Development of Ego
This section of the book “examine[s] the path from beginner’s mind to the enlightened one” – this examination is the foundation of Buddhism.
CT concludes this chapter by apologizing that it’s “not especially beautiful”, but introduces it as an effort to see ego-psychology as it is: “soil good enough to cultivate; we can plant anything in it.”  “As sentient beings we have wonderful backgrounds,”  even if they are not enlightened or peaceful or intelligent.
“The beginning point is hat there is open space, belonging to no one. There is always primordial intelligence connected with space and openness…. Vidya [is] precision, sharpness with space…. We are this space, we are one with it, with vidya… and openness.” 
“Confused mind is inclined to view itself as a solid, ongoing thing, but it is only a collection of tendencies, events” . There are five “heaps” of identification, perception and belief that cause this confusion. The unfolding of these so-called skandhas is the development of ega.
1st Skandha, “ignorance-form” – ignoring primordial, open space. “[I]t is as if one of the grains of sand had stuck its neck out and begun to look around. We are that grain of sand, coming to the conclusion of our separateness…. A kind of chemical reaction. Duality has begun [147-8].
This is an intelligent ignorance, made purely of reactions to one’s own projections
2nd Skandha – After one differentiates from open space, he sets to feeling around for the qualities of “the other” – assessing if elements of the outside world are threatening, seductive or neutral.
3rd Skandha – “perception impulse”: responses to the information above. This is a “bureaucracy of feeling and perception” , organized in to three main reactions: hatred, desire, stupidity.
4th Skandha – concept. We proceed by labeling everything according to our reactions– good, bad, beautiful, ugly, etc. “So the structure of ego is gradually becoming heavier and heavier” . We use these categories to interpret our weakness as strength, “fabricate a logic of security,”  and confirm our ignorance.
5th Skandha – consciousness. This amalgamates the above with uncontrollable patterns of discursive thought. It is from within the 5th skandha that we are now studying Buddhist psychology and meditation.
To conclude, CT introduces the captive monkey, who lives in a five-windowed house – crazily poking its head out each “window” of the senses. He is stuck in the house rather than able to play in the undifferentiated forest, where he could swing in trees and hear the wind moving. He sees his house as solid, and gradually moves from a neurotic to a completely insane state of mind, locking himself in to the mental state known as hell.
The Six Realms
What follows is a description of samsara: a “perpetual cycle of struggle, achievement, disillusionment, and pain” .
So, we have the monkey, stuck in hell—an “environment of claustrophobia and aggression” . Eventually he relaxes a bit and begins to “consider the possibility of relief” . This feeling of present impoverishment coupled with fantasizing about more spacious, pleasureable ways to be is the preta loka – the torturous realm of hungry ghosts. This is actually somewhat exciting and amusing: the monkey is more interested in being hungry than satisfying the hunger.
Settling in to habitual responses to the world, the monkey “refuses to explore new territory, clinging to familiar goals and… irritations… intoxicated with his safe, self-contained, familiar world…. . Then, he gets very involved in distinguishing pleasure and pain – passionately manipulating the world to achieve pleasure. Then, plagued by illness, age and death, he logically devises a heaven to escape them – perhaps extreme weath, power or fame. “The monkey dreams of ideal states that are superior to the pleasures and pains of the human realm and is always trying to achieve these states, always trying to be better than anyone else” . This is a time of compulsive progress-measuring: obsession with self mastery and mastery of the world, obsession with (“spiritual”) achievement. There is much self-condemnation and fear of failure.
Sometimes fame or whatever goal is actually achieved! If so, the monkey settles in to a self-hypnotic state of concentration and bliss – blocking out everything irritating or undesirable. This is a high state of concentration (implicitly the state of dharana?) – the realm of the gods.
Next is dhyana, a refined, durable state of mental pleasure. A sense of limitless space is achieved by puffing the ego: “The empire of ego is completely extended… [it] becomes a… gigantic beast.” … this is “the highest level of concentration and achievement that confused, samsaric mind can attain.” 
But eventually the monkey realizes this is still ego, and is plunged straight back to hell. “The monkey’s aggression is so intense that the environment around him responds with equal aggression and an atmosphere of heat and claustrophobia develops” [172-3].
Hope dawns. Instead of simply struggling, the monkey begins to experience the struggle and see its futility. He laughs through the usual hallucinations. He discovers that when he does not fight the walls of his “solid” house, “they are not repulsive and hard but are actually warm, soft and penetrable” .
From here grows compassion – “a soft and noble heart.” The mind of compassion is soft, open and warm.
The Four Noble Truths
(One common distillation of these propositions is: That humans suffer, that suffering comes from clinging, that it is possible to end suffering, and that Buddhism articulates a path toward this end.)
For CT, the 1st NT is that humans exist in a state of dissatisfaction, dukha. “Somehow, something is not quite right, not quite enough. So we are always trying to fill the gap, to make things right, to find that extra bit of pleasure or security…. Eventually one begins to become irritated by just being ‘me’” . One fears losing the pleasure we enjoy, and desires to escape pain.
CT describes the 2nd NT as a process of constantly trying to maintain and enhance ourselves.
Yet, realizing that the struggle for self-improvement is itself the problem gives way to a feeling of a “sane, awake quality within us”  this sanity is the goal, the 3rd NT.
But just “letting go” in to the 3rd NT is only possible for short periods. It takes some kind of practice to habituate to “letting be.”
CT digresses in to a (witty and coruscating) depiction of concentration practices as “mental gymnastics.” Because concentration (i.e. dharana) meditation treats the object of focus as solid, it is ultimately ego-reinforcing. This form of meditation does not deal with the totality of one’s life-situation. “[T]his… is not conducive to openness and energy nor to a sense of humor… [and] could easily become dogmatic [because the thought is of] imposing discipline” .
Rather, CT proposes meditation that makes you completely aware of your present state of being and situation. He speaks (without specifics) of giving space and finding gaps in experience.
“The main point is that we have this basic intelligence that shines through our confusion” .
“Opening to oneself fully is opening to the world.”