When longtime California Sen. Barbara Boxer announced on Jan. 8 that she would be retiring after her current term ends in 2016, the national media turned its attention to the senatorial politics of the Golden State for the first time since… well, since Boxer and her fellow Democrat Dianne Feinstein were initially elected way back in 1992.

At first, all eyes were on State Attorney General Kamala Harris and Lt. Gov. Gavin Newsom. The wags figured that only one of Northern California’s two brightest Democratic stars — Harris, a 52-year-old African- and Indian-American prosecutor, or Newsom, the 47-year-old former San Francisco mayor — would run to succeed Boxer; the other would presumably wait until Gov. Jerry Brown finished his fourth term in 2018. The prediction promptly came true: Harris said she was in, Newsom said he was out.

But then the chattering classes began to wonder: Who would be challenging the formidable Harris?

Former Los Angeles Mayor Antonio Villaraigosa has signaled his interest. So have several lesser California luminaries. But right now most of the buzz, from the Beltway to Sacramento, is about Tom Steyer — the San Francisco hedge-fund manager turned environmental activist who has spent the last few election cycles spending vast amounts of his estimated $1.6 billion fortune to influence climate-change policy nationwide.

To run or not to run?

On Tuesday, Steyer wrote in the Huffington Post that “Washington needs to be shaken up, and we need climate champions who will fight for the next generation,” adding that “I will decide soon based on what I think is the best way to continue the hard work we’ve already started together to prevent climate disaster and preserve American prosperity.” On Thursday, he told Reddit that he was still “trying to figure out how to have most positive impact.”

According to one confidant, Steyer should declare his intentions “sooner rather than later” — by “the end of this week” or “early next week” at the latest. In the meantime, the adviser agreed to give Yahoo News a behind-the-scenes look at Steyer’s decision-making process, providing insight into the tricky calculations bedeviling one of America’s most aggressive investors as he considers taking one of the biggest risks of his career.

“It comes down to a pretty clear decision point, which is, ‘What is the best way to impact the issues I care about: primarily climate change, but also education justice and economic justice?’” said the adviser, who was not authorized to speak on the record. “‘Is it better to do this race? Or is it better to just go all in on the presidential in ’16 and do everything possible to help Democrats then?’”

At the moment, Steyer is genuinely divided about which course to pursue, even as he studies internal polling that paints a rosy picture of his chances and consults with donors and aides about a potential campaign.

Some progressives have urged Steyer to stand down, arguing that he’d have a greater impact as a big-spending outsider than an enfeebled junior senator. Steyer is sensitive to the claim.

“The fact is, you can’t really do anything on these issues [as a senator] unless you have a Democratic president,” said the Steyer adviser. “Plus, Tom has a really close relationship with Hillary [Clinton] that goes back some time. He was one of her major donors in 2008. His foundation funds her Too Small to Fail initiative.”

For that reason, it seems as if some in Steyer’s camp are counseling him to focus on presidential politics in 2016 before campaigning for California governor the following cycle.

“With NextGen [Steyer’s climate-change PAC], Tom has a lot of infrastructure in key presidential states,” his adviser explained. “So his initial plan was really to focus on 2016 as a hinge election on this issue, and then run for something potentially statewide. I would make the argument that governor is a better job than senator. As governor, you can do more in a morning than you will do in six years in the Senate sometimes.”

And yet Steyer is still tempted to vie for Boxer’s seat. Why? “Because it’s now,” his adviser revealed. “There’s a limited window to impact climate. With NextGen, he has a platform to do something you really haven’t seen on the left — a progressive platform with real resources behind it. And someone who’d be in office — that creates some real synergies.”

The thinking in Steyer’s camp is that in 2016 he could do for climate change what Harris Wofford did for health care in 1990. That year, the tweedy, aging Wofford defeated front-runner Dick Thornburgh in the Pennsylvania Senate race by 10 percentage points by mounting a fiery populist campaign for universal coverage. In 1992 Bill Clinton adopted a similar platform, and even though “we didn’t get health care done in the next presidency,” argued the Steyer adviser, “it became an issue that people had to get done at some point.”

In addition, Steyer believes California’s unique role in American politics would only serve to amplify his message. “If you’re looking at the constituency groups, if you’re looking at labor, if you’re looking at fundraising, California is the epicenter of that for the entire Democratic Party,” said the adviser. “So the ability to build out a pretty significant platform is pretty huge here. That’s why Steyer is looking at this. He doesn’t want to spend his life being a U.S. senator. He just sees an opportunity on issues that he really cares about to leverage the California platform to push them forward. Other than that, I’m not sure he’d be considering it.”

If Steyer does choose to run, he’ll have a number of hurdles to overcome. Low name recognition. A lack of campaign experience. California’s demonstrable apathy toward rich political novices (see: Meg Whitman, Carly Fiorina, Bill Simon, Al Checchi, Michael Huffington). Not to mention the fact that Steyer didn’t get many Dems elected in 2014, despite spending a staggering $65 million.

Team Steyer, of course, is sharpening its rebuttals. Unlike California’s previous fat-cat contenders, their man won’t be going “from being a CEO on Monday to being a candidate for office on Tuesday. He’s spent almost 10 years really being involved in politics,” according to the adviser. He’s waged war against “Big Oil” and become “enemy No. 1” for the GOP, meaning that he’s already “been playing in the major leagues — arguably more than anyone else in California.” And as for 2014, Steyer’s strategists will argue that “it was the first time we ever saw Republicans have to play defense on climate, which is a systemic change in terms of how our politics plays out.”

Ultimately, however, Steyer’s decision is going to come down to his own accounting of risk and reward — and in that sense, a campaign that’s likely to cost more than $100 million might not sound as scary as it would to a candidate with less cash in the bank.

“In a sense he’s playing with the house’s money,” said his adviser. “You win, great. You don’t, you talk about your issue. You’ll be competitive. It’s interesting. It’s fun. And then you move on.”