Socrates explains that the theory which he regards as most certain, as least vulnerable to attack, is none other than the Theory of Forms. This is the theory that there exist as real entities such things as Beauty in itself, Goodness in itself, and Largeness in itself. Socrates hopes that his Theory of Forms will help explain causation, and ultimately give a proof for the immortality of the soul that will satisfy even Cebes.
Socrates posits Forms as the true reasons for things being as they are. For instance, something is beautiful because it participates in the Form of Beauty, and for no other reason. While others might try to explain the beauty of an object in terms of its color or shape, Socrates suggests that ultimately, the simplest and best explanation is given by the Theory of Forms.
This argument is clarified by reference to the claim that one man who is taller than another man by a head is taller by virtue of his participating in the Form of Tallness. The alternative explanation would be that the man is taller "by a head." Socrates has two arguments against accepting this explanation. First, the shorter man would also be shorter "by a head," and so the same explanation would be given for two opposite phenomena. Socrates' theory assigns a different cause for each phenomenon, explaining the taller man's being taller by the Form of Tallness and explaining the shorter man's being shorter by the Form of Shortness. Second, if the taller man is indeed taller "by a head" he would be made taller than the short man by something which is very short: a head. It would be odd to say that the cause of a man's being taller is something short.
Similarly, the Theory of Forms provides an answer to Socrates' earlier problem of explaining how one and one make two, and how one divided in two makes two. Rather than give an explanation in terms of addition and division (for how could there be two different causes for something's becoming two?), Socrates explains that both these cases yield two as a result of their participating in the Form of Duality.
Rather than try to give all sorts of reasons for different phenomena, Socrates suggests that in the poverty of our ignorance, we should just cling to the hypothesis we have, the Theory of Forms, and rely on that for our explanations. And rather than try to justify the theory in itself, we should ask only whether or not its consequences are mutually consistent. And in substantiating the hypothesis itself, we should assume whatever more basic hypothesis from which this hypothesis follows is the most plausible, and hold to that. In investigating hypotheses, it is important not to confuse the hypothesis itself with its consequences.
All present remark how convincing Socrates' theory is, and Echecrates also notes to Phaedo that he finds Socrates' explanation to be remarkably clear. Socrates proceeds to one final point of clarification. We might be inclined to say that if Simmias is taller than Socrates but shorter than Phaedo, then Simmias must at the same time be participating in the Form of Tallness and the Form of Shortness. But, Socrates explains, it is not Simmias himself who is tall simply because he is Simmias. Rather, it is because he has the attribute of tallness with respect to Socrates' shortness. Similarly, he has the attribute of shortness with respect to Phaedo's tallness. Thus, Simmias can be described as both tall and short.