Looking For 100 Baggers? Invest In The Innovation Culture.
There is only one way to become a 100 bagger: Innovation. And innovation is not a one man show.
Aswath Damodaran makes a very clear definition of investing that I love: It’s neither an art nor a science, it’s a discipline.
As with every discipline, investing has its own myths, idols and trophies.
Arguably, the pinnacle of investing is finding 100 baggers, stocks that make 100x after you invest. Anybody who invests in one of them is likely a very good investor and those who can find several are considered masters.
Indeed, investing in a hundred baggers isn’t something you can do by luck.
You have to identify the right company.
You must be tolerant of blunders on the way.
You have to patiently wait, sometimes for decades.
Appeal of the concept is undeniable. There are books written around this concept:
All to help you find 100 baggers.
These companies are rare. To be clear, less than 1% of the public companies can grow revenues 10% consistently for more than 10 years. And doing it for 10 years is not enough to become a 100 bagger.
This is why most 100 baggers tend to be well known companies: Apple, Microsoft, Amazon, Nvidia, Google, Meta, AMD, Walmart, Costco etc… It’s like a celebrity status in corporate life. If you are one of them, you tend to be famous.
Naturally, the question everybody is asking is “What makes 100-baggers?”
I think one of the best explanations on the topic comes from Mohnish Pabrai.
Though he uses a different term for such companies: Spawners.
For him, spawners are the companies that get into business lines where they don’t have competence but gain competence over time and succeed.
By definition, those companies are innovators. Getting into new lines of business and outperforming the incumbents requires innovation. You have to either bring something new to the market or do the same thing in a new, better way. Both are innovations.
Naturally, spawners, or 100-baggers, tend to be the most innovative companies.
How can a company be so innovative?
Answers to this question gives us the best blueprint to spot potential 100-baggers. This is what I am going to discuss here. I will draw on the examples from some of the most innovative companies and try to explain what it takes to become “innovative.”
It’s also really important in terms of evaluating the management and this will also, to some extent, answer the question that I occasionally receive: “What is good management?”
Innovation Starts With The Founder
It should be easy right?
Just look at one of the popular books about innovative people, Walter Isaacson’s “Innovators.”
You see Steve Jobs and Bill Gates on the cover and you immediately get the message that innovation is something driven by extremely talented individuals. “Geniuses” we may call them.
This is both true and gravely false.
It’s true that some individuals have exerted more influence in the history of innovation than others. Edison is one of the first people that come to mind. It’s impossible to explain that Apple was a magical company when Steve Jobs was there, lost it when he got fired and gained it back when he returned.
Yes, some people are asymmetrically important in driving innovation.
Edison invented the light bulb by himself, Tesla invented the first remote control and Graham-Bell invented the telephone.
Steve Jobs, on the other hand, invented none of Apple’s products, he didn’t know how to code and his knowledge of hardware engineering was no more than an engineering sophomore. Yet, until his death, Apple came up with the most innovative products.
Because he dared to think big.
When Steve Wozniak showed him the hobby computer he put together, he dared to think it could be commercialized. When he saw graphic interfaces in Xerox Parc, he thought Apple could do it better and commercialize it; he believed he could convince music distributors to sell their catalogue on iTunes; he dared to think people would leave the keyboard phones and use their fingers…
He dared to think…And he did it so passionately that made other people believe in it and tirelessly work to materialize those projects.
He dared because he knew that everything around us that we call “life” was made up by people that were no smarter than us:
In the same way, Larry Page and Sergey Brin imagined that they could catalogue all the web by using backlinks; Jeff Bezos imagined that he could create an online store that would sell anything and everything; Jensen Huang believed that GPUs would become increasingly popular, Elon believed that electric cars would be mainstream etc…
And they executed on that vision, they burnt the first fire. They are outsiders and rare visionaries but none of them were visionary enough to create all the products of their companies.
They set out the roadmap for the early success of their companies. But those early successes are dwarfed by what those companies have become now. Amazon’s e-commerce business is dwarfed by its cloud business.
Jeff Bezos’ vision for “everything store” was largely fulfilled in 2006; Sergey and Larry didn’t create Chrome or Youtube, Jensen didn’t envision parallel computing will be the backbone of AI, Steve Jobs didn’t invent the iPhone. No, but they did something else.
