Lillian throws a party for the Reardens' wedding anniversary. Hank Rearden doesn't feel like celebrating but, of course, duty dictates that he must attend. He would prefer to devote his time to the mills, because the superintendent of his rolling mills has resigned suddenly and without explanation. Rearden must find a suitable replacement quickly, because the mills are rolling the Taggart rail.
Dagny attends the party and feels that she and Rearden have legitimate cause to celebrate the Rearden Metal track that's progressing across Colorado. She is puzzled and mildly disappointed when Rearden treats her with rigid formality.
Francisco appears unexpectedly, and Rearden tells his wife that he doesn't wish to meet him. However, Francisco approaches him with such simple sincerity that Rearden speaks to him. Francisco says that Rearden's family wields a weapon against Rearden that he must learn to recognize. Francisco adds that it is crucial for Rearden to take a stand and tell his family that he works for his own happiness. Although Francisco won't explain the purpose behind his appearance at the party or his advice, he claims that he wants to arm Rearden with ideas that he'll need in order to defend himself. Rearden recognizes that Francisco is offering him something crucial, but he also despises this playboy because he squanders his talents and lives an unproductive life. Rearden ends the conversation by insulting Francisco.
At the party, Dagny overhears Lillian's criticism of the Rearden Metal bracelet that Hank gave her. Dagny offers Lillian a diamond bracelet in exchange, which Lillian accepts. The two women exchange angry words and Rearden sides with his wife. Also, several guests at the anniversary celebration discuss the activities of Ragnar Dannesjköld in Delaware Bay. Dannesjköld is a modern pirate who preys on ships carrying welfare payments from the United States to the Peoples' States around the world. No one has been able to catch him.
The most important event in this chapter is the meeting of Hank Rearden and Francisco d'Anconia. Francisco is a squandering playboy whom Rearden — a man who has risen from poverty by means of his own backbreaking effort — despises. Rearden wants to completely avoid Francisco, but the dignity of Francisco's manner and the startling truth of his words attract Hank despite his resistance. Francisco's message to Rearden is deceptively simple: It's important for Rearden to announce the egoistic basis of his work and his life to his family and the world. Rearden is egoistic regarding his work because he pursues his values, his loves, and his happiness. He would never sacrifice what is dearest to him (his mills) to his family or to society. However, Rearden isn't egoistic regarding his personal life. He permits a gaggle of vicious moochers to sponge off of him, and he tolerates their moral condemnation. He accepts guilt as payment for his extraordinary achievements. His family abuses him relentlessly for his greatest virtue — his enormous productivity — and he allows their abuse. He gets no happiness or value from his family — only suffering. Because he accepts the morality of self-sacrifice, Rearden willingly carries these parasites on his back. Francisco warns that Rearden must understand and announce to his mooching family that he has no moral obligation to support them — that he does so only out of generosity and kindness, which deserves appreciation and thanks.
Francisco indicates that Rearden is virtuous and a moral paragon because of his industriousness, not in spite of it. Rearden must understand his own greatness. He must embrace a joyous pride in his life-giving achievements and reject any guilt that his family asks him to feel. Francisco offers Rearden the beginnings of validation and a moral sanction that Rearden doesn't yet fully realize he needs. Rearden doesn't even have the words yet to define his situation, but somehow he knows that he needs the sanction that Francisco offers.
Dagny's attendance at the party, the beauty of her appearance, and her disappointment at Rearden's indifference reveal her romantic attraction to him. Rearden's rigid formality, and the way he takes Lillian's side regarding the bracelet, offers his own subtle indication that he has similar feelings for Dagny. Rearden holds himself to the strictest standards of justice. Despite the fact that he feels only contempt for Lillian, she is his wife. Rearden realizes that he made a terrible mistake in marrying her, but that mistake is a lifetime commitment that he intends to honor.
The incident with the bracelet emphasizes the contrast between Lillian, whom Rearden barely tolerates, and Dagny, who represents everything Rearden admires. Dagny loves the bracelet made of Rearden Metal because it symbolizes everything she worships — technological innovation, industrial production, and the ability of a man's mind to create progress and prosperity. Lillian, who claims to have higher spiritual concerns, despises the bracelet as something materialistic. Rearden's attraction to Dagny is a threat to his commitment to Lillian; it puts him in danger of committing adultery. At this point in the story, he resists his attraction. Consequently, he treats Dagny coldly in all settings that don't relate directly to business.
The unfolding mystery that lies at the heart of the story continues in this chapter. The superintendent of Rearden's rolling mills resigns without explanation at the precise time that the Rearden Metal rails for the Rio Norte Line are rolled. Francisco offers no explanation for attempting to morally arm Rearden against his family. The world is at the mercy of an invincible pirate who preys on government relief ships, and the combined navies of the world are powerless to catch him. Why has Rearden's superintendent resigned at this crucial time? What is Francisco's purpose in coming to Rearden's moral rescue? Why does the pirate rob the ships of the poor? As of yet, we have no answers to these questions.