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As we learn in The Hobbit, hobbits do not like adventures. They like food and ale and smoking. They like the comfort of home and hearth. Good company is more important than adventure. As he embarks on and moves through the hero's journey, Bilbo grows and changes. A big part of the hero's journey is facing, accepting and overcoming fear. Bilbo does this many times. He is afraid of adventure, but he goes. He is afraid of the trolls, but he talks to them until Gandalf can trick them. He is afraid of Gollum, but he plays and ultimately wins the game. Finally, he is afraid of goblins and war but he acts heroically to protect his friends.
I think one thing you have to focus on is how Bilbo as a character is changed through his encounters with the various challenges he faces. I think also we see a gradual escalation in the complexity of the situations that Bilbo faces. Consider Gollum. This is a challenge that Bilbo must go through by himself to save himself. However, when he rescues the dwarves from the spiders, this is the first time that he takes the lead in the company and is given leadership by the dwarves. Thus it is well worth investigating each of these incidents and considering how Bilbo changes as a result of going through them, gradually becoming more and more heroic.
Bilbo has two things going for him now - he has self-confidence to deal with the unknown, but less arrogance in his "view" of the world. He is calm and clever when dealing with the dragon, listening carefully and watching carefully to find the way out. He fights bravely in the war, even though he is so small and relatively weak. When he leaves Misty Mountains at the end, his spirit is more tempered, more accepting, and wiser.
Fear is healthy because it protects the characters from doing foolish things. They were not fearful enough in Mirkwood and it almost killed them.
How does Bilbo defeat various powers of darkness in this portion of the hobbit? how does he emerge from the Misty Mountains a changed person?
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