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Perhaps... perhaps Sauron could have become anything he wanted to, anything at all, with all that power, but he chose to become a gigantic glowing red eye simply because he couldn't comprehend that it looked ominous, he thought it looked great, he wasn't intentionally trying to scare or intimidate anyone. He was just that divorced from reality, and nobody dared to tell him otherwise.
Kind of like bureaucracies and corporations that commission terrifying and oppressive Brutalist architecture think it looks "rather nice, actually," because their aesthetics are skewed that far away from how ordinary people see the world... so far that "oppressive," "looming," and "unsettling" seem like positive traits.