(FORTUNE Magazine) – It is 7 A.M., and Richard Branson has been hard at work for 2 1/2 hours, though you'd never know it by watching him.

Barefoot, clad in a navy bathing suit, he is lying in a hammock strung up in one corner of the great room of his Necker Island home, open to the West Indies trade winds and looking due west out over the turquoise Caribbean. He has a black composition book in his lap and the tip of a plastic ballpoint pen in his mouth. He is writing a letter to the Financial Times. "Hello," he says, looking up. "Can I get you a cup of tea?"

Already this morning, from his hanging perch, he has scanned a pile of faxes and had several phone conversations in an attempt to resolve a thorny disagreement with his Australian partner, Patrick Corp., over their airline, Virgin Blue. He has begun to mend fences with T-Mobile, a Virgin partner and supplier. The portable phone in his lap rings, and he takes a message. It is Monica, over at the Fat Virgin's Cafe, wanting to know if anybody on the island can share a supply boat today; she's running out of food. He writes the message on the back of his hand so he won't forget.

As he works, the rest of the house--a glorious Balinese structure, open to the ocean on all sides, roofed in Brazilian cedar, and decorated casually with mahogany furniture and Buddhist statues--begins to stir. Branson's wife, Joan, floats in, wrapped in a white-silk sarong. A couple of bleary-eyed teenagers wander through and flop down in front of a big-screen TV at the opposite end of the room; they are friends of Branson's son, Sam, and they have been up most of the night celebrating Sam's 18th birthday. Empty bottles of Red Stripe, Bacardi Limon, and Sour Apple Pucker, along with bits of fluttering crepe paper, disappear into the dustpan of an island caretaker who looks more like a mermaid than a maid. The big screen suddenly comes alive, filling the room with the opening strains of Beauty and the Beast. "Sometimes," Branson says, "I do wake up in the mornings and feel like I've just had the most incredible dream. I've just dreamt my life."

Richard Branson's life is better than a fairy tale. The 53-year-old corporate bad boy was never supposed to end up like this: the master of his universe, directing a $7 billion empire he created from scratch as a teenager, from his hammock in paradise. He is not necessarily the world's greatest businessman, or the most successful. His empire is spread willy-nilly from bridal gowns and cosmetics to airlines and railways; most recently he has jumped into cellphones and consumer electronics. His track record is varied, with home runs in records and airlines and fumbles in retail and rail. He's not the wealthiest businessman around either, although his net worth (estimated by his financial advisors at $2.6 billion) is as hard to pin down as the profitability of many of his companies. His holdings are mostly private, controlled through offshore family trusts. (All told, Virgin Group says it expects worldwide earnings before interest, taxes, depreciation, and amortization to be $600 million this year.)

But if you were able to trade places with any corporate chieftain, wouldn't it be Richard Branson? He simply has the most fun. Branson's greatest business feat, perhaps, has been to engineer a breathtaking life for himself. We're not talking expensive art collections, or memberships at Augusta, or well-appointed apartments, or fancy cars. We're talking about a career that feeds his passions, holds his interest, incorporates his family, allows for his quirks. He loves adventure, and his job provides plenty of it: from his quixotic attempt to save the high-speed Concorde to his dangerous transoceanic hot-air balloon races (he's been rescued four times by helicopter). He has trouble with authority, so the brand he came up with demands that he mock it. He gets bored easily; with Virgin he can constantly reinvent himself. He loves beautiful women, and they are always around. He has an insatiable curiosity, and his job provides the education he was never able to get in a classroom. "I don't think of work as work and play as play. It's all living," Branson says. "I'm living and learning every day--it's like being at a university, studying a course you're really fascinated by. And in between all that, I am surrounded by family and friends."

