Mr. Sir takes Stanley to see the Warden. Mr. Sir explains that someone stole the sunflower seeds but that he doesn't think it was Stanley. The Warden asks Stanley to bring a makeup case over to her. In the case there is, among other things, a lipstick case and a bottle of red nail polish. The Warden explains that the nail polish has rattlesnake venom in it. The polish is harmless when dry but toxic while wet. The Warden then paints the nails on her hands and slaps Mr. Sir across the face. Her wet nail polish makes him write with pain. When Stanley expresses concern for Mr. Sir, the Warden tells him, "He's not going to die Unfortunately for you."
Stanley returns to his hole and thinks of how his great-grandfather felt after being robbed by Kissin' Kate Barlow and then stranded in the desert. By the time Stanley's great-grandfather was rescued he was insane. He claimed that he had "found refuge on God's thumb." He married a nurse from the hospital after he recovered but he never knew what he meant by "God's thumb". When Stanley reaches his hole he finds that Zero has dug it for him.
Back in the tent, Stanley waits until the other boys have left before thanking Zero for digging his hole. When asked why he helped, Zero says that Stanley didn't steal the sunflower seeds. Stanley points out that Zero didn't steal them either to which Zero responds, "You didn't steal the sneakers." After this, Stanley offers to teach Zero to read and they work out a deal in which Zero will dig Stanley's hole for an hour every day so that Stanley won't be as tired when he teaches Zero. Stanley begins to teach Zero the alphabet and discovers that Zero is very good at math. Zero says he knows everyone thinks he is stupid but that really he just doesn't like answering questions. That night Stanley worried what X-Ray will say when Zero digs for Stanley. Then he thinks of the gold tube he found and realizes it is like something he has seen in the Warden's bathroom; it is half a lipstick container. He wonders if the initials KB could stand for Kate Barlow.
Green Lake is described as it was one hundred and ten years ago: a beautiful body of clear water with peach trees lining the shore. Miss Katherine Barlow was the teacher of the one room schoolhouse and she made wonderful spiced peaches that were preserved to last a year or longer. Charles Walker, or Trout Walker as he was known due to his horrible foot odor, came to classes that Miss Katherine taught. Trout did not come to learn, however. He was from the richest family in town and he wanted to marry Miss Katherine. One day he asked Miss Katherine to go on a ride with him in his new motorized boat. Trout is used to getting his own way so he is shocked and angry when Miss Katherine refuses to go with him.
At Camp Green Lake, Mr. Sir yells at a boy who comments on his face, which is swollen from the Warden's rattlesnake venom. When Mr. Sir drives up to deliver water that day he doesn't give any to Stanley.
When Stanley is caught stealing the sunflower seeds, he thinks that he is again in the wrong place at the wrong time, but in fact, had he not been caught, he would never have realized that the gold tube he found while digging his hole is actually half of a lipstick container. This series of events explores the nature of luck, asking if was Stanley in the wrong place at the wrong time, or in the right place at the right time. If he had not been brought to the Warden's cabin for stealing Mr. Sir's sunflower seeds then he would not have seen the Warden's lipstick container and might never have realized that it looked the same as the gold tube he found. Because Stanley does have this realization, however, he obtains an important clue. He now has more information about what the Warden is looking for as she has the boys dig holes. Although Stanley's great-grandfather thought he was in the wrong place at the wrong time when he was robbed by Kate Barlow, it is ultimately because of this robbery that he meets his wife, Stanley's great-grandmother.
Holes questions the nature of fate. By finding Kate Barlow's lipstick tube, Stanley has found not only a piece of history, but a piece of his own history. He has effectively linked the present with two separate stories in the past, that of the outlaw Kate Barlow and that of his own great-grandfather, the first Stanley Yelnats. The introduction of Kate Barlow as a school teacher who makes spiced peaches seems surprising when the reader also knows that she was a dangerous outlaw. Her character is an example of a person's full story revealing more about them than their name might suggest. Although Stanley only guesses that the lipstick case he found may have belonged to Kate Barlow, the fact that the narrator informs the reader that Kate used to live near Green Lake allows the reader to assume that the case does belong to Kate. The facts of the mystery are slowly accumulating, and the reader has far more information than Stanley does.
The character of Trout Walker has many similarities to the character of the Warden. Both like to get their way and both have a lot of control over their surrounding area of Green Lake. In addition to realizing that the gold tube is a lipstick tube, Stanley's visit to the Warden provides Zero the opportunity to do Stanley a favor. This in turn forces Stanley to re-think his behavior towards Zero. When Stanley and Zero agree to help each other with reading and hole digging, they are not forming the kind of authoritarian system that X-Ray and the Warden use, but rather a system of mutual benefit, which has the possibility of leading to real friendship. Neither Zero nor Stanley fears the other, and so their actions and their friendship is honest and genuine. This agreement also gives Stanley and Zero the chance to get to know one another beyond the point of what their names, or the other boys, say about them. Stanley discovers that Zero is very smart even though he does not talk a lot.