D3 Analyzer: Data-Driven Disposition
Visualization, analysis, and advocacy in multi-million dollar dissolutions with Mathematica
by Andrew G. Watters, Esq.
This is a work in progress article that will be revised and updated as I continue to use these techniques in my cases.
Issues in complex California dissolutions of marriage
A discussion of the issues presented in most complex cases, irrespective of actual size.
- Division of assets and liabilities. In a complex case, there are often multiple issues with characterization of property between community and separate property based on the source of funds, title presumptions, prenuptial agreements, dates of marriage and separation, and other matters. Similarly, there are concerns with allocation of debts between spouses based on the timing and intent regarding each obligation that was incurred. Analyzing the components of each issue results in a substantially equal division of property and debts between the spouses, with room for advocating each side's interests.
- Support. In a high earner case and/or a case involving self-employment or professional practices, one issue is how much income is available for support. What happens if the business and personal expenses are commingled by agreement, or otherwise? Should the income available for support take into account future business prospects and recent challenges, or is this a snapshot of cold hard cash earned over the last twelve months?
- Reimbursements/Offsets. Pereira/Van Camp, and "reverse Pereira" rear their ugly heads. What is fair compensation for a person's efforts after separation to manage community property? Should the services be discounted due to the mutual benefit of a spouse preserving community property? Or is it more economical to sell a venture and have the spouse start over with separate efforts and his or her share of the community property?
- Attorney fees. What is a reasonable amount in a large dissolution? Can you compute how much the award should be based on the attorney's experience and ability, or is this just guessing?
- Sanctions. Is it possible to calculate the time value of information that could or should have been gained at the beginning of a matter? If so, what amount of monetary sanctions is appropriate to deter concealment of financial information at the beginning of a matter when it can potentially resolve the entire case if known?
- Integration of Experts. Management of forensic accounting, economics, compensation, and appraisal experts in one integrated case scenario is desirable.
Capabilities of computational applications
An overview of technical computation is provided.
- Visualization. Let's be honest: everyone responds better to charts that are functional and easy to read. A technical computation program such as Mathematica provides a rich library of built-in plots, to the point of being ridiculous. Some examples are Plot, Parametric Plot, Region Plot, Region Plot 3D, and many more interesting examples. What use are these in a family law matter and why are they better than what can be done in Excel? Read on.
- Analysis. A computation program doesn't just help you visualize; it helps you analyze actual data. For example, cash flow analyses are trivial to do once you have the figures available. You can import massive amounts of data into a computation program and calculate virtually anything, including cash flow, many financial operations, date and time operations, and more. With the ability to pull data from databases, spreadsheets, plain text files, and others, there is no shortage of things you can do.
- Algebraic manipulation. California's guideline support formula is the subject of much confusion and many crappy but free to use online calculators. Slice through the fluff and go to the statutory source as manifested in a computation program for true utility. And you definitely can't do this in Excel.
- Interactive computation. Text boxes and sliders to adjust parameters for computations are just the beginning. You can do trial presentations with on-screen computations and show the court exactly how adjustments affect the result. Also not possible in Excel.
- Extreme performance. Mathematica Standard ships with eight compute kernels, which lets you use up to eight cores in the CPU, plus two front-ends, which lets you map to up to two GPU's. Not really needed for a divorce, but if Bill Gates ever gets divorced, high performance GPU mapping may come in handy.
- Proof, evidence, and audit. All of the data underlying the computations is viewable, which lets the user support and justify his or her computations. Mathematica has the capability of exporting CDF (computable document format) files that can be shared and manipulated among users who don't have the full application.
Application of technical computation to two complex dissolutions in California
I present my use of the computation program Mathematica in two cases.
Regarding support and property division, the community business had sales of over $1 million in the preceding twelve months, but the couple was carrying large amounts of unsecured debt. Husband took the position that there was simply no money available and that the community residence should be sold to clear out all the debt and provide cash for the parties to go their separate ways. I prepared a cash flow analysis in Mathematica based on bank statements provided by Husband, producing the following table:
When plotted on a graph, the data came alive and revealed an obvious trend: the net profit of the community business over the last twelve months was essentially zero (the green region is net cash flow each month).
The overall picture became even worse when financial statements were prepared, revealing that payables had increased along with the unsecured debt, which made the business lose significant money over the same period due to non-payment or late payment of vendors. This showed that the couple could not sustain its lifestyle in California, and I used the information to justify a motion to sell the community residence in order to provide quick cash, and also justify certain positions taken in the case.
I expect to publish additional analyses and visualizations in the near future showing how I am exploiting technical computation to advocate for my client on the issues of property division, support, and attorney fees.
This is an interesting one because of the complicated acquisition and transfers of several real properties and portions thereof via 1031 exchange and gifts, as well as Husband's 401(k). I will show how I used Mathematica to visualize and analyze the characterization and appreciation of these real properties over time as well as compute the separate property portion of Husband's 401(k). In addition, I expect to improve on the cash flow analysis and visualization performed in Dissolution A. The use was for the client's benefit in a pre-filing discussion so the client knew what kind of numbers to propose to the other party versus what could be expected in court.
I am pleased to announce the development of D3 Analyzer, which will be an alternative to the DissoMaster Suite of applications based on my research. The new application will be an interactive computation system that takes actual data as inputs and produces results that are justifiable and easy to understand. In addition, project/case management for aggressively litigated complex family law matters is achieved in an integrated web application.
D3 Analyzer provides a comprehensive software platform and interface for running various financial computations on high-asset, high-earner, and/or other types of complex dissolutions of marriage. D3 Analyzer is based on original, interdisciplinary research that our team has done in the areas of data science, data visualization, decision theory, predictive modeling, behavioral science, and complex family law. The above print ad/announcement shows a basic list of the features of D3 Analyzer as well as some sample graphs. The input consists of data points from documents such as bank statements, tax filings, business financial reports, and similar matter. The output consists of (1) stunning, effective, high-resolution, and interactive graphs and charts; and (2) proposed property divisions, reimbursements/offsets, support, attorney fees, and other figures that are all justified by the underlying data. In addition, we are experimenting with machine learning and computer vision to automatically map financial transactions shown on bank statements and canceled checks for tracing purposes. We also plan to integrate predictive modeling of decisions based on multivariate regression of such factors as the parties’ personality traits, the community’s financial practices, separate property ownership of either party, opposing counsel ratings, judicial officer temperament and past decisions, and more.
If you want custom analyses and/or charts for your case, email me at my law firm address for a consultation.
Last updated: March 18, 2018
© Andrew G. Watters