What has for decades been called "proliferating tricholemmal cyst" is not a cyst but a carcinoma that begins in a pre-existing follicular cyst. Both the cyst and the carcinoma that develops in it show differentiation toward the outer sheath at the isthmus (which, morphologically, is indistinguishable from the outer sheath as it involutes at a stage in catagen). The history of the evolution in thinking about this muddled matter is told in such a way that the subject, at long last, becomes crystal clear.