Of All That He Sells, He Sells Himself Best By GERALDINE FABRIKANT

　　Published: June 1, 1997 WEST WITTERING, England― ON a recent blustery Saturday, a scruffy-looking Englishman and a small group of guests climbed aboard two giant hot-air balloons in the southern English countryside. As the winds pushed the balloons above fields of muted green, the host waved from the gondola to throngs of spectators below. An hour later, the balloons touched down with a thud near an old graveyard. The balloonist stepped out -- to be mobbed by children pleading for autographs. A rock star? A sports hero? No, it was Richard Branson, the billionaire owner of Virgin Atlantic Airways and one of the few entrepreneurs in the world famous enough to leave crowds gaping. And Mr. Branson, who stuttered from shyness as a young man, gloried in the adulation. In a nation that disdains ostentation and prides itself on its stiff-upper-lip reserve, Mr. Branson is an anomaly. The 46-year-old high-school dropout is practically a one-man publicity circus, embarking on headline-grabbing balloon trips, hamming it up in wedding dresses and other costumes, and emblazoning the Virgin name on everything from planes and trains to blue jeans and lipstick to promote his businesses. And far from disapproving, his fellow Britons love him for his grandstanding. When the BBC Radio asked 1,200 people who they thought would be most qualified to rewrite the Ten Commandments, Mr. Branson came in fourth, after Mother Teresa, the Pope and the Archbishop of Canterbury. And an Evening Standard survey on who ought to be mayor, if London had one, made him the winner by a landslide. What the public rarely glimpses underneath all the bonhomie is a man who watches every penny. Even his famous balloon trips are paid for mostly by others. And he knows how to turn failure to his advantage, gaining invaluable publicity, for example, even when the balloon that is supposed to carry him around the globe crashes ingloriously in some remote desert. Clearly, Mr. Branson has found the right mix of bravura and boyish effusiveness to charm his way into British hearts. Now, he is using his hard-won celebrity to cajole his way into their investment portfolios. Two years ago, he began an index fund intended to track the Financial Times All-Share Index of about 900 stocks. Indexing, a money-management approach that eliminates the need for stock picking and reduces management costs, appealed to the miser in him. Though similar index funds were already on the market, ''the existing funds were not properly promoted,'' he said in an interview at his sister's home here, on the southern English coast. He was convinced that the fees and sales charges of the existing funds were too high and that the Virgin name would attract a new group of investors. ''I thought I could set up a business and bring other people into an area they did not know anything about,'' said Mr. Branson, ever the marketer. And so he has. Small investors, in particular, have been drawn to his no-load financial company, called Virgin Direct, which handled $1.3 billion in two funds at last count. Modest even in the British market, Virgin Direct would be dwarfed by the Vanguard Index 500 fund, which has more than $30 billion in assets and has been the fastest-growing fund in the United States. Paul Barnes, a spokesman for Micropal, a fund tracking company in London, said that having established itself as a serious competitor in the financial arena, Virgin is ''now moving into pensions, insurance and other products.'' And with Mr. Branson at the helm, is anyone betting that Virgin might not swell someday into a major financial services company? Except for relatively small personal investments in the index funds, Mr. Branson says, he avoids the stock market because he thinks he can do better plowing his own money back into his own Virgin empire, which now counts more than 200 companies with annual sales of about $2.5 billion, according to The Sunday Times of London. Only once did he consider buying individual shares -- in oil companies, ''so that if oil prices went up, it would compensate us for the use of oil in our planes.'' -- but in the end, he thought better of the idea. For the most part, Mr. Branson sidesteps questions about his finances, citing a desire for privacy. Although he doesn't have a conventional investment portfolio, he may not need one, since 99 percent of his wealth is tied up in his companies. After selling one of his most prized possessions, Virgin Records, to Thorn EMI for $1 billion in 1992, Mr. Branson placed a chunk of the proceeds with money managers, but quickly became dissatisfied with the results and the hefty fees. ''If you can give me a list of people who have outperformed the stock market over 20 years, obviously I will consider them,'' he said. ''On paper, it actually looks like they have done well. But then you take their charges into account. They will never mention there is a big spread off the top that takes 5 percent straight away. There is a management fee that they charge every time they buy and sell the shares, and they can buy and sell them as many times as they want through the year, and so on and so on.'' SO, with Ron Gormley, a former leveraged-buyout specialist, Mr. Branson started the Virgin U.K. Index Tracking fund in May 1995 and put $15 million of his own money into it. Britons have followed his lead, making the fund the second-biggest index-style fund in Britain. But