Underlying it all is an unorthodox circular logic that, in the case of Necker Island, goes something like this: Virgin stands for fun, and that of course justifies owning a Virgin Island. There you can entertain not only your top brass but your kids' friends, your investors, your parents, your pilots--oh, and Bill Gates, if you think you might've ticked him off when you said that Microsoft should be split up. You do this by partying and diving and speedboat racing; sometimes, just for fun, you pull a plug on one of the boats and watch the CEO of your biggest airline begin to sink. When you're not using it, you rent it out to people like Robert De Niro for $22,500 a day. You rent it as well, just like any other paying customer, because if you didn't it would count as a corporate perk, and you'd have to pay taxes on it. And at the end of the year your profits offset your cost.

Necker is the perfect synthesis of work, play, and life that seems to be Branson's underlying business model. "I get up in the morning, and I come into what must be the nicest office in the world. It is a fantastic time for reflection and thinking about things," he says. "I come up with more ideas here than I ever do in the day-to-day running back home." He is almost always up by 5:30. "England has been at work for two or three hours, and Australia is just going to bed. The U.S. is waking up," he says, a twinkle in his eye. "We're quite well positioned here on the time zones."

For someone who was invited to speak at a Microsoft conference, Branson is hilariously low tech. He never uses a computer. He uses his black book and writes all his ideas down in longhand, including the e-mails he will dictate to his secretary. Immediate things to remember--like phone messages--he writes on the back of his hand.

If Sir Richard (he was knighted in 2000) doesn't think like a conventional businessman, it's because he never purported to be one. The outlines of the story are familiar: He was a middle-class British kid with dyslexia who nearly flunked out of one school, was expelled from another, and finally dropped out altogether at age 16 to start a youth-culture magazine called Student that he hoped would one day be Britain's Rolling Stone. (He still lacks a high-school degree.) He never set out to be rich, nor did he ever intend to be a CEO. "I had no interest whatsoever in running a company," Branson says. But he needed to fund his magazine. So he started a mail-order record business. That led to a recording studio and eventually to Virgin Records, and Virgin Atlantic, and so on.

He continues to be a corporate iconoclast, defying conventional wisdom, pushing the envelope, poking fun at the big guys, saying exactly what he thinks and doing exactly what he wants. Which includes foolish publicity stunts like dressing up in a bridal gown to promote his apparel company Virgin Brides and descending into Times Square by crane from atop the Bertelsmann building nearly buck-naked (he was wearing a body stocking) except for a cellphone (see photo on the previous spread). Right now, though, he's not looking so foolish. Virgin--the naughty name he dreamed up in 1969, when he was 19 and living in a drug-infested London commune--has become one of the world's best-known brands. Virgin Atlantic, the niche player that everybody said he was crazy to start from scratch in 1984, has become (along with Southwest Airlines) one of the models for the airline industry. Virgin Atlantic and Branson's two other niche airlines, Brussels-based Virgin Express and Australia-based Virgin Blue, are profitable; Virgin Blue took 30% of Australia's airline business in its first year. Branson is planning to launch a new low-cost regional airline in the U.S. next year.

His goal was never to be the biggest. Branson likes being a disruptor--taking on industries that charge too much (music) or hold consumers hostage (cellular) or treat them badly and bore them to tears (airlines). His goal was never to be the most profitable. Although two of his companies--Virgin Express and the clothing and cosmetics company Victory--are publicly traded, he generally prefers to stay private. (Branson took Virgin Atlantic public in 1986, then private again two years later after its market value fell by half.) He has little interest, most of the time, in delivering a nice, steady earnings stream. As a public company, "you can't suddenly have profits of $400 million one year and minus $300 million the next," he says. But that's exactly what he likes to do: invest profits from one venture in the next, and the next--which, by the way, greatly reduces his tax bill. His offshore trusts allow him to avoid paying capital-gains tax on asset sales as long as he reinvests the proceeds.

