The top three reasons to use an index
Some of you will disagree with the title immediately. Indices, among other complaints, are prone to lack transparency, magnify errors, misrepresent details…and you get the message.
But you may realize how frequently indices enter into your decision-making. A recent staff meeting of ours uncovered three major ones used today: NASDAQ for our investments, U.S. News and World Report college rankings for our kids and the Big Mac Index to settle a bet.
Much as we love to critique (and criticize) indices, they do have their place. Please read through my top three reasons for using an index; then tell me what you agree – and disagree – with.
Indexes have readily available relative information that sparks dialogues and invites further investigations.
Indexes often invite new audiences to a concept that differs from their area of interest because they combine different variables rather than looking at them in isolation.
Indexes provide measures for change that, otherwise, are not quantifiable with a numeric indicator.
The most satisfying indexes allow those who use them to control variables and scenario analysis that visualize the effects of each index component. This is what turns them from conversation starters to decision-making tools.
For adaptation indexes, I’ll possess the disadvantages while still celebrating the ability to start a conversation about results leaders who take steps toward resiliency often obtain. I’m particularly struck by the opportunity to measure climate adaptation long-term through ND-GAIN. Coming from the climate mitigation world, I miss my tidy metric ton of greenhouse-gas equivalent as a way to measure progress. No neat unit exists for climate adaptation. But through an index that tracks change over time, you can detect relative shifts in vulnerability and readiness.