The Mexican government has discovered, upon nationalizing Francisco d’Anconia’s San Sebastian mines, that the mines are completely worthless. Dagny is furious. On her way to confront Francisco, she remembers the way he used to be. His summer visits were the highlight of her childhood, as they played together and dreamed of taking over their families’ businesses. Later, they had become lovers. But the affair ended ten years ago when Francisco left her. Leaving was torture for him, but he said he had no choice and warned her not to ask any questions. He said that he would do things that soon would make her denounce him, and she has. Over the next few years, Francisco became the most notorious playboy in the world, squandering his fortune on foolishness.
Dagny confronts Francisco. She asks him why he deliberately invested in worthless mines and ruined the fortunes of his stockholders, among them James Taggart. She tells him that he should be fighting hardest against the looters of the world. He responds that in fact he is fighting against her and her railroad. She is horrified. She asks him what he is trying to do, and why, but he tells her that she is not ready to hear it. She does not have enough courage yet.
Lillian Rearden throws a party to celebrate her wedding anniversary. Hank Rearden agrees to attend out of a sense of duty, though he dreads it. He would rather be working to find a replacement for the recently resigned superintendent of one of his mills. Dagny also attends. Although she feels there is much to celebrate in the progress of the Colorado track, Rearden is unexpectedly cold toward her.
The party guests are writers, intellectuals, and other important figures in society. Their conversations suggest the futility of the times. Dr. Pritchett argues that man is nothing but a collection of chemicals, with only instinct as his guide. Balph Eubank contends that true literature is about suffering and defeat, because it is impossible to be happy. The only thing one can live for is “brother-love.” The intellectuals agree that need is the only valid consideration, that whatever is good for society is right.
Francisco d’Anconia enters the party. Rearden asks Lillian to keep Francisco away from him. Jim Taggart pulls d’Anconia aside to confront him about the San Sebastian mines. Francisco responds that he only did what the entire world is now preaching. He hired men not because they were competent, but because they needed the work. He did not work for profit, but took a loss. Everyone criticizes industrialists for their domineering nature, so he simply let his underlings control the venture. Jim is helpless and furious.
After some time, Francisco approaches Rearden and tells him that he came to the party simply because he wanted to meet him. He approaches him with such sincerity that Rearden finds himself listening. Francisco’s message is mysterious, but Rearden is drawn to it. He asks why Rearden carries so many people, why he is willing to work and let others feed off his energy. Rearden responds that it is because they are weak and that he does not mind the burden. Francisco corrects him and tells him the others are not weak; they have his own guilt as a weapon against him. A woman at the party professes to know the identity of John Galt. She says Galt was a millionaire who discovered Atlantis. Dagny does not believe the story, but Francisco steps in and announces that he does.