Dick has a dream: the KGB contacts him and shows him the “doomsday device” the U.S. Army has created. He interprets the dream to mean Valis is this doomsday device. The U.S. put information about Valis into Flow My Tears as a trap in order to draw out the KGB and get them to contact him.
He decides to take the dream literally, but realizes humans didn’t let the weapon loose. It escaped. It is an anti-Soviet weapon that worked as designed by promoting love of God and country. He calls it capitalist mind control. It creates a personality that seeks bourgeois comforts and fears the left wing. He is afraid of all authority as a result.
He had been desperate in 1974 but now he feels guilty about the comfortable life he is living, one of financial security that he achieved by cooperating with the state. In a moment of reflection he admits his belief that the Soviets would contact him was a paranoid, psychotic fantasy.
He has a memory of a parallel world that phases in and out of reality. He tries to makes sense of what have probably been schizophrenic episodes. His writing has been an attempt to create some kind of philosophical framework to deal with all of this. This is one of his clearest views of what he has been going through where he admits the puzzle he has embraced solving for so long exists mostly in his mind.