There are two basic ways to create and index. One is price-weighted, which is how the Dow is done, not unlike what Mr Soros said. It's not as straightforward as that these days because of all the splits and whatnot that have taken place (requiring adjustments to be made to the price weighting), but the idea is the same. The other is market cap weighted, which is how the S&P 500 is done.
You can, of course, come up with variations. It just depends on to what end you're working. If you want the index to replicate a portfolio, set it up based on how you'd build that portfolio.