The End of Average: How We Succeed in a World That Values Sameness

by Todd Rose

If the correlations between all the dimensions in a system are strong, then that system is not jagged and you are justified in applying one-dimensional thinking to make sense of it. Consider the Dow Jones Industrial Index. The Dow is a single numerical score that represents the combined stock value of thirty large and famous “blue-chip” companies. At the close of each American business day, the financial news dutifully reports the value of the Dow to the hundredth decimal place (it was 17,832.99 on January 2, 2015) and whether this number has moved up or down. Investors use the Dow to evaluate the overall strength of the stock market, and for good reason—between 1986 and 2011 (twenty-five years), the average correlation between the Dow and four other leading stock market indices was extremely high: 0.94.31 Even though the stock market is multidimensional (there are thousands of publicly traded companies in the United States), its general vitality can be reasonably captured with a single number: using the Dow to assess the overall strength of the stock market is one-dimensional thinking at its most reasonable.