Amazon's (AMZN 0.23%) meteoric rise will be studied in business schools across the globe for decades to come.

There's obviously a number of factors that went into the company's success, like its customer-centric obsession, ability to scale its supply chain, and the genius founder, Jeff Bezos, at its helm.

But there's one less-discussed attribute that is at the heart of Amazon's ascent, and it just might be a key indicator for predicting the next wave of generational companies.

To truly understand this secret ingredient, we need to examine Amazon's origin story. 

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A brief history of Amazon

The company opened its doors in 1995 in Bellevue, Washington, and was quite successful right out the gate. Within a few months, it was selling books in over 40 countries and raking in $80,000 in monthly revenue.

The immediate success coupled with the market's fervor for internet stocks led Bezos to take the company public only two years after its founding -- raising a whopping $58 million. The company used this new capital to expand into selling other products, eventually selling just about anything you could think of.

While the dot-com crash crushed the stock in 2000, the company was still executing well and heavily reinvesting into its logistics network. This led to the launch of two-day shipping with Amazon Prime -- which at the time was mind-blowing for customers and the competition.

In 2007, Amazon did something genius. It recognized that businesses of all sizes, all over the world would likely prefer to rent web servers than to buy and maintain them in-house. This sparked the launch of Amazon's most profitable product, Amazon Web Services (AWS).

Over the next decade, Amazon would go on to start its own streaming service and acquire companies like Whole Foods, Zappos, IMDB, Audible, Alexa, MGM, and Ring, to name a few.

The secret ingredient

Amazon is a story of expansion. The company has continually invested massive amounts of money into new markets and products. And while not all of these worked out (remember the Fire Phone?), Bezos created a culture of risk-taking and embracing failure. For all the products that didn't work, Amazon created AWS.

Enough said.

The investing term for this is "optionality." It's not a metric you will see on any financial statements or something you can model in a discounted cash flow, but it's at the heart of the vast majority of multibaggers. Think of it as the possible number of paths in the company's overall growth story.

Early investors in Amazon could never have predicted that they would one day be owners of the largest cloud computing company in the world. But in listening to the management team's statements and seeing the massive investments they were making, those few early investors who held the stock until now likely knew they were buying something special.

How to recognize optionality

Optionality won't show up on a stock screening. There's no ratio or financial metric that will indicate numerous potential avenues of growth.

But if you listen to the words the leadership team uses at conference calls and in shareholder letters, you can get a sense of the potential future expansion.

The mission statement is a great place to start. Amazon's mission statement for years was to be "Earth's most customer-centric company." It wasn't to sell more books than Barnes and Noble or to be the leader in e-commerce, both if which it accomplished. The company had more ambitious goals than that.

Another indication is failure, oddly enough. High-optionality businesses will inevitably launch products that flop. While Wall Street usually punishes companies for this, smart investors know this is the price of ambition. As seen with Amazon, it only takes a few successful launches to moonshot a company.

A present-day example

One small-cap company today that shows signs of optionality is the language learning platform Duolingo (DUOL 0.06%).

While the company is mainly known for its gamified language learning app, the mission statement is: "To develop the best education in the world and make it universally available."

In its most recent investor presentation, the company expressed this mission as ultimately expanding beyond language learning to offer a plethora of educational products, from reading and writing to mathematics.

CEO Luis von Ahn provided an update on the recent Q2 earnings call: "We already launched Duolingo ABC, which is for literacy. We are going to have a public beta of our Math app later this year, and that's going to happen."

While this doesn't necessarily scream Amazon-level optionality, it shows the company has an ambitious vision for its future and is making investments into new products.

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Investing in optionality requires a long-term focus

Successful long-term investing requires patience, that's undeniable. But it also requires an ability to see where a company is headed even if the market has written it off in the short term.

Today's market environment feels eerily similar to the dot-com bubble when Amazon's stock lost 95% of its value. But investors who were able to separate the company from the stock, and see where the company was headed -- not where it was -- had their lives changed by the resulting wealth creation.

There will be beaten-down companies today that do the same for patient investors. This is the value optionality brings to investing.