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In the first part of Inception, Cobb’s crew leave the dream where they attempted to extract Saito’s secrets in the castle, and return to a dream (though this is unknown to Saito at this point) in Saito’s apartment.

Saito remarks that nobody else knows about this place, and soon realizes that he is still dreaming when he is forced onto a carpet, by Cobb, which is made of a different material to the one in the apartment he uses in real life.

After leaving this dream, Arthur asks Nash (the architect of the apartment dream) how he could have screwed this detail up, and Nash says that he didn’t know Cobb was going to rub his cheek on it.

If nobody else knew about Saito’s apartment, how could Nash have created it in such almost perfect detail within the dream?

Did he simply observe Saito in the apartment in real life, or is there some other mechanic going on that Nash could perhaps extract the information from Saito in the castle dream and use it to create the apartment environment?

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I do not think there is some other mechanic going on here.

Don't forget the Apartment dream is one level up from the Castle dream. In the Apartment, Cobb in a chair positioned over the bath to give him a kick to wake him up from the Castle. That situation in the Apartment has to 'exist' before they go into the second layer of dream.

Its a good question to ask how they found out about the 'secret'. I guess it is possible that the apartment details are obtained through a previous extraction event, perhaps even a few minutes before on the train, but I don't think so for the following reasons:

  • You can only extract what you can carry in your memory - there's no physical medium to carry out photo's of the apartment. You could potentially visit Saito's dream of the apartment and try to memorize it that way but that seems unlikely as you would have to do that with Saito around for him to 'summon' the apartment like a projection. So even to do this you'd have to be aware of the apartment, its location etc to create the situation for Saito to create a projection of it.

  • I think the architect needs to spend some considerable time preparing their mental model of the dream - we see Ariadne preparing architectural models of mazes as her way of preparing. I think to get the details correct the architect would need to spend some time getting familiar with Saito's apartment in enough detail.

So given that to plan a dream sequence to allow your architect to memorize the apartment you'd have to already be aware of it's existence and location - you're already half way there to simply finding, visiting and/or photographing it in real life.

It seems that a big part of Arthur's job is to do the background research. It seems likely that they simply find out about the apartment and observe it in real life.

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In the scene that you have mentioned, Cobb also says to Saito that it is difficult to keep a secret apartment like this when "there is a married women involved".Even though Saito instantly disagrees with him,Cobb responds to him by saying "yet here we are".This may or may not be true.In a later scene(where Ariadne wakes from her first dream with Cobb), when Cobb mention's to Arthur that he is gonna visit Eames(Tom Hardy), Arthur responds to it by saying that "there are plenty of thief's out there" to choose.This may point out to a fact that Cobb may have been using thief's to get the required information about his clients.Hence Nash may have been a thief or Cobb may have hired a thief/spy to get the details of the apartment.

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This is addressed in Inception: The Big Under, a (canon) prequel comic that, along with Inception: The Cobol Job was intended to explain some of the back-story to the film.

While preparing to dream-jack Saito, Arthur hired a 'tail' to watch him and report on his movements in Venezuela. They determined that Saito was having an affair with the wife of a prominent politician and surmised that they must have a love nest somewhere in the city.

COBB: If word got out about the affair, it would ruin Saito’s interests in Venezuela. So I’m assuming he’s taken precautions. One of which must be a secret hideaway where they meet.

NASH: So we’re going to build his love nest.

Cobb and the gang trick Saito's mistress into giving up the location of Saito's secret shag pad. Cobb and his architect Nash head over there to check it out.

The door swings open. We are in Saito’s secret apartment (this will look exactly as it does in the film.)

Cobb enters the room. Nash follows.

NASH: Saito’s quite the romantic. What a dump.

COBB: Smart. No one would ever think to look for him here. If we’re going to build this environment in the dream to make him think it’s real, you have to make sure you have every detail right.

We learn in the film that Nash's opinion of his own abilities is slightly higher than reality, but Saito is still sufficiently impressed as to offer the gang a shot at his business rival, something that could theoretically rebound spectacularly.

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