savings and loans at that time. Nobody considered the global impact on the economy from moving from money going into bank deposits to money going into money market mutual funds.
Now, I raised that only because CBDC could have a similar impact, depending on who holds the accounts for the CBDC. For example, Joe, if you can open up an account at the Federal Reserve Bank and you could use CBDC and you don’t need an intermediary bank, that changes the business of banking overnight. Where do they get their deposits? How do they make loans? Who’s making loans in that environment, right? It’s just a mammoth change in the market that could occur, and the question I always come back to is: what do we want our intermediaries doing, how important are intermediaries, and what is CBDC going to do the future of our intermediaries, meaning banks?
The second issue I’ve raised, and I think this issue is also stuck because I know several folks at the Fed have given speeches; several governors have given speeches about these issues since I’ve written about it, and that is, I thoroughly believe the Fed could do a CBDC tomorrow from a technological point of view. I don’t think that’s the problem, but I don’t think they should do it until they can guarantee it’ll be 100% secure. Because it will be the most sought-after thing online by any hacker on the universe once it goes live, right? Every hacker will be drawn to hacking United States Federal Reserve Board’s CBDC. There could be no more attractive target to anybody. So, if the Fed can’t guarantee the security because a breach in that system would be horrific. If the Fed can’t guarantee security, they shouldn’t do it. I’m pretty sure they can’t guarantee 100% security.
Kornik: I’d be curious to your thoughts just to where you think this all - how this all plays out in terms of CBDCs, cryptos, all those emerging technologies? Take me out to 2040 and tell me what kind of world we live in financially.
Vartanian: I think, Joe, the principal problem is this. You can’t stop technology and you should never stop progress. We’ve got to have progress as human beings. That’s the good part of the equation, but what I’m concerned about is if the scale is changing in terms of the balance. Let me give you an example. When I started in banking in the 1970s as a regulator, the maximum amount that you could steal from a bank was about the amount you could put in two valises and throw in a van waiting outside. Today, the amount is unlimited. There’s $4 billion of crypto being stolen every year. That’s probably more than all the bank robberies in the history of the country. So, the scale is changed. The scale of damage that can be done by these things has changed, and my prediction is that if we don’t get together with all of the other democratic countries of the world and begin to impose rules that control and channel technology to make sure we stay in charge, and you can argue about who’s “we” in that, but to make sure human beings, to make sure benevolent countries, to make sure democracies stay in charge of where that technology goes. I think the combination of AI, facial recognition, the internet of things and quantum computing is going to encourage the criminal elements of the world. It’s going to empower less powerful nations to do things and punch way above their weight. So, unless we start setting the rules now for the way that this will affect us geopolitically and financially in the future, I think rolling the dice on our financial future with all of the things, these things, these technologies are going to be able to do, is pretty risky. I think we’ve got to stay in charge, and we’ve got to drive the bus if we want a future that serves us.
Kornik: Well, Tom, thank you so much for your time today and those insights. Fascinating discussion. I appreciate it.
Vartanian: Thanks, Joe. It’s a pleasure to be here with you.
Kornik: And thank you for watching the VISION by Protiviti interview. On behalf of Tom Vartanian, I’m Joe Kornik. We’ll see you next time.
Thomas Vartanian is an attorney, author, advisor, regulatory expert, board mentor and an expert witness on financial services and technology. Currently, he is the executive director of the Financial Technology & Cybersecurity Center. As a regulator and private practitioner, he has been involved in 30 of the 50 largest bank failures in U.S. history. He is the author of nine books, including his latest “The Unhackable Internet: How Rebuilding Cyberspace Can Create Re al Security and Prevent Financial Collapse” released in 2023.
Joe Kornik is Director of Brand Publishing and Editor-in-Chief of VISION by Protiviti, a content resource focused on the future of global megatrends and how they’ll impact business, industries, communities and people in 2030 and beyond. Joe is an experienced editor, writer, moderator, speaker and brand builder. Prior to leading VISION by Protiviti, Joe was the Publisher and Editor-in-Chief of Consulting magazine. Previously, he was chief editor of several professional services publications at Bloomberg BNA, the Nielsen Company and Reed Elsevier. He holds a degree in Journalism/English from James Madison University.
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