are they embracing its lack of sales commissions, or flocking to Mr. Branson, who promoted the direct-sales company by appearing in television commercials? Ann McMeehan, a spokeswoman for the Association of Unit Trusts and Investment Funds in England, favors the latter interpretation. ''Richard Branson is the antithesis of the City gent,'' Ms. McMeehan said. ''He is not someone one would typically associate with things financial, so he breaks the mold. He is attractive to the man in the street.'' Notably, Virgin Direct is farming out the money management to experts. What it is doing is marketing and selling. The 1984 start-up of Virgin Atlantic followed a similar approach. Mr. Branson began the airline out of exasperation with the boredom of traveling and with a conviction that he could compete by offering to entertain passengers. ''If I am invited for the weekend, I don't want to sit facing a blank wall for 10 hours and have a bit of chicken dumped in my lap,'' Mr. Branson said. By the same token, he reasoned, travelers would stampede to an airline that offered relief from the tedium of sitting in a cramped seat with only one film during the flight. Initially, the only lure was a lower fare. But by 1988, the airline provided economy-class travelers individual video machines. A year later, business-class passengers got free manicures and massages. Mr. Branson's flamboyant persona lets him delve into activities that more conservative investors might shy away from. In 1981, he bought London's biggest gay nightclub, Heaven, for $750,000, and it remains popular to this day. Often, he says, he gets ideas for new businesses from ordinary people. After a flight attendant mentioned on a London-to-New York flight what trouble she had shopping for her wedding, he decided to open a one-stop mart called Virgin Brides. Ever the showman, Mr. Branson appeared at the opening of his first store in London last year dressed as a bride, a stunt that was splashed across the front page of several London newspapers. Some people say Mr. Branson's antics sometimes get out of control. A legendary party animal, he has been known to pour ice down a woman's back, lift her up and turn her upside-down -- sometimes against her will. After he tried that with Ivana Trump, he recalled, she spent the rest of the evening chatting up his rival, Lord King, the chairman of British Airways. In one lawsuit, filed last year in Federal District Court in New York City, a former employee, Elizabeth Hlinko, accused Mr. Branson of fondling her during a press party in 1994 at his home. Mr. Branson, who has been married to his second wife, Joan Templeman, since 1989, denies the accusation. ''Hopefully, the charges will get chucked out and never get to court,'' he said. WHETHER or not he goes to extremes, Mr. Branson cultivates the image of a fun-loving man-about-town, not a businessman focused on building his fortune. To hear him tell it, getting rich is not the point of amassing businesses. Having fun, calling his own shots and pursuing his own dreams is. ''I never started out to make money,'' he said as his 12-year-old son, Sam, and several nephews donned wet suits and waded into the ice-cold Atlantic outside his sister's home. ''I have gone into projects out of a personal belief that we can so do something special that we can be proud of. Successful entrepreneurs never cost out a project. They have a vision that something is not being done properly and they can do it better.'' The relaxed image that Mr. Branson tries to project is reflected in his clothing. When not wearing a long, white satin dress, he appears in casual attire even for major business events. For example, he wore a casual shirt and sport jacket for a debate on Cable News Network with an American Airlines executive. In a lively performance that contrasted with the tedium of many of his prepared speeches, Mr. Branson clearly got the best of his opponent in arguing against a route-sharing plan of American and British Airways. The sartorial simplicity is a carefully calculated effort to convey the image of the common man who just happens to be worth $2.76 billion. In a country where being chauffeured in a Jaguar is de rigueur among the very rich, Mr. Branson zips around London in taxis because, he says, ''I don't like to keep people waiting,'' not even chauffeurs. (He recently made an exception for a reporter, keeping her waiting for two hours while he attended to an unforeseen task.) To be sure, Mr. Branson's fondness for taxis might also be a manifestation of his frugality. For years, he lived relatively inexpensively on a houseboat in the Thames. Only when his growing family -- in addition to Sam, he has a daughter Holly, 15 -- put pressure on him to find ampler quarters did he move to a town house in the fashionable Holland Park section of London. Initially, his home served as company headquarters, but Virgin's offices have since moved to an adjacent building, where he works in an informal office that looks more like a living room than a corporate lair, and where Sam sometimes sprawls out on school holidays. Despite his free-wheeling style, Mr. Branson is far less impulsive about taking risks than it may seem. In starting Virgin Airways 13 years ago, he was keenly aware that a predecessor in the upstart airline business, Freddie Laker, had overextended himself financially. So he leased a single plane from Boeing in a deal that allowed him to walk away from the venture if