They envisioned that a collection of intelligent and hardworking people, if provided with opportunity and the right environment, could create a constant stream of innovative products. We call this “the culture of innovation.”
They entrenched the culture of innovative thinking in their organizations.
Culture Makes Innovation Transcend
Being a visionary and actually coming up with ideas are two different things.
You can only come up with so many great ideas and have time to personally implement them. Vision, on the other hand, is by definition self perpetuating. If you are a visionary, you can’t stop envisioning things because it’s not a visionary action.
This is why most visionaries keep going.
In 2004, Jeff Bezos had largely fulfilled his vision for an everything store. Amazon was the largest e-commerce website with the biggest collection on earth. He was a billionaire and he had every right to spend more time with his family. Yet, he kept going.
2004 was also the year Google became public. It surpassed Amazon in market cap in weeks of becoming public despite Amazon’s larger revenues and way longer track record. It was because Amazon was largely a stepson of the internet era.
Outsiders saw it as a tech company because it had “.com” in its name and it was operating online without any physical stores. However, to tech insiders, Amazon was just a retailer, an online one. They weren’t wrong. Amazon had pouched Walmart executives to build its retail operations. Amazon marketplace had largely risen on their shoulders.
In 2004, Jeff Bezos knew Amazon had to become a real “tech company” if it wanted to keep thriving. Why would it need to thrive? Amazon was already big and Jeff had everything? Because Jeff was a visionary and not wanting that would be contrary to this.
He just didn’t know how to do that. He was away from the playground for a long time and he didn’t know what was happening on the edge. He couldn’t invent his way to become a tech company by himself.
He didn’t need to. He had cultivated an innovative environment within Amazon from the first day:
Employees solving a problem that wasn’t their job were getting rewarded.
He created an “employee suggestion system” that executives had to take seriously without regard to the role or seniority of an employee that generated the idea.
Employees whose ideas were considered worth trying were often charged with heading or co-heading the projects.
Here is an internal slide from an orientation program of Amazon’s new hires:
This is how beloved “Amazon Prime” came into existence.
In 2004, an Amazon employee named Charlie Ward dropped in the suggestion system the idea of offering 2-day free shipping to customers in exchange of an annual membership fee. All executives hated the idea, except one: Jeff Bezos himself.
Executives were concerned that such an offer could deepen the losses that Amazon incurred every time it sent an expedited shipment. But Bezos picked it up immediately, he reasoned that:
Price could be adjusted to avoid loss.
Prime members would buy more to justify the membership fee.
As Amazon’s fulfillment network grew, expedited shipping wouldn’t be that costly.
Amazon Prime debuted in February 2025 at an annual membership cost of $79.
People flocked to the Prime. Putting an order and somehow getting it magically revealed at their doorstep two days later gave them an instant dopamine boost. They became Amazon addicts. Bezos proved right. Prime members spend nearly twice as much as the regular members. Once people bought the membership, they were spending the rest of the year trying to justify it.
Amazon had created itself an online subscription business, its first step to become a real “tech” company. But that wasn’t enough.
What turned Amazon into a real technology business, its cloud business, was also a result of an entrenched culture of innovation.
As Amazon was increasingly getting discounted by the investors as just a “retailer”, Bezos constantly pressured Amazon employees to come up with new ideas. He liked to say “there is only one way out of this predicament, it’s to invent our way out.”
This was an important milestone in entrenching the culture of innovation in the corporate fabric of Amazon.
In 2002, Web evangelist Tim O’Reilly met with Jeff Bezos and raised the importance of Amazon’s becoming a “platform” not an isolated address on the Web. He told Bezos that Amazon could unlock a whole new set of opportunities by allowing third party developers to use some of its services such as allowing them to access its catalog and price data and also payment infrastructure.
Bezos liked the idea. He tasked Amazon's engineering department with developing a set of Application Programming Interfaces (APIs) for the use of outside developers. The service was named “Amazon Web Services (AWS).”
The service was nothing like today’s Amazon nor they imagined that it would evolve into today’s cloud giant. No, they just took the serendipitous way of innovation and it evolved by itself.
