Earlier quoted context omitted.
I think you're right that there is an arbitrariness to this algorithm, and there are other ways of normalizing your data. And you could probably build entire new branches of statistics off of them (like non Euclidean geometry), and they'd probably even be better in some way. But, you'd be speaking a different language from everybody else. Speaking of language, have you ever thought about how all names and grammatical…
No, standard deviation is special. If you have a large enough amount of independent distributions which gets averaged or added in some way, then the only thing which matters are their standard deviations and average values for what the final distribution looks like.
My larger point is that, something can be arbitrary and still be meaningful. If people agree on a common meaning, it formalizes a communication protocol that allows for much better information sharing.