Forty-five years ago next week, a tiny four-store hardware chain in Atlanta completed a very unlikely IPO. Desperate for capital to expand, the company turned to the public stock market in a last-ditch effort to raise funds after exhausting its loan capacity.

Even in 1981 when IPOs were smaller than today, this was an unusual move for such a modest enterprise. It was possible only because a well-connected investment banker, Ken Langone, happened to be a nonexecutive co-founder and a member of the company's board of directors. Langone had such faith in the young company's prospects that he called in some favors on Wall Street, and Bear Stearns reluctantly agreed to take on the piddly $6 million planned offering.

Demand for the IPO was thin, and one week before IPO, Bear called the company and said they'd be unable to raise the funds. Langone managed to save the deal with further strong-arming, but only at a reduced offering size. Bear's equity sales force finally took the deal out on Sept. 22, 1981, raising only $4 million at an initial market capitalization of less than $40 million.

What no one-not even Ken Langone in his wildest dreams-could have foreseen is that this small hardware company, the Home Depot, would go on to generate the highest total return of any U.S. stock in the next 45 years. If you had invested $1,000 in Home Depot on the day of its IPO, that $1,000 (with dividends reinvested) would be worth roughly $16 million today-a greater total return than what you could have made from investing in any other stock in the S&P 500 on any day since.

In fact, it's not even particularly close-at least compared with the technology giants that we often think of as having generated the majority of the stock market's returns. For comparison, a $1,000 investment in Apple Computer's IPO less than a year earlier would only be worth about $4 million today.

Now, like us, you might wonder how on earth a hardware store has returned more than any of the "Magnificent Seven" technology stocks like Apple or Microsoft, when Home Depot's roughly $300 billion market capitalization is about one-tenth the average "Mag 7" valuation. You might not have noticed this-Home Depot's stock hasn't done much for the last five years as tech has boomed.

Part of the answer, of course, is that Home Depot started its public market compounding journey at a much lower base. By comparison, Apple's market cap at IPO was over $1 billion.

But low IPO valuation alone wouldn't have crowned Home Depot the stock market's total return king. After all, small IPOs usually reflect businesses with small potential. Home Depot took a niche, specialty retail idea and somehow turned it into a $300 billion market cap behemoth that today does about $165 billion in annual sales. That's more than half of Costco's revenue and 75% of Costco's market cap...selling just one category of goods! Investors' low valuation of Home Depot at its IPO was based on the solid reasoning that a specialty retailer could only grow so large. Walmart by 1981 was already a Wall Street darling valued at over $1 billion, but its promise was selling everything to everyone.

As we learned while studying the company for our latest "Acquired" podcast episode, Home Depot defied that ceiling via a clever set of interlocking business strategies that relied, in part, on the growth of the stock price itself.

Home Depot's other founding partners-Bernie Marcus, Arthur Blank and Pat Farrah-realized that hardware wasn't like other specialty retail categories. Customers didn't inherently desire power saws and stacks of lumber. They wanted a new deck, and the savings and satisfaction that came from building it themselves. Successful completion of one project often led customers to tackle bigger projects, and it was all turbocharged by the country's large and aging housing stock.

Based on this insight, Home Depot radically reimagined the business they were in: moving from one-time hardware sales to a continuing home-improvement relationship. Once customers trusted Home Depot as their partner to accomplish projects, there was almost no limit on how much they could spend in their lifetimes. A Costco customer can only buy so many mixed nuts, but a $5 screwdriver sale at Home Depot could-and often did-one day lead to a $100,000 remodel project, or several.

Home Depot's co-founders realized that the key to creating the potentially massive home-improvement market was customer education. In the days before the internet, DIY homeowners could buy tools but often had no way of learning how to tackle projects. Home Depot devised a strategy of hiring former professional tradespeople en masse-carpenters, plumbers, electricians-to staff stores as their salespeople. Customers could ask how-to questions, and employees were expected to stop whatever they were doing, get out tools and show customers how to build their projects.

Motivating former tradespeople to spend their days teaching neophytes how to tile a bathroom (while also stocking shelves and working registers) sounds like a tall order. This is where the growing stock price came in.

From its earliest days, Home Depot distributed equity widely into the hands of its store employees, a radical idea in retail that the founders borrowed from Sam Walton and Walmart. But Home Depot went a step further: the company trained its associates that time spent with customers on the store floors would lead to increased sales growth, which would lead to the stock price going up...which in turn could make them rich.

Home improvement has the rare characteristic in retail where a customer's appetite and spending are limitless, and a knowledgeable salesperson can instill confidence in customers to tackle larger-and bigger budget-projects. This was embodied in the company's longtime slogan: You can do it. We can help.

This equity flywheel worked extraordinarily well. Frank Blake, Home Depot's CEO from 2007 to 2014, told us that "the best sign of a store's health was seeing the company's stock chart up in the break room."

In this regard, the company's small IPO actually became one of the key factors in its subsequent success. The low valuation offered a lot of running room ahead. An individual store associates' work growing sales really could move the stock price-and their net worth. According to Langone, 3,000 store floor employees became multimillionaires thanks to their Home Depot equity-and their hard work with customers.

Of course, this strategy required rapid growth or the whole machine would fall apart. The expert trade employees would leave if the promise of equity riches went unfulfilled, and stores full of unsold goods could have dragged the company into bankruptcy in its early days. Home Depot's founders bet the company on a retail version of the hypergrowth strategy common in venture-backed tech companies today. And it worked-growth did indeed come.

In 1986, just five years after its public offering, Home Depot passed $1 billion in sales and its stock soared to 10 times the IPO price. Five years after that, sales passed $5 billion, and the company's market capitalization jumped to an incredible $8 billion-up 250x from its debut a decade earlier.

Over the long run, that trajectory continued-right up to the company's $300 billion valuation today.

Acquired's full episode on the history and strategy of The Home Depot is available now in Apple Podcasts, Spotify or any podcast player.