Dick sketches out ideas for what he intends to be his next novel The Owl in Daylight. He refers to the main character as Owl and imagines the book as a parody of the gnostic search for salvation through knowledge depicted in VALIS.
Owl, a holy fool archetype, exists in a “construct” governed by some kind of plasma, and only Owl seems to have figured out the maze everyone is trapped in. Dick clarifies the entire book won’t be a parody. It will be “tragicomic”. It will parody Jorge Luis Borges and Kafka but not Beethoven or Dante.
Owl interacts with the controlling plasma/computer in four stages. In the fourth stage it introduces the Ditheon psyche and Owl realizes the pointless Faustian nature of his endless quest for knowledge. By that time Owl has isolated himself and become a pathetic antiwar protestor. A subplot involves a “crippled dwarf” and a governmental eugenics program.
Dick wonders about including a possible government agent based on Ursula Le Guin who is worried about Owl’s increasingly deranged mental health. It’s interesting he brought up Le Guin, since she had already written this type of PKD parody novel in Lathe of Heaven published ten years earlier.
He has further insights about the war between the Empire and Christianity (except Christianity is the true Empire and the true Christians are a Celtic-Orphic mystery religion) before he ultimately decides all of it is ridiculous.