Roughly at the same time, incentives for innovation and pressure to come up with new ideas peaked within Amazon. However, there was a problem: Amazon’s technical team had the sole control over Amazon’s servers and it was strictly monitoring who had access. This significantly slowed down the innovation process because teams that wanted to experiment couldn’t get required resources like storage and compute power.
Engineer named Chris Brown elevated this issue through Amazon’s internal suggestion system. It reached all the way to Jeff Bezos for whom such a thing was unacceptable. Amazon started to seek out ways to provide its engineers with resources they could use to innovate and create new products.
Chris Pinkham, Amazon’s IT Infrastructure Manager, took Chris Brown with him and they started to develop something called Elastic Compute Cloud, that allowed developers to use compute power in Amazon’s servers. This is what became the core of “Amazon Cloud” as we know it today.
If you follow the flow of events, you clearly see that it’s not a one man show.
It started with a visionary CEO.
He wanted the company to go beyond his vision.
He took suggestions and complaints seriously and wanted to solve them.
What’s the most important thing in this process is the fact that an employee suggestion could find its way all the way to the billionaire CEO at the helm and he took them seriously.
They didn’t know the journey that started with developing APIs would conclude in developing cloud computing. They only arrived at that point because employees came up with new ideas and they only did that because they knew an idea could reach all the way to the CEO and he would take them seriously and reward those who generated it.
If you look at the broader picture, you’ll see that this is not Amazon’s story, this is the story of all innovative big tech companies.
Steve Jobs had the initial vision of personalizing computers but that vision had already been fulfilled by the late 1990s. Next big product of Apple, the iPod was another man’s idea: Tony Fadell.
He was a former employee in General Magic and Philips and he wanted to make a better MP3 player. He was turned away by Philips and RealNetworks, but Apple accepted.
What is remarkable in Tony Fadell’s above interview is one thing: Steve Jobs promised him that they would put every marketing dollar they had behind the product and he lived up to that promise.
This wasn’t his idea, this wasn’t Apple’s core competence and yet he supported it.
Same thing happened with the iPhone.
The idea of Apple Phone came from an Apple engineer named Jean Marie Hullot, who had previously worked with Jobs in Next.
Jobs was against the idea in the first place, but Hullot convinced him.
This is what’s important. Hullot could do this only because he knew that if the idea was great and he fought for it, he could get it accepted. He knew that opportunity was there.
Jobs himself points out to this fact. He says Apple is organized like a startup:
Was it different in Google?
Hell no.
When it became public in 2004, Google had already fulfilled the initial vision of its founders, cataloguing the web. But they simply didn’t want Google to stagnate.
They created a program called “side project time.”
They urged employees to use 20% of their work time to work on their side projects. Google Maps was a result of one of those side projects by an employee named Sundar Pichai.
Reward? He was then appointed to oversee critical Google projects like Chrome and Gmail.
The guy is the CEO of the company now.
Conclusion
No matter how good the initial idea is, what makes public companies to become 100 baggers is the consistent innovation for a long period of time.
Investing in this culture is your best chance to find 100 baggers.
Balance sheet won’t tell you anything about it. Past performance won’t be a good indicator. Most visionaries come up with only a few exceptional ideas and you can’t rely on them for decades of innovation.
But some of these visionaries also entrench the culture of innovation in their companies.
How can you find such companies? It’s hard.
There are few things that come to my mind:
Read books about founders and great companies.
Look at the decision making processes. Decentralized decision making is more conducive to innovation.
Look at the product iteration cycle. How fast do they come up with new products and new versions?
Is there a good reward structure? Was the new CEO transferred from other companies or was he promoted from within the internal innovators who oversaw introduction of new successful products?
Is it building or acquiring? Most innovative companies have a preference for building new products over acquiring them.
This is not a conclusive list of course. In short, the best thing you can do is to holistically evaluate the innovative culture of the company you are looking at.
100 baggers become 100 baggers because they go above and beyond of the initial vision and one successful product. The most indicative proxy of this ability is the culture of innovation.
Is there a dependable way to find those companies? Freaking impossible.
But you can well advance your chances by being aware of this fact and actively looking for green and red flags.
Fantastic article. Well-researched and nicely written... love the flow. Thanks, Oguz for sharing.. :)
I think there’s a typo as to when Amazon prime debuted (not 2025 February) because it hasn’t happened yet. Great article.