A Price-weighted Index: Dow Jones

The Dow Jones Industrial Average is what’s known as a stock market index. An index is a group of stocks that are combined to figure out whether the stock market as a whole is going up or down. It is a way to track the performance of the stock market.
 
The business world has changed a lot since 1896, so the Dow Jones has adapted to keep up. In 1928, the Dow was expanded to include 30 companies instead of just 12. Every few years some of the declining businesses in the Dow Jones are removed and are replaced by businesses that are growing. This helps to ensure that the biggest and most successful companies of the day are always included in the Dow Jones. As of 2021, the Dow includes businesses like Apple (NASDAQ:AAPL), Disney (NYSE:DIS), and Home Depot (NYSE:HD).
 
The Dow Jones has become one of the most well-known stock market indexes in the world. However, the Dow Jones also has critics that point out two big flaws.
 
First, the Dow Jones only tracks 30 companies. That’s only a tiny fraction of the 6,000 publicly traded companies that exist in the U.S. alone. Critics argue the Dow Jones does not accurately represent the entire stock market.
 
Second, the Dow Jones is calculated by using the dollar price of each stock. The Dow Jones ignores the size of each business. This means that a stock that is trading for $100 per share will have 10 times more influence over the Dow Jones than a stock trading at $10 per share.
 
That’s why the Dow is called a price-weighted index. The dollar price of each stock is what matters, not the size of each business.
 
To see why some investors think that this is a problem, let’s review the stock price from two Dow Jones stocks—McDonald’s (NYSE:MCD) and Intel (NASDAQ:INTC)—in October 2020:

McDonald’s was $52 billion smaller than Intel, but its share price was about four times higher. This means that the price movement of McDonald’s stock had a four times greater influence over the performance of the Dow Jones than Intel’s stock, even though Intel was a larger company!

 

- Brian Feroldi, Why Does The Stock Market Go Up?:

Everything You Should Have Been Taught About Investing In School, But Weren't, 2022

 

A Capitalization-weighted Index: NASDAQ Composite Index

Computers became a lot more advanced during the 1950s and 1960s. By the early 1970s, people who worked on Wall Street started to experiment with computers to see if they could be used to improve stock trading.
 
At the time, there wasn’t a good way to get stock price information—or stock “quotes”—to all investors at the same time. This made buying and selling stocks inefficient and expensive. The National Association of Securities Dealers (NASD), an agency that oversees the buying and selling of stocks, decided that computers could be used to solve this problem.
 
The NASD created a brand-new stock exchange in 1971. This new stock exchange would allow investors to buy and sell stocks on computers that were connected to each other. They called this new stock market the National Association of Securities Dealers Automated Quotations, or NASDAQ.

The NASDAQ stock exchange offered many advantages over other stock exchanges. Since all of the buying and selling was done on computers there was no need to have a physical trading floor. Accurate prices could also be viewed by all investors at the same time.
 
The inventors of the NASDAQ stock exchange also created an index that tracked the price movements of all the companies that were listed on the exchange. They called this new index the NASDAQ Composite Index. Today, there are more than 3,200 businesses that make up the NASDAQ Composite Index.
 
Like the S&P 500, the NASDAQ Composite Index is a capitalization-weighted index. This means that larger companies have a bigger influence over the movement of the NASDAQ Composite Index than smaller companies.

- Brian Feroldi, Why Does The Stock Market Go Up?:

Everything You Should Have Been Taught About Investing In School, But Weren't, 2022

A Capitalization-weighted Index: S&P 500

In 1923, the Standard Statistics Company created a new stock market index. Their goal was to compete with the Dow Jones Industrial Average, which was popular with investors. To stand out, Standard Statistics decided to use data on 233 companies instead of just 30 like the Dow Jones.
 
Years later, the Standard Statistics Company merged with Poor’s Publishing to create the Standard & Poor’s (S&P) company. In 1957, S&P made a few changes to its stock market index that would allow it to better compete with the Dow Jones.
 
First, S&P increased the number of companies that it tracked from 233 to 500.
Second, S&P let larger companies have more influence over the index’s movements than smaller companies. S&P judged the size of each business by using its market capitalization, which is the total dollar market value of a company’s equity. This is called a capitalization-weighted index.
 
On March 4, 1957, the S&P 500 was officially launched.
 
In 2021, large companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) had market values that exceeded $1 trillion. That causes them to have much more influence over the index than smaller companies like Hanesbrands (NYSE:HBI) and Under Armour (NYSE:UA) which are worth less than $10 billion. This is why many investors like that the S&P 500 is a capitalization-weighted index.
 

- Brian Feroldi, Why Does The Stock Market Go Up?:

Everything You Should Have Been Taught About Investing In School, But Weren't, 2022

What is A Servant Leader

What is a servant leader? It is someone who, in Senske’s words, refuses to use people as means to an end—who always asks, “Am I building people up, or am I building myself up and merely using those around me?” 

A servant leader creates an atmosphere of “transparency” in which all relevant information is shared openly, so that everyone has an opportunity to make responsible decisions. Finally, a servant leader lets go of command-and-control methods, and creates a culture that allows everyone to grow into leaders, stretching their own God-given talents.

Dare to Confront

Every Christian needs to be equally convinced that biblical principles are true not only in some abstract sense but in the reality of our work, business, and personal lives. If we become aware that a ministry or business is violating biblical principles, we need to stop being enablers and start calling people to accountability—even if it means paying a price. An employee who takes a stand may not ultimately succeed in changing anything. In fact, he may run the risk of losing his job. The church’s task is to make sure that he does not bear that risk alone. As Lesslie Newbigin writes, fellow Christians should stand ready to support those who speak the truth to power and pay a price for it, even providing financial assistance to those whose moral courage costs them their livelihood.

We must never forget that going along with unbiblical practices is not only wrong, it is unloving. Acquiescing in an unjust situation typically stems not from love but from fear of possible negative repercussions. If we aspire to a godly, holy love for others, we must be willing to take the risk and practice loving confrontation.

- Nancy R. Pearcey, Total Truth: Liberating Christianity from Its Cultural Captivity, 2004.

Leadership vs. Management: It’s All About Intent

The leadership vs. management question is answered when we look at the intent behind both terms. When we take the lead, we are:

• At the front, showing the way.
• Doing new things – going to places where nobody has gone before.
• Making change, instead of keeping things the same.

When we manage, we:

• Make sure everything is under control.
• Want to see stability and reduced risk.
• Look at metrics to monitor and measure success.

Leading is about putting ourselves out there and carving a path. Management is more transactional, about stability, smooth operations and cutting out risk.

excerpt from: https://www.thoughtfulleader.com/leadership-vs-management/