This April, Theranos laid off all but a sliver of its workforce. This marks a sad event for a medical technology firm whose board once included prominent people such as Henry Kissinger, George Schultz, Larry Ellison, and the country’s current Secretary of Defense General Jim Mattis. Moreover, Theranos was backed by luminary Silicon Valley venture capitalists such as Tim Draper and Don Lucas (a great friend to Santa Clara University and School of Business “Lucas Hall” was named after him).

The SEC contends that Holmes misled investors about the efficacy of the firm’s technology, in the course of raising $700 million of financing.

Theranos’ layoffs occurred in the wake of the charge by the SEC in March that the firm’s CEO Elizabeth Holmes had committed fraud. The SEC contends that Holmes misled investors about the efficacy of the firm’s technology, in the course of raising $700 million of financing. For this, Holmes agreed to a settlement in which she would pay a $500,000 penalty.

There are some behavioral questions to ponder, given the fraud. Were all these prominent board members and venture capitalists conned? If so, did they allow themselves to be conned? Was Elizabeth Holmes a victim of her own psychological traits?

To answer these questions, we need to understand the essence of the fraud. The fraud allegedly entailed the firm falsely claiming that its purported revolutionary technology was successfully producing accurate lab results from small drops of blood. Instead, according to the SEC, the firm cheated and used conventional technology to produce accurate results, as its own technology was inaccurate.

Several years of drama led up to the charge of fraud and subsequent layoffs. Although Theranos began to market its products in 2013, through the drug store chain Walgreens, chief scientist Ian Gibbons warned that the technology was not ready. Gibbons eventually committed suicide, but his wife suggests that he was considering making his concerns public. At about the same time, Holmes sued her family’s friend and neighbor, the inventor Richard Fuisz, along with his sons, for allegedly stealing her ideas and patenting them. Fuisz unsuccessfully attempted to have Gibbons testify during the trial. In October 2015, Wall Street Journal writer John Carreyrou wrote an exposé on Theranos, after concluding that Holmes’s explanations for how her technology worked lacked depth. Amazingly, Carreyou’s chief source was Tyler Schultz George Schultz’s grandson, who had worked for the firm, came to the same general conclusion as Gibbons, and blew the whistle.

Consider a series of psychological phenomena that suggest answers to how and why Holmes conned her board. The first phenomenon centers on a concept known as “representativeness,” which entails overreliance on stereotypes. Holmes fit the description of a successful technology entrepreneur. Like Bill Gates and Steve Jobs, she dropped out of college, in her case from Stanford, in 2003. Like Jobs, she adopted a signature clothing style, in her case black turtlenecks, and effectively communicated a compelling vision.

The second phenomenon is “unrealistic optimism,” stemming from wishful thinking—wanting something to be true. Technically, wishful thinking is described by the psychological term “desirability.”

The third phenomenon is “confirmation bias,” the tendency to ignore information that runs counter to positions we are testing or views that we hold, and to overweigh information that supports those positions and views. Perhaps there is no more apt example than George Schultz. He was personal friends with Holmes and her parents, and celebrated Thanksgiving with them. Despite the strong evidence that Tyler Schultz presented to his grandfather, the elder Schultz could not bring himself to accept that Theranos’ claims were exaggerated.

Were Theranos' board members and investors conned? Indeed, they were. Did some of them allow themselves to be conned? Yes, in the sense of being vulnerable to psychological phenomena such as representativeness, excessive optimism, and motivated reasoning.

Part of confirmation bias is being reluctant to search for disconfirming evidence. Not until April 2016 did Theranos add a medical advisory board to its leadership. The advisory board's first task was to conduct an independent assessment of the efficacy of Theranos’ technology.

she had great difficulty coming to terms with a loss, instead accepting a bad bet that was likely to deepen the loss

As for Elizabeth Holmes, she exhibited strong “aspirational risk seeking,” by defining success in terms of exceedingly high goals, which she treated as of the utmost importance. As a result, she had great difficulty coming to terms with a loss, instead accepting a bad bet that was likely to deepen the loss. At some stage along her journey, Holmes took a bad bet and lost at least $500,000, along with her reputation. Aspirational risk seeking and aversion to a sure loss comprise a fourth behavioral phenomenon.

Many people who have watched Elizabeth Holmes, or interacted with her, find her cherubic. They find it difficult to conclude that she set out to be a con artist. Perhaps she didn’t.

Perhaps Elizabeth Holmes was self-delusional, and conned herself.

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*A version of this article was originally published by Forbes on April 14, 2018.