So Virgin Group operates like an eclectic venture-capital firm. Branson has mostly majority stakes in its 224 companies, each of which has its own CEO and board of directors. Each board includes at least one member from Branson's seven-man advisory council, a team of bankers, strategists, and accountants who are more or less in constant touch. Each company also has its own set of outside investors and/or joint-venture partners (Singapore Airlines owns about half of Virgin Atlantic; Sprint owns about half of the U.S. cellular business). Some of these companies will go public eventually, in part because his other investors may demand it. That could spell trouble down the road, given Branson's penchant for doing things his way. But he is enough of an opportunist to covet the cash some IPOs would bring: It's fuel to keep him growing and to finance his obsessions, like trying to revive the Concorde, which he regards as an important national symbol. "He's not driven like other people. He's driven to do stuff," says Tom Alexander, a former British Telecom executive who is now head of Virgin's U.K. Mobile. "The money is the byproduct. If it makes money, well, then great, because then he can go off and do more stuff. Doing nothing is not an option. If you've ever been on holiday with him, it's hard work."

Before Sam's birthday festivities begin, Branson wants to get in his morning tennis. He trots down Devil's Hill through the bougainvillea and neckerberry bushes to his clay courts where he is to take on Paul, the tennis pro he has imported from London, and two other bleary-eyed partners. (They appear to be hung over; Branson is not.) Tennis is one of his current passions. He's in the middle of reading Tennis's Strangest Matches: Extraordinary but True Stories From Over a Century of Tennis. He is mulling the creation of an alternative tennis league back in London. Tennis could become a hot game again, he believes, if only it could be less stodgy--you know, ditch the whites, change the ridiculous uptight scoring.

Today, as usual, he plays in his bathing suit. After a couple of wild ball tosses, he decides to serve underhand, and when he takes the set, he says, "I think I'll serve underhand more often." His partners look as though they'd be just as happy to quit after one set, but how can they when Branson's so eager? He doesn't like to work out in a gym; this is how he stays in shape: tennis and swimming and crawling all over this island. He tries to make up for a more harried lifestyle in London by overdoing the sports on Necker.

After the tennis, he begins a day of multitasking. The family gathers in a private knot at one end of the great room so that Sam can open his presents. Branson watches with great amusement as Sam rips open his packages, dons his new gold signet ring, and models his new Ozwald Boateng tuxedo jacket over his Jams. (The gifts were procured by Joan; Branson, who couldn't care less about clothes, was once photographed wearing two shoes that didn't match.) As soon as there is a lull, though, he is back in his hammock, dialing Phil Condit, CEO of Boeing, to see if he can talk him down on the price of his 747s for Virgin Atlantic.

From there the party migrates to neighboring island Jost Van Dyke for an afternoon of bar hopping and catapulting off an anchored catamaran. Branson is conducting an outrageous Halle Berry look-alike contest, grading Sam's girlfriends on a scale of one to ten as they emerge in their bikinis from the surf. When a cellphone rings, it becomes apparent that Branson has not had nearly as many rum-laced bushwhackers as everybody else: He snaps effortlessly back into business mode. ("I hate being out of control," he wrote in his 1998 autobiography, Losing My Virginity, about his one and only acid trip. "I prefer to have a great time and to keep my wits about me.") It is Stephen Murphy on the line, one of his top executives, who sits on the board of Virgin Blue. By the next morning Branson will have a handshake deal with Chris Corrigan, the CEO of Patrick Corp., resolving their dispute over how much Patrick should pay for its stake in Virgin Blue and clearing the way for a public offering. And Branson will not have missed a minute of Sam's birthday.

Despite his well-known eye for the ladies, Branson is devoted to his family. He dotes on his daughter Holly, 21, a graceful and gorgeous medical student whom the British tabloids linked with Prince William a few years back. (They're just friends.) He is endlessly amused by Sam, who, after unsuccessfully lobbying his parents to let him drop out of boarding school to open a nightclub, graduated in June. He is clearly devoted to and dependent on Joan, his wife of 13 years and companion of nearly 30, who has been able to keep the kids on track and mostly out of the public eye, even if she hasn't been able to do much about Branson. (It was Joan who grabbed Branson's hand to keep him from raising it at the Microsoft conference when Bill Gates asked if there was anyone left in the group who doesn't use the Internet.)

