Why did Shocker underestimate the risk of Takeshi Hongo? Cost optimization and catastrophic risk from the perspective of Kamen Rider

Kamen Rider 1, Takeshi Hongo, is turned into a cyborg by the evil organization Shocker.

The physical modification was complete. However, because he escaped just before undergoing brain modification, he managed to avoid losing his human will.

As a result, Takeshi Hongo ends up using the abilities granted to him by Shocker to fight against Shocker.

This is a massive management failure for Shocker.

They invested their own costs and technology to create one of their strongest enemies themselves.

So, why did Shocker perform the physical modification first and leave the brain modification, which controls loyalty, for later?

Rather than just a convenience of the script, I would like to consider this from the perspective of economic rationality.

Performing physical modification first was rational in itself

Suppose Shocker's modification process was as follows.

Physical modification has a high failure rate. On the other hand, brain modification has a high success rate.

However, brain modification requires expensive equipment, special parts, rare drugs, and skilled technicians, and the cost is also high.

For example, let the cost of physical modification be 20 with a 20% success rate, and the cost of brain modification be 100 with a 99% success rate.

If you perform physical modification first on 100 candidates, the physical modification cost is 2,000. Since about 20 people succeed, the brain modification cost is 2,000.

The total is 4,000.

Conversely, if you perform brain modification first, you perform expensive brain modification on all 100 people, which alone costs 10,000.

Even if you perform physical modification afterward, only about 20 people will ultimately succeed.

From the perspective of Shocker's accounting department,

"Why would we perform expensive brain modification on everyone first when 80% will fail the physical modification anyway?"

That is how the conversation would go.

This is a very common way of thinking in the manufacturing industry.

Place processes with high defect rates first, and only invest expensive parts or finishing processes into units that have passed the preceding stage.

This is a design known as 'failing fast and cheap'.

In economics and management, this can be explained as phased investment, screening, and optimization of process sequencing.

In other words, performing the physical modification first was not necessarily a mistake.

Shocker's failure was leaving 'dangerous work-in-progress' unattended

The problem was Takeshi Hongo after physical modification but before brainwashing.

At this point, Hongo had the combat capabilities of a modified human, but his will remained that of a human.

To use a manufacturing analogy, he was work-in-progress before completion.

However, he was different from ordinary work-in-progress.

He could move on his own.

He could escape.

He harbored hostility.

He knew the structure of the facility.

And he possessed combat capabilities close to those of a finished product.

Shocker may have calculated the manufacturing cost per modified human.

However, they did not sufficiently evaluate the extremely dangerous intermediate state of being 'enhanced but not brainwashed' as a risk.

This is a mismatch between local optimization and global optimization.

Looking only at the modification department, efficiency is high because expensive brain modification can be limited to successful subjects.

However, looking at the organization as a whole, they created a permanent enemy in Kamen Rider, leading to the loss of monsters, combatants, facilities, and operations one after another.

Manufacturing costs may have decreased, but corporate value has been catastrophically damaged.

They did not correctly calculate the expected loss

Risk should not be judged solely by the probability of occurrence.

The fundamental concept is

probability of occurrence × loss if it occurs

This is called expected loss.

Even if the probability of Takeshi Hongo escaping after his body modification was only 1%, if the loss incurred upon his escape is extremely large, it cannot be ignored.

The losses Shocker suffered due to Takeshi Hongo's escape included not only the loss of modification costs, but also facility destruction, operational interference, loss of Kaijin, leakage of confidential information, and a decline in organizational credibility.

Ultimately, the very survival of the organization was threatened.

This is a 'tail risk'—a low-probability event that results in extreme losses if it occurs.

Shocker likely only looked at the probability of escape.

However, what they should have looked at was not the probability of escape, but the total loss caused by an escaped modified human.

'It rarely happens, so no countermeasures are needed'

This judgment only holds true when the scale of the loss is small.

The same applies to nuclear power plants, aircraft, financial institutions, and core systems.

Even if the probability of occurrence is low, if the organization ends when it occurs, countermeasures are necessary.

Possibility of normalcy bias at work

Could normalcy bias have been at work within Shocker?

Normalcy bias is the tendency to underestimate the possibility of an abnormal situation occurring,

thinking, 'It has been fine until now, so it will be fine this time too.'

This is a cognitive bias that leads to the neglect of potential dangers.

This is the psychology that leads one to think that way.

If they had handled many cyborg candidates before and there had been no cases of escape after physical modification, the security personnel and technicians would assume that the current procedures were safe.

The fact that Takeshi Hongo was an extremely talented individual may have also caused them to misjudge the risk.

Shocker judged that because he was talented, he had high value as material for a cyborg.

However, being talented means having not only high physical ability, but also high judgment, willpower, observation skills, and escape capabilities.

