(FORTUNE Magazine) – Successful entrepreneurs, aside from being dauntless and obsessive, are almost by definition inventive people. They conjure gee-whiz technologies, or contrive new business models, or figure out how to pry open new cracks of opportunity in a marketplace. Sometimes they even unleash whole new industries.

Jerry Yang, the freshly scrubbed co-founder of Yahoo, has accomplished all of the above by the ripe old age of 31 and become a billionaire seven times over. In 1994 he and a fellow Stanford graduate student named David Filo cooked up one of the first Internet directory services to help surfers find their way around the Web. Emboldened by its instant popularity, they devised an ingenious business model to transform their hobby into a new kind of media company: one that electronically locates, recycles, organizes, and customizes news, financial data, and specialized information from other providers, and one that--get this--makes money.

Along the way they made Yahoo stand out from the throng of other so-called Web portals, coming up with snappy versions of Internet e-mail and online chat and shopping. Given Yahoo's huge popularity--100 million people browse its offerings monthly--it's no stretch to say that Jerry and Dave's company, as much as any other, fomented the Internet revolution.

But there's another Yang innovation that bears scrutiny, and that's his loose and improvisational approach to the role of founder at a fast-growing Internet company. Neither he nor Filo ever wanted to be the CEO of their creation. Employee No. 6, otherwise known as Tim Koogle, handles that chore. Instead, the founders call themselves Chief Yahoos--the kind of silly title that at first makes us geezers over 40 want to roll our eyes. (Imagine Steve Jobs dubbing himself Big Apple or Larry Ellison parading around as Delphic Oracle. On second thought, don't.)

Both Chief Yahoos say their goal is to build a company that outlives them. For Filo, "Chief Yahoo" mainly entails being the company's technology guru, which is nothing to sniff at. But for the more outgoing and insatiably curious Yang, the title, like Yahoo itself, seems to take on a new dimension every day. Yang is especially adept at helping his company react to whatever opportunities and challenges the restless Internet presents. And that makes him a pretty good case study for other 21st-century entrepreneurs.

"It's a real challenge for companies and entrepreneurs when the founders don't find a meaningful role. The entire company suffers," says John Hennessy, provost of Stanford University, who was a faculty adviser to Yang and Filo in the mid-1990s. (Hennessy knows all about companies and founders; he started his own semiconductor company in the 1980s.) "Jerry has managed to sculpt out a new kind of role for a founder that is as important as Koogle's or anybody else's at Yahoo: He's everything from technical visionary to chief strategist to corporate spokesman and cheerleader to Washington lobbyist to the company's conscience." And Yang is all these things even though only one of the company's 2,000 employees--his administrative assistant--reports to him.

As Yang tells it, he has never really felt qualified to run Yahoo. "People always ask me why I took myself out of the day-to-day operating responsibility," he says. "But that's never what I wanted to do, and besides, I knew so little about business that I didn't want to slow things down when the company began to scale up. And anyway, to me, the broader the role, the more exciting it is. Yahoo is in everything from pets to old people to finance to communications to e-commerce and more, and I really thrive on that." Yang's eclecticism isn't so surprising once you know his background. While he's your classic overachieving immigrant who's really good at math, he's no one-trick geek. Born in Taiwan in 1968, Yang is the older son of parents who had fled mainland China. His father died when he was 2, and from then on his mother, an English professor at a university in Taipei, raised her two sons on her own. She dreaded the thought of their being drafted by the Taiwanese army when they came of age, so she moved the family to the U.S. in 1978 as part of the first wave of Taiwanese immigrants allowed in after the U.S. reestablished diplomatic relations with China. They ended up in San Jose.

"It wasn't an easy decision for my mom," says Yang. "The ability to teach English wasn't exactly a skill that was in short supply in the U.S. So even though she had the language skills to get along here, she didn't have the slightest idea what she would do. She was really brave."

Despite their mom's English proficiency, the only word that Jerry and his brother understood when they arrived on American soil was "shoe." But they were smart kids and still young enough to pick up a language easily. "We got made fun of a lot at first. I didn't even know who the faces were on the paper money," Yang recalls. "But when we had a math quiz in school I'd always blow everyone else away. And by our third year, my brother and I had gone from remedial English to advanced-placement English."