It is not clear exactly how much cavorting Branson still does, if any, or how much of his playboy image is really just that: an image. But Joan, like any of Branson's investors and partners, clearly knew what she was getting herself into. The two were married when Holly was 8, after the youngster told them she thought it would be a good idea. When Branson isn't traveling, he's a homebody. He spends winter holidays with the family at Ulusaba, his South African game preserve, and spring break in Majorca at a hotel he used to own. He spends weekends at the family's home in Oxfordshire and weekdays in London. Two months during the summer he's with them at Necker. "I'm always around my kids," he says. "I've seen much, much more of my family because I've always worked at home."

His London executive suite is an overstuffed armchair at one end of his living room in a townhouse on Holland Park that is at once grand and lived in. In the marble entryway and up and down the front hall are strewn pairs of running shoes, Rollerblades, open gym bags, slung shopping bags. Atop a grand piano sits a vase that contains two dozen long-stemmed roses--crispy, dried-up dead. When they are home, Holly and Sam wander in and out with their friends. So do business executives. "You have one call waiting, and Mr. Nomura is here to see you," announces a voice from an intercom on the table in front of Branson's chair. Ever polite, Branson excuses himself to usher in Koichi Nomura, an EVP at All Nippon Airways, right past the sports gear and drooping flowers.

Branson really doesn't care about putting on airs. Dan Schulman, the head of his U.S. cellular business, has bet him an expensive bottle of wine that he will add more customers than his U.K. counterpart, but Branson has no idea what the wine is. (It is a 1982 Bordeaux, Cos d'Estournel.) He owns one car, a Land Rover, but he prefers to take cabs--it's easier. He wears a Breitling watch (both the car and the watch are gifts from their makers) not to show off but because he's fascinated by a tiny pin in its side, which, if pulled, will send out an emergency radio signal that will then summon a rescue helicopter. (It never tells the right time, because he's not sure which pin will set the time and which will call the copter, but he's constantly glancing at it, as if tempted to just pull one and see.) He never has a penny in his pocket, which Holly finds hysterical. "I'm sure it's because he's never figured out how to use a cash machine," she says. "And even if he could," she laughs, "he'd never be able to remember his PIN."

When it comes to spending, "my real extravagance is being able to bring lots of friends on holiday--200 or 300," Branson says. "It's fortunate that I own an airline." It's much more fun than an art collection, and much more practical. It burnishes the aura that helps Branson attract and keep the supporting cast he badly needs to make it all work. There is Joan, of course, and a stable of aides, including Penni Pike, his personal assistant for 30 years, who keep him on track if not on time. There is his advisory team, whose job it is to capture his entrepreneurial ideas and wrestle them into some kind of corporate structure that is both attractive to investors and palatable to him. He's loaded it with guys with who have credible resumes and skills he doesn't have, like Stephen Murphy, a former finance executive at Quaker Oats, Gordon McCallum, a former McKinsey consultant, and Patrick McCall, a former investment banker at UBS Warburg.

Branson is anything but hands-off. On the contrary, he can be obsessively, passionately meddling, as he was the Sunday morning right after the U.K. cellular launch. He called Tom Alexander, the former British Telecom exec, four times between 6 A.M. and 7 A.M. (Branson had listened to the voice recording on the customer-service line, and he thought it "a bit rude." He wanted it changed, and by the end of the hour he had written out what he wanted it to say.) But people like Alexander and Schulman, who was CEO of Priceline.com and head of AT&T's consumer business, deal with that because Branson can be a joy to work for in other ways. What really sets him apart from other CEOs is that he doesn't mind surprises. He thrives on them. Startup problems don't bother him at all. Neither do unforeseen battles. "It's refreshing to work for somebody who wants to say yes instead of always wanting to say no," says Alexander. In fact, Branson is a lot like a kid with a chemistry set, mixing up ingredients to see what happens next.

Branson's appetite for the unexpected, along with his innate opportunism, can turn an ordinary day into a high-wire act. On a morning in July, he is supposed to be down at the London Stock Exchange, or so he thinks, for a 7 A.M. interview with the BBC. He jumps out of the cab and dashes up the stairs of the exchange with his gym bag (which he carries instead of a briefcase) and into the BBC studio. The producer greets him, trying to conceal a look of shock. "Oh, Richard Branson," she says. "What a nice surprise."

