So, What’s Your Algorithm? headlines a January 4th Wall Street Journal article. It’s a good question for lawyers to consider, especially in-house counsel. 

The article addresses “How analytics harvested from massive databases will begin to inform our day-to-day business decisions. Call it Big Data, analytics, or decision science. Over time, this will change your world more than the iPad 3.”

I wrote about Big Data last May in Data, Data, Everywhere… Someday in Legal Too. That post focused mainly on how law firms could use Big Data. It only touched lightly on how Big Data might help corporate clients reduce the amount of law we need to do (also known as preventive law).

My idea – and it’s only embryonic – is that we should be able to tap corporate proprietary databases as well as public databases to find relationships that might give us early warning of legal problems. I’ve long been intrigued by the idea of legal early warning systems. In my April 2005 post Legal Radar, I speculated about analyzing blog content “to get an early handle on the possible emergence of a new legal problem.”

Today, Big Data tools allow going well beyond blogs. Big Data is big business, from established player such as IBM to newer but already widely adopted players such as Splunk.

Yet when I search the web for examples using Big Data analytics for preventive law, I find nothing. I am convinced that we should at least try. With tools form IBM, Splunk, and others, general counsels could tap corporate operational data – accounting systems, customer transactions, product returns, call center volumes, complaints, trading records, etc. – to look for patterns that might portend legal problems. This is not easy and it might not work. But it is intriguing: after all, what better way to reduce legal spend than to eliminate legal problems before they occur?

Beyond any inherent analytic difficulty lies a bigger challenge. Who will undertake this analysis? Law firms lack both the interest and capability as far as I can see. Law departments must lead. But, as I lamented in The Case for General Counsels to Invest in R&D (Nov 2010), the GC seems to have no interest in research and development.

Companies with more than a couple of hundred lawyers or legal spend in excess of $100 million should be motivated to conduct R&D on how to reduce legal spend. Sadly, however, I am not sure they are.

I hope that in my lifetime we will see someone undertake this exercise and even achieve success.