Yang excelled at Piedmont Hills High School, and he wasn't just a nerd either. He was class valedictorian, he played on the tennis team, and he was elected student body president his senior year. On the side he managed to take the equivalent of his freshman-year college course load.

Not surprisingly, he won scholarships to every college he applied to, including UC Berkeley, Stanford, and Cal Tech. He settled on Stanford so that he could remain close to his family, even though he'd have to work part-time to make ends meet. Just as important, Stanford was the only one of the three that didn't require him to pick a major during freshman year. "I thought I wanted to be an electrical engineer, which I turned out to be," he says. "But I was always curious about other things too, and what if I got interested in history or the law?" Or, for that matter, business...

Yang kept up his breakneck academic pace at Stanford. In four years he completed not only his BS in electrical engineering but a master's degree as well. All the while he juggled on-campus jobs, including a stint as a book sorter and shelver in the university library. "That's where I first learned about how systematically information was categorized--you know, the Dewey decimal system and all that," says Yang.

Indeed, if Jerry has a hallmark, it's that he gleans something useful from just about everything he does. "Like all the best students, Jerry has channeled his everyday experiences well," says Hennessy, the Stanford provost.

Yang met his future business partner at Stanford in 1989. Filo, who is two years older than Yang, grew up in Louisiana and got his BS from Tulane. Like Yang, he's a sports nut and a whiz at math and engineering. But the two really bonded on a six-month academic exchange program in Japan in 1992.

They went to Japan ostensibly to study, but they spent much of their time soaking up the culture and, well, socializing. In Kyoto, Yang met the woman he would marry, a fellow Stanford student of Japanese parentage who had grown up in Costa Rica. ("When we argue, Akiko says I always have the advantage because English is my second language but it's her third language," he jokes.)

While in Japan, Yang and Filo also got to know Srinija Srinivasan, another Stanford student, who was studying artificial intelligence and information organization. She would later join Yahoo as editor-in-chief. Years afterward Yang and Filo would choose Japan as Yahoo's first foreign outpost. Today Yahoo is the No. 1 portal there, and users in Japanese account for about a fifth of the company's traffic.

When Yang and Filo returned to California, their fellow Ph.D. students were buzzing about Mosaic, new software that permitted browsing of information stored in computers all over the world on something called the World Wide Web. Suddenly a computer was like a window into a whole world of information, and Yang and Filo immediately set out to put it to use. Their first project used Mosaic and some homemade software to collect statistical data on NBA basketball players so that the two could quickly update the performance of an imaginary "rotisserie" basketball team they had put together. Jerry also tried his hand at designing Websites. His first site was dedicated to sumo wrestlers.

By late 1993, both Yang and Filo noticed that, rich and diverse as the World Wide Web was becoming, it was almost impossible for a user to know the breadth of what was actually out there. Academics like them would especially benefit from a directory of research papers at other universities. So the two went to work building software that could organize Internet sites into categories.

Within a few months the site, which initially was called Jerry's Guide to the World Wide Web, was renamed Yahoo and took on a life of its own. (Yahoo was an acronym for "Yet another hierarchical officious oracle.") Yang and Filo found themselves working round the clock, and Stanford's computer infrastructure began to creak under the traffic. In late 1994 university officials asked them to find a company that was willing to host their service, and Yang and Filo finally admitted they were onto something.

"David had it in his gut very early on that Yahoo could ultimately be a consumer interface to the Web rather than simply a search engine or piece of technology," recalls Yang. "We weren't really sure you could make a business out of it though." So, even as they put in 20-plus-hour days working on Yahoo, they still kicked around other ideas, including the notion of selling college textbooks over the Web. This was two years before anybody had ever heard of Amazon.com.

When word got out that Yahoo was looking for a commercial home, executives from what are now MCI WorldCom, AOL, and Netscape came to visit Yang and Filo in their ramshackle offices in a mobile, temporary building on the Stanford campus. Other visitors began showing up too--venture capitalists. The two students began to realize that like it or not, they had already effectively started a business. Another Stanford student named Tim Brady helped the two cobble together a rudimentary business plan, and in March 1995 they incorporated Yahoo. Brady, who is now vice president for production, signed on as employee No. 3. Together they started looking seriously for venture financing.

