Unstructured Data, Text Documents, And The Attorneys of Tomorrow

Attorneys need to look at how the insights from non-traditional data analytics can complement their own skill sets.

big data analytics word cloudThe least surprising secret in business intelligence is that many people do not believe their jobs can be improved through data analytics. That holds doubly true for many in the legal industry, from attorneys to litigation finance professionals. It is also wrong.

Attorneys and other professionals often point to what they see as the subjective nature of their work and the difficulty that exists in translating those concepts into data. The reality is that people who think this way are missing a profound shift in the industry – a shift towards what is called unstructured data.

Unstructured data simply means any type of data that does not fit neatly into a spreadsheet. The vast majority of communication fits that model. Yet unstructured data, from phone call transcripts to court opinions, can all be transformed into usable data – and it is not that hard to do. In fact, anyone with Excel and a transcript for a document can begin doing data analytics on their own.

Try this exercise for fun sometime. Take this article, remove all of the punctuation marks, then import it into Excel using space delimiters. When you get done, you will have a list of every word used here. From there, use Excel’s count function to count the frequency of each word, and use a word list from one of the research portals on the internet to decide which words are positive and negative. Once you have done that, you will have a measure of the “sentiment” in this article. You can repeat the process for any other text document out there. Of course, positive and negative sentiment are just the tip of the iceberg in terms of what can be measured with these types of techniques.

That type of transformation of text data into a sentiment score has been used in many applications, from examining a judge’s rulings for judicial proclivities to analyzing executive commentary on conference calls. The results are highly correlated with traditional variables that we often care about – like rulings in future court cases and future stock returns for a company.

All of this was once considered subjective and impossible to measure – it is not. Some parts of the legal industry are starting to come around to this realization. I recently did a project with a law firm helping them to take unstructured data related to client interactions and turn it into insight to determine which clients are most likely to jump ship for another law firm, which clients are at great risk of adverse outcomes in litigation, and on a business level, which clients have a higher willingness to pay that would enable the law firm to increase its fees.

All of this requires an upfront investment, of course, but once that investment is made, it is very easy to examine massive amounts of unstructured data in the form of text and transcripts and then make decisions accordingly.

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More broadly, the point for professionals of all stripes to remember is that even if a decision seems to be inherently subjective, it is likely that data is playing a role behind the scenes. Figuring out how to take the mass of information and turn it into insight is tricky, but not impossible.

Does this mean that lawyers are outdated or that professions like the law are doomed? Of course not.

What it does mean is that attorneys need to look at how the insights from non-traditional data analytics can complement their own skill sets. Finance has already seen this change occur. There are very few traditional traders in finance at this point. Instead, former traders generally work with quants to develop automated algorithms that enable trading.

In the same sense, attorneys will be needed to work with data scientists to help drive algorithms that glean insight from data. In addition, attorneys will be better poised to use data in the future to make decisions on behalf of clients. The same thing holds true for litigation finance.

The legal profession is changing, and hiding behind a veneer of subjectivity in decision making won’t stop the process. The best attorneys of tomorrow will be the ones who capitalize on that change today.

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Michael McDonald is an assistant professor of finance at Fairfield University in Connecticut. He holds a PhD in finance. Michael consults extensively through Morning Investments Consulting and writes for Litigation Finance Journal. Michael has served as an expert witness in legal disputes, and is an arbitrator with the Financial Industry National Regulatory Authority (FINRA). Michael can be reached at M.McDonald@MorningInvestmentsCT.com.

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