Shocker evaluated Takeshi Hongo's abilities highly as "post-modification performance," but did not evaluate them as "capabilities for escape or rebellion."

This is a classic oversight where the same ability becomes both a benefit and a risk.

Principal-Agent Problem

One can also think of Shocker as the principal, the client, and Takeshi Hongo as the agent who actually performs the activities.

Shocker gave Takeshi Hongo combat abilities and tried to make him use those abilities for Shocker's benefit.

However, Takeshi Hongo's own goals were not aligned with Shocker's goals.

Brain modification is not just a surgical process.

It was a governance mechanism to forcibly align the interests of Shocker and the cyborg.

However, Shocker granted high abilities and authority before aligning those interests.

If translated to a modern company, it would be like handing over administrator privileges and confidential information before completing background checks, contracts, and access management.

Rather than Takeshi Hongo betraying them, the interests of Shocker and Takeshi Hongo were not aligned from the start.

Shocker planned to resolve that fact through brain modification, but they granted him the abilities before the resolution.

Takeshi Hongo as a Hold-up Problem

This case can also be explained as a hold-up problem.

A hold-up problem is a situation where, after one party has made a large investment for the sake of the other, the party that received the investment changes their attitude, putting the investing party at a disadvantage.

Shocker made a dedicated investment in Takeshi Hongo's body.

However, even after the investment, the substantial control over his body and will remained with Takeshi Hongo himself.

Shocker bore the costs, while Takeshi Hongo held the assets.

Moreover, Takeshi Hongo used those assets to attack Shocker.

In effect, Shocker used its own R&D budget to cultivate a competitor.

Before making an investment, one must secure control, means of restraint, contracts, and methods of termination.

Since contracts do not apply to Shocker, they at least needed continuous anesthesia, restraint facilities, remote shutdown devices, or to perform the brain modification simultaneously.

The possibility that sunk costs further worsened their judgment

After Takeshi Hongo escaped, Shocker attempted to defeat Kamen Rider by deploying a large number of monsters.

This also involves the issue of sunk costs.

Sunk costs are expenses that have already been paid and cannot be recovered.

Rationally, one should judge based only on future costs and benefits, not on how much has been spent in the past.

However, Shocker executives may have thought:

"Since we invested this much in Takeshi Hongo, we must recover it at all costs."

"Since we have lost so many monsters already, we cannot withdraw now."

They may have thought this.

As a result, they invested even more monsters, funds, and time, expanding their losses.

This is called the sunk cost effect, or escalation of commitment.

Rather than admitting failure and cutting their losses, they try to recoup the failure and end up incurring even greater losses.

Shocker may have exhausted its entire organization because it failed once in modifying Takeshi Hongo and could not admit that failure.

The failure to learn was greater than the initial failure itself

Takeshi Hongo's escape itself may have been considered an extremely low-probability event beforehand.

In that sense, the first incident could be explained as an unfortunate accident.

However, once an accident occurs, risk assessment must be updated.

In economics and decision theory, revising probability judgments when new information is obtained is called Bayesian updating.

At the moment Takeshi Hongo escaped,

"Candidates can escape after physical modification but before brain modification"

was the new information obtained.

A rational organization would change its processes after that.

Strengthen security.

Change the restraint methods.

Make physical modification and brain modification a continuous process.

Install a remote shutdown function.

If they continued to have similar betrayals and escapes even after that, the problem lies not in their technical capabilities, but in their organizational learning ability.

A strong organization is not one that never fails.

It is an organization that can change its procedures and systems after failing.

Shocker was strong in cost management but weak in risk management

Shocker's decision to perform physical modification first was rational if one only looks at the manufacturing cost of the modified humans.

Narrow down candidates through physical modification with a high failure rate, and perform expensive brain modification only on the successful ones.

This is correct as a phased investment.

However, they failed to manage the dangerous state that occurred during the process: 'physically enhanced, but brainwashing not yet performed'.

Shocker succeeded in minimizing average costs.

However, they ignored the catastrophic losses that occur with low probability.

Furthermore, even after the initial failure, they did not review the process, were dragged down by sunk costs, and continued to deploy additional monsters.

As a result, in order to save on the unit cost of a single modified human, they put the entire organization at risk.

In management, what is truly terrifying is not just irrational decision-making.

It is a decision that is rational when viewed only in part.

It is correct at the departmental level.

It is correct in terms of cost accounting.

It even follows the procedure manual.

However, when viewed as a whole, it destroys the organization.

Shocker's failure did not happen because they were an evil organization.

As a result of accumulating localized efficiencies, they created a massive risk as a whole.

This is a story that could easily happen in modern companies, government, or information systems.

Shocker did not lose to Kamen Rider.

They lost to the risks they created themselves as a result of over-rationalizing the process of creating Takeshi Hongo.