Recalls Yang: "We weren't so much looking for money as for another partner who could help us with the aspects of the business that we didn't understand and give us skills that we didn't have." The two founders met with more than a half-dozen VCs but settled on Mike Moritz and Sequoia Capital. Why? "Because he seemed to have more soul, and he shared our values," says Jerry. "Like us he's cheap, and he's not a big believer that technology solves everything. But he does believe in the human element and in the art of what we were doing as well as the science." Moritz returns the compliment. "Jerry would be considered an unusual entrepreneur today because he actually wanted to build a company that is really lasting. He's not yet another grotesque Doonesbury caricature of an entrepreneur."

Now Yang and Filo had a million dollars to work with, a VC on board, and an employee. So they hired a headhunter and began interviewing for a boss.

Among the candidates was another Stanford graduate school alumnus, from Seattle, who wasn't even looking for a new job. His name was Tim Koogle, and he ran a $400 million company called Intermec, which made automated data collection and communication gear. Koogle, who was 43 at the time, came to the interview as a favor to the headhunter, who had placed him in a previous job. He met with Yang and Filo in a brewpub in Mountain View on a Sunday evening in June 1995. Let's have Koogle narrate it from here:

"Here were a couple of very smart guys who were genuinely passionate about what they were doing and not in it for the money or the ego or the fame. They also struck me as being well aware of what they didn't know.

"Then there was this thing they'd built called Yahoo. And in spite of the fact that they had spent no money on promotion or branding, it was getting what we call strong organic takeup--people were finding it and using it, and telling their friends about it. Whenever you see something like that, it usually indicates that it's something people really, really want."

Needless to say, Koogle took the job, in a decision that wound up making him a billionaire.

Fast-forward five years to the present. Yang, Filo, and Koogle have broadened Yahoo's palette of interactive information services far beyond that of a mere directory. More important, they've tweaked their business model into one of the most profitable on the Web. Like most traditional media companies, Yahoo makes the bulk of its revenues from advertising, in this case the banner and button ads that decorate the margins of a typical Web page. Yahoo's secret sauce, if you will, is that it can closely target those ads to the user's particular interests simply by observing a person's Web-surfing patterns. Plus, Yahoo can measure the effectiveness of a particular ad--namely, whether a Web user clicks on it--something advertisers are willing to pay extra for.

But it's the numbers that really tell the story. Yahoo has a market capitalization of more than $70 billion. Yang and Filo are each worth over $7.5 billion, and Koogle's 2% stake clocks in above $1.3 billion. In 1999 revenues more than doubled to $588.6 million, and the company posted a profit of $61.1 million. Yahoo has planted local operations in 15 countries and has five times as many regular visitors as AOL has subscribers. Not bad for a company that started out as a hobby.

Yang doesn't much like to talk about the stock price or his mind-boggling wealth. Filo is less shy: "Many of us around here really don't buy these market valuations. To us the market valuation of Yahoo has always been ahead of where we thought it really ought to be. On the other hand, it's been a huge motivator."

Indeed, that's the main reason Yang and Filo are still on the job. Filo continues to do more or less what he has always done, which in many instances amounts to being the brakeman on the train. Some of his business cards sport the title "Cheap Yahoo," and he is the official keeper of Yahoo's production values--making sure that Web pages are available round the clock, and that they pop onto the screen almost immediately.

Yang, who takes a more active role than Filo in pushing Yahoo into new realms, has a conservative streak too. Says Filo: "Jerry isn't the happy-go-lucky guy he sometimes appears to be. He can be pessimistic like me. We're always trying to figure out what we could do better."

John Hennessy puts it differently: "Jerry doesn't think of himself as a businessman trying to exploit this new Internet community. He still thinks of himself as being a citizen of the Internet and makes sure the management team runs the company according to the Golden Rule, so to speak."

Yang just shrugs his shoulders when asked how it feels to be the founder of what has become an icon of the Internet age. "Maybe in a few years we'll be better at this, but at the moment it's really hard for us to objectively evaluate ourselves. I'm very afraid to have Yahoo placed in a historical context this soon, because I don't think we've done it yet. The Yahoo story is still being written."

At the end of this chapter, at least, it has been the moral force of Yang and Filo's willingness to share power that, more than anything else, has set the tone for the place. Because they have relied so heavily on Tim Koogle, Mike Moritz, and Jeff Mallett (the president and COO) almost from the beginning, no single person can claim authorship of the Yahoo phenomenon, not even Yang. And that's the way he likes it.