After a few minutes it becomes clear that he was really supposed to be down the street at CNBC. "So sorry," he says. He begins to straighten out the mess but discovers he has forgotten his cellphone. He borrows mine, writes "mobile" on the back of his hand as a reminder to have someone give him a new one, and before long he is being interviewed by not one but three networks about Virgin's new upper-class cabins and his battle to save the Concorde. While Branson's on television, I answer the cell and take messages for him.

Now he is running very late. He must catch a train that will take him to Gatwick airport, where he is to star in a Virgin Atlantic press conference that begins at 10 A.M. We jump into a cab and are heading for Victoria Station when suddenly it occurs to him that he has no money. "I'm terribly sorry," he says. "I may need to borrow some."

That causes the cabdriver to whirl clear around and take a closer look. "It's Sir Richard, isn't it? Did you say you needed to borrow some money?"

"Yes," quips Branson. "It's terribly hard being a billionaire."

"How goes it with the empire?" the driver asks. Replies Branson: "Oh, the empire is fighting back."

He arrives at the ticket counter the moment the train pulls in, grabbing a cellphone that one of his assistants has arranged to have handed to him as he steps aboard. He arrives at his hangar at Gatwick just in time to jump onstage, amid pyrotechnics, and uses an electric chainsaw to slice through the upper-class airline seat of archrival British Airways.

Branson is getting a little more ambivalent about the publicity stunts. There's always a danger that one could backfire, that he could go a step too far. He worked hard to tone up and lose weight last year for his cellphone drop into Times Square. "There's something inside me that says I don't really need to be doing these things anymore," he concedes. He sometimes wishes he could groom Sam for the role. "It would be a bit more appropriate for a handsome 18-year-old to be launching some of these products than for a 53-year-old," he says.

But he's created a monster. "All Richard has to do is to sneeze, and he's all over the front page," says one of his executives. It's true. And that's largely how Virgin has been able to build its brand on a shoestring. He can count on getting his letters to the Financial Times published. He can pick up the phone and get through to Bill Clinton, or Phil Condit, or Stelios Haji-Ioannou, the founder of easyJet, another low-cost European airline, as he did on Necker, to find out how much he has to pay Phil Condit for his airplanes. Branson's high profile "makes it that much easier to conduct my business," he says. "Can I really say, Well, I'm all grown up now, I don't want to do that anymore?"

The conventional wisdom in his family is that he will never retire. "Never," says his mother, Eve Branson. "Not ever." Indeed, a glance at Branson's black book shows that after three full decades, he is still as energetic, peripatetic, and fully engaged as ever. The current diary (he began keeping them when he was 16) begins in March, and it includes every brainstorm, every business conversation, every meaningful valuation of any business deal, any substantive conversation he has had with his advisors, his investment bankers, his partners. It includes musings about a possible new cellular company in Canada, a low-cost airline in Japan, and another transatlantic balloon race. He has filled page after page with his exhaustive efforts to get his hands on the Concorde--details of talks with Airbus executives, former Concorde pilots, and engineers--and he is clearly irked that he won't succeed.

But the book also includes the following: "Michael Jackson wanted to come [to Necker] next week." And several days later: "Nicole Kidman said she'd love to play tennis." It includes a letter he has penned to Nelson Mandela, urging him to do something about the war in Iraq. There is a quote from Joan: "Extremism in the pursuit of excellence is not a vice." Woven in are amusing stories ... Why did the British immigration lady check his passport, when it was so obvious she knew who he was? "We wanted to know your age," she tells him. Holly has been to Prince William's 21st birthday party, where there was an enormous elephant made of ice, with straight vodka pouring from its trunk. As Holly leaned forward, mouth open, to taste the vodka, she caught a glimpse of the Queen, surveying the scene with a disparaging look on her face.

In some later entries he muses about possible promotional schemes. Can we sell a side of an airplane to Viagra, he wonders.

If you happen to be Richard Branson, it's all in a day's work.

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