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Wall Street Superman to the Rescue

Hedge-fund billionaire Tom Steyer is succeeding where other richer-than-thous have failed: winning elections with an MBA mentality.

Steyer, whose net worth is estimated to be around $1.3 billion, bankrolled the passage of Proposition 39—and who knows what his next target will be?

This is the area where Steyer’s other philosophy—his business one, honed over three decades of predicting risk and reward in the markets—begins to emerge. In his view, voters are not demographically predestined units: They are rational actors—customers, if you will. This mindset was instrumental in his first high-profile initiative campaign, in 2010. At that time, he joined with former secretary of state George Shultz to form “Stop Dirty Energy” with the aim of defeating Proposition 23, which would have rolled back California’s signature anti–global warming legislation. Veteran Democratic operative Chris Lehane, who was a consultant on the campaign, describes Steyer’s approach thusly: “The environmentalists wanted to come at it with butterflies and things, but he took a realistic approach and made it about jobs and health.” Adds Schnur, “He put a more pragmatic face on an environmental message than many environmentalists do.”

Steyer’s strategy was hugely successful: Prop. 23 lost by more than 2.2 million votes, receiving more no’s than any other initiative or candidate in the 2010 election. According to a September 2012 report by the nonprofit Democracy Center, the anti–Prop. 23 campaign’s focus on “local concerns” like the economy rather than simply on “messages that motivate the activists” has changed the way that environmentalists campaign for their causes.

This year’s Prop. 39 battle was yet another case study in the “Steyer Way.” Lehane, who directed the campaign for the measure, describes how he and Steyer built their game plan. “When Tom was first looking at closing the corporate loophole, I told him that he should assume a price tag of at least $30 million to pass it with a 60 percent likelihood of success... He said we should go out and make sure we increased the chances of winning to 80 percent.”

In order to accomplish that, the campaign had to take a two-pronged approach: First, make it clear that the proposition had broad support on all sides, and second, eliminate the opposition. As for the first objective, the list of endorsements left no one out: Unions, environmentalists, business groups, and even the American Lung Association gave Prop. 39 the thumbs-up. It was in eliminating the opposition that things got interesting.

Prop. 39 was initially Senate Bill 116, which died largely due to lobbying efforts by out-of-state companies calling themselves “California Employers Against Higher Taxes.” So Lehane, with Steyer’s approval, directed the “Yes on 39” campaign to take swift preemptive action against those companies. In the last week of July, well before election season was in full swing, the campaign ran a full-page ad in the Sacramento Bee, calling upon the CEOs of General Motors, Kimberly-Clark, International Paper, and Chrysler to pledge not to oppose Prop. 39. “If they choose to stand against California,” the ad threatened, “we will launch ‘The Big Four Tax Dodgers’ campaign—a sustained effort to inform taxpayers, consumers, and government officials about the conduct of these four companies, including, but not limited to: the specifics of their government contracts; their record of state and local tax delinquencies; the amount of bailout money they received that came from California; their record of off-shoring of jobs; and what contracts or other issues they are currently lobbying before federal, state, and local governments.” To top things off, the campaign hired a plane to fly over the Democratic Convention in Charlotte, pulling a banner sporting the logos of the four companies and the slogan “Stop tax dodgers! Yes on 39!”

Aside from raising a total of $45,000—all of it before mid-August—none of the named companies made any public effort to oppose Prop. 39. Having earned his fortune in part by internalizing the id of corporate America, Steyer had known exactly how to “change the value proposition for the opposition,” says Lehane. “He understood what was going on in the boardrooms of the companies who might fight us, so we made it too damaging for their brand and their bottom line to come after us.”