Nicodemus, like us, does not really have phantoms and dragons in his head. He has just one demon, one virus, one malady: he lives in fear.
In the encounter between Jesus and Nicodemus there are two theologies expressed: a theology of scarcity and a theology of abundance. Nicodemus thinks out of his scarcity. That's why he asks Jesus, "How can anyone be born when he’s an old man?" Nicodemus' whole theology, the way he relates to God, comes from a place of scarcity. Jesus. Spirit. Water. An open heaven. All held out to Nicodemus as an invitation. All of God's love and life opened up to Nicodemus as gift, and all he can do is argue against it.
Nicodemus just cannot wrap his head around what Jesus offers. He hears Jesus just fine, but what he hears is, "Do this impossible thing and you’ll get into God’s kingdom." Jesus talks about new birth, but all Nicodemus hears is, "Climb back into your mother's womb, get born again, then try to live your life better this time around."
He cannot hear Jesus because Nicodemus operates out of his own scarcity. He is so focused on himself, what he can and cannot do for himself (and all of this so he can get into God's good graces), he does not comprehend that he is delusional. At the core, the way Nicodemus relates to God creates a kind of madness. Nicodemus lives in a delusion. God's love for him is measureless and has no boundaries, and He is inviting Nicodemus to enjoy this limitless love and life, but this "well-known teacher of Israel", as Jesus calls him, can only react with fear to Jesus' offer.
Nicodemus can't recognize that his God is talking to him because this man (who teaches others how to serve and worship God) worships the phantoms and self-made dragons in his head that drive him to eat, and live, and behave, and relate to other people in a way that leads him to cover up the truth: he is arguing with God, who is giving him for free what he has tried to earn for himself his whole life.
You see, Nicodemus, like us, does not really have phantoms and dragons in his head. He has just one demon, one virus, one malady: he lives in fear. Fear of God. Fear of not being enough. Fear of not being worthy of God's love. Fear of death. Fear of pain. But, underneath it all it is all one demon, whose name is "fear."
Fear is at the core of living in scarcity; living as if God is waiting for us to find Him; living so we do not die; living so we do not have to experience pain; living for the sake of self-preservation. But this isn't what it means to fear God. Fearing God means to worship and honor and love and respect Him and what He creates. We fear what God makes—we fear our neighbor and just about everything else—but we do not actually fear God, not authentically, and that is why we are afraid. That is why Nicodemus reacts with fear to what Jesus offers him, too.
This is not how it is supposed to go. This is not manipulation. It is not "You'll burn in hell if you don't do what I say." Jesus just says, "I can relieve you of all your worry and work. I can fill you with love and life and respect for God and all He's created. It's simple: a sprinkling of water, some words—and, most importantly, My Spirit does it all for you."
God has the wisdom and the means and the will to save us in the way of Gift-giver Jesus: Spirit, words, water. That is it. We are saved from judgment, from death and hell, and our demon, fear. None of us can see God's kingdom unless God waters us (John 3:3). None of us is a child of God without God's Word. None of us is a Christian without God's Spirit. We do not make these decisions for ourselves or anybody else. Who we are, our identity, is a weave of Spirit, and words, and water. We are fed, and love, and pray, and sing, and believe, and hope, and confess our trust in God's abundant grace because we are grounded in Jesus' limitless love and life that He just imputes to us. No work or worries required.
Nicodemus doesn't need to climb back into his mother's womb to get born again and neither do we. We do not have to try to live a better life. We do not have to be afraid of God, or not being enough, or being unworthy of being loved, or death, or pain, or the demon, fear. Fear will not get us closer to God, and guilt about our mess of a life will not get us God's sympathy.
We live so often in scarcity, afraid to lose the little we have gotten for ourselves. This is what makes it so impossible for us to recognize that God comes to us in abundance, all of Jesus' love and life bent toward freeing us from the fear and guilt and delusion that our theology of scarcity produces. And, sure, we are not done with our lives, and our identity, and our anxiety, and our being beaten down, and our struggles, and our getting back up to fight another day. That is why the only way we will ever see God’s kingdom is if He brings the kingdom to us, gives Himself to us, claims us, and showers us with His promises and gifts... and He does!
For Nicodemus, and for us, it is not our work and worries, but the Spirit, God's Word, and some water that does it all. All of God, all of His love and life, all freely imputed to us for Jesus’ sake—who is the Giver and gift, today and always.