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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?

Still, Steyer’s life is far from a rags-to-riches story. Born in New York City to a lawyer father and a school volunteer mother, he attended high school at the hoity-toity Phillips Exeter Academy and went on to study economics and political science at Yale. He first came west in 1981 to go to business school at Stanford, after which he moved back to New York to work for two years at Goldman Sachs under future Clinton treasury secretary Robert Rubin. In the mid-’80s, he returned to the Bay Area and, armed with $14 million ($4 million of it from legendary local investors Warren Hellman and Tully Friedman), founded Farallon Capital Management. A 2008 profile of Steyer in Fortune credited Farallon’s success to its application of the “absolute return” philosophy, which essentially favors bankable, risk-adjusted investments over high-risk moon shots, though Steyer refused to answer Fortune’s questions about his overall strategy. In any case, his hedge fund, now one of the world’s largest, has around $20 billion in assets.

Along the way, Steyer brought up four kids with his wife, Kathryn Taylor, a Harvard graduate who earned both a law degree and an MBA from Stanford. Taylor is the CEO of One PacificCoast, the Oakland-based bank that she and Steyer founded to provide loans to members of underserved communities (while also, through the One PacificCoast Foundation, serving as a philanthropic outlet for the family’s growing riches). It was in part because of Taylor’s roots in San Mateo that Steyer so eagerly moved back to California in the ’80s, and he has a convert’s starry-eyed zeal for his adopted home. “The dream of California is that you can come here and fulfill your potential,” he says, suddenly sitting up straighter. “This is your chance.”

When I point out that California is often maligned by outsiders as a bastion of governmental and budgetary dysfunction (not to mention the stomping ground of the loony left), he retorts, “I like to say to them, ‘Where are the great companies that you’ve produced in the past 20 years? If you guys are so realistic and mature, name the great companies you’ve produced. Because I’ll name you 10!’” Achievement here, he says, “usually involves a small number of people going off by themselves and creating something new to solve the problem and change the world. That’s how great things are done, not by joining a high-quality professional institution and working your way up.”

Not surprisingly, Steyer has applied that same queue-jumping philosophy to politics. Though he cut his teeth as a staffer for Walter Mondale’s presidential campaign in 1983, he has otherwise eschewed the “work your way up” path in favor of rapidly buying his way in. Since 1999, he has donated over $500,000 to Democratic candidate and causes, allowing him to rub high-powered elbows as a delegate to the Democratic National Convention in 2004 and 2008. (At the 2012 DNC confab, he was tapped as a speaker.) In this Wild West era of Citizens United, Steyer is as vulnerable to accusations of electoral engineering as right-wing bogeymen like the Koch Brothers and Sheldon Adelson. And yet his words—and his record—betray far less self-interest than is characteristic of his billionaire fellow travelers.

It is a rare thing to get through a conversation with Steyer without hearing him bring up the concept of duty in some fashion. His deepest motivators, he says, are “stewardship” of the planet and the “social compact” we have with one another. In a 2010 interview with Christiane Amanpour, he actually choked up while discussing his support for higher taxes: “I think that people have sacrificed a lot more than a little tax money to make the system available for all of us,” he said. “And I would be ashamed of myself if I didn’t give some credit to that.”

For Steyer, these concepts aren’t merely spiritual or patriotic googah: They are grounded in economic rationalism (another conviction that he shares with Bloomberg). Steyer opened the community bank with his wife because it offered an efficient use of his charitable giving, and he’s working to improve education via his brother James’s “Too Small to Fail” project. It is only logical that climate change tops his priority list: What’s the point of bettering kids’ education if the cities they live in are literally under water? “I argue with my brother,” Steyer says, “because he thinks that providing educational opportunities is the biggest question in society. And I say, ‘Jim, you have to have a society!’”

Climate change, Steyer maintains, is in large part an economic issue, and it is costing us a fortune. “What we’re doing is insane,” he says. “If we actually did the math right, we’d understand how expensive [carbon emissions] really are” in terms of health, property damage, and military spending. Once the costs of global warming are made apparent, he believes, the public will be motivated to embrace the shift to a cleaner world. Of course, he says, the change needs to be presented in a positive way. “This transition is not going to be ‘Eat your spinach.’ It can be ‘You know what? Instead of eating your Big Mac, we’re going to go and have an omelet.’”