it faltered. He even managed to lay off much of the cost of his daredevil attempts to cross the Atlantic and the Pacific with balloons, adventures that gave his Virgin empire millions of dollars' worth of free publicity. ''Generally speaking, because the profiles of the trips are so high, we can find sponsors if we want them,'' he said. ''We can sell the space on the balloons for some millions of dollars more than it actually costs us.'' Benfields, a large British insurance company, for example, helped to underwrite the last voyage. To be sure, Mr. Branson likes to affect an absent-minded disregard for money. He often goes out without cash in his pocket. ''Well, I don't get the weekly paycheck and stuff the money in my pocket,'' he said. And he pointedly refused to consider a prenuptial agreement to protect his fortune when he married Joan. ''It cheapens the relationship,'' he said primly. Besides, the rich in Britain are at little risk of losing half their fortunes to former spouses, who usually are awarded only ''enough to live a very comfortable life,'' he said. Of course, Mr. Branson has had his share of rich men's toys. Take his private island, Necker, a jewel in the British Virgin Islands. He stumbled into the purchase of the 76-acre tract at the age of 23, when, on vacation in New York, he decided to go to the Caribbean. ''In order to make sure we had a good time,'' he recalled, ''I rang up a travel agent,'' who showed Mr. Branson two private islands. Necker, with a price tag of $3 million, enchanted him. He tracked down the owner in London and learned that he was desperate for a quick sale. Mr. Branson offered $300,000 in cash, and the deal was closed. When the island is not occupied by him, his family or his business associates, he rents out his compound, which sleeps 24 and has a Cordon Bleu chef, for $16,000 a day. The list of occupants has included Steven Spielberg, Kevin Costner and Phil Collins. ACTUALLY, his business acumen dates to his youth, when he dropped out of school at age 16 to start, of all things, a magazine called Student. That set him on a course that deviated from the ambition of his father, a lawyer, who wanted him to follow in his footsteps. But it was in keeping with the aspirations of his mother, Eve, who early on had gone to pains to develop an independent spirit in him. When Richard was just 5, fearful that ''kids were getting a bit soft and feeble,'' she dropped her son in a field and told him to make his way to their country home two miles away. ''We thought we had lost him,'' his mother recalled, ''but he found his way to a farmhouse and they called us.'' Mrs. Branson inherited her feisty spirit from her mother, Dorothy Flindt, now a 99-year-old great-grandmother who recently boasted of having two boyfriends and who made the Guinness Book of World Records by getting a hole-in-one in golf when she was 91. Mrs. Branson herself is a skilled tennis player. ''I like to go on beating my son for as long as I can,'' she added. Even today, though she has a bit of money in the Virgin index fund, she says she tries not to pester her son for financial advice, preferring to do things her own way. Richard Branson, in turn, appears to have inherited his drive from his mother and his sociability from his father, Edward. The elder Mr. Branson remembers how, as a barrister, his court victories were usually bittersweet. ''I liked winning, but I felt sorry for the people who were defeated,'' he said. RICHARD BRANSON'S first venture in journalism, Student magazine, was a failure. Setting himself up in the basement of a town house, he produced a magazine with a liberal bent, even talking Jean-Paul Sartre, the famous French philosopher and social activist, into writing an article. Though the magazine folded, he parlayed it into a mail-order record business. He and his friends toyed with the idea of calling the venture Slipped Disc, finally opting for Virgin because they were such novices, and also because virgins, like money, were in such short supply in the basement occupied by the fledgling business. Over the next 14 years, he built Virgin into one of Britain's best-known independent record labels. But by 1983, he wanted to diversify, and was receptive when a lawyer he did not know presented a proposal for a new airline that would use the airport landing slots that were emptied by the collapse of Laker Airways. Mr. Branson called on Mr. Laker (who only last year started another airline) and received a bit of advice he took to heart. ''If you are taking on British Airways and Pan Am and they have massive ad budgets, you have to use yourself to get free advertising,' Mr. Branson recalled Mr. Laker as saying. So, Mr. Branson said, ''the following week, when the inaugural flight took off, I dressed up in a captain's outfit.'' ''One could say that I have taken Freddy's advice with a bit of a vengeance,'' he added, alluding to his romance with costumes. He has dressed up as everything from a pilot to a pirate. But perhaps his most effective guise is the one he wears every day: That of the average bloke taking on the establishment. He plays that role to the hilt in his battles with giant British Airways, which he accused of attempting to damage his business by stealing secrets from Virgin's computers. Mr. Branson took British Airways to court and, in a sweet victory, won a $945,000 settlement and an unusual public apology from Lord King -- a public-relations coup worth its weight in gold.