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Dave Singleman's story is important for two specific reasons. It firstly introduces the tendency that Willy has to mythologise individuals and it secondly represents a life lived according to the principals of the American Dream, that Willy himself is trying so hopelessly to replicate.
Clearly, the way in which Willy mythologises certain individuals can be seen to be part of his skewed perception of the world. He refers to Dave Singleman as if he were a legend and believes that his death must have been something that would have been incredibly noble and beautiful. However, he seems blind to the loneliness of Singleman's death, not being able to recognise the way that dying whilst on-the-road would be a very sad way of ending your life. Through idolising Dave Singleman, Willy seems to deliberately commit himself to achieving the American Dream which is shown to be nothing more than a Dream, as Willy actually dies without leaving any form of legacy and in addition dies in a pathetic manner.
Telling Howard the story about Dave Singleman shows how hopelessly romantic Willy is about his profession, and of course indicates the massive conflict that is occuring between Howard's pragmatic, rather mercenary approach to sales and the romantic idea that Willy has of it.
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