Why billionaire Ray Dalio loves criticism — and says you should too

Criticism can be a tough thing to stomach. But according to Ray Dalio, founder of the world's largest hedge fund, it's not something to be shied away from.

In fact, it should be welcomed, says the billionaire investor.

"I love it," Bridgewater Associates' Dalio told CNBC's Christine Tan in a recent episode of "Managing Asia."

Why? Well, it offers an opportunity to "stress test" your ideas and improve your decisions.

It's a realization Dalio came to the hard way. In 1982, he blindly predicted a stock market crash, despite critique from his naysayers. That bet nearly lost Dalio his business — an experience he has described as "painfully humbling" — but it went on to define his future.

"That was the best thing that ever happened to me," Dalio said, "next to my marriage and my kids."

"It made me think: How do I know I'm right?" he continued. "That changed my approach to life. I wanted to find the smartest people I could who disagreed with me, and to understand their reasoning and to work things through."

In the years that followed, the entrepreneur did just that, and made feedback a central tenet of his business. Indeed, it's a culture for which Bridgewater Associates has become famous.

When people keep bad thoughts held in their minds and they don’t put them on the table, it’s very inefficient, and it’s very unproductive.

Ray Dalio

founder, Bridgewater Associates

Under a philosophy Dalio dubs "idea meritocracy," staff are expected to openly give and receive feedback — good and bad — regardless of their level or position. That includes to himself, he said.

"Anybody I'm working with always has the right to question anything, the right to the opinion," said Dalio.

The alternative of letting criticism fester away unspoken is no use to anyone, he said.

"When people keep bad thoughts held in their minds and they don't put them on the table, it's very inefficient, and it's very unproductive," he said.

"Let's have a totally open communication. If you want an organization to be really, really successful, this is the key to Bridgewater success, then you want a real idea meritocracy."

Bridgewater Associates founder, Ray Dalio.

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