The final episode addresses the actual rise of al-Qaeda. Curtis argues that after their failed revolutions, bin Laden and Zawahiri had little or no popular support, let alone a serious complex organization of terrorists, and were dependent upon independent operatives to carry out their new call for jihad. The film instead shows the United States government wanting to prosecute bin Laden in absentia for the 1998 U.S. embassy bombings, and needing to prove him to be the head of a criminal organization to do so. They find a former associate of bin Laden, Jamal al-Fadl, and pay him to testify that bin Laden was the head of a massive terrorist organization called "al-Qaeda". With the September 11th attacks, Neo-Conservatives in the new Republican government of George W. Bush use this created concept of an organization to justify another crusade against a new evil enemy, leading to the launch of the War on Terror.

After the American invasion of Afghanistan fails to uproot the alleged terrorist network, the Neo-Conservatives focus inwards, searching unsuccessfully for terrorist "sleeper cells" in America. They then extend the war on "terror" to a war against general perceived evils with the invasion of Iraq in 2003. The ideas and tactics also spread to the United Kingdom where Tony Blair uses the threat of terrorism to give him a new moral authority. The repercussions of the Neo-Conservative strategy are also explored with an investigation of indefinitely-detained terrorist suspects in Guantanamo Bay, many allegedly taken on the word of the anti-Taliban Northern Alliance without actual investigation on the part of the United States military, and other forms of "preemption" against non-existent and unlikely threats made simply on the grounds that the parties involved could later become a threat. Curtis also makes a specific attempt to debunk fears of a dirty bomb attack, and concludes by reassuring viewers that politicians will eventually have to admit that their claims of threats are void of reality.

The title of this episode appears to refer to Plato's allegory of the cave, which is mentioned in the course of this part of the film, and to the belief in the complex in Tora Bora.