The author IMHO hasn't quite got it. He's focused on people using the wrong conceptual model for solving a problem and says things like:
>> Stupidity has two features that make it particularly dangerous when compared with other vices. First, unlike character flaws, stupidity is primarily a property of groups or traditions, not individuals: after all, we get most of our concepts, our mental tools, from the society we are raised in.
I would argue that it's not the misapplication of existing ideas, but ignoring the reality in front of you and doing something that goes against it. You might be going against it by habitually applying the wrong mental model, but it's only "stupid" in cases where that model seems obviously wrong (to others, or if you step back, etc) in a relevant way.
An example from a game: We are losing. We can win if we score one goal (2 points). There is only enough time for one quick play. Obviously we should make our best offensive play (including putting the goalie on offense and leaving the net open), but someone on the team gets the ball and takes a very defensive (slow) approach and the clock runs out. We lose. That was stupid - taking your time was never going to result in a win. It is a case of using the wrong mental model, but the reason it's stupid is because it obviously can't work in the given situation.
Product development example: The widget makes too much noise - the gears are noisy. Options: 1) change the material and test again. 2) hey the gear geometry can be improved - tweak design, make new tools and new parts. Management picks option 1 because we have a tight schedule and need to show improvement. OK with no other information, but this becomes really stupid when you hear that the material had already been changed once with no measurable effect.
Government example: People thinking they can legislate outcomes without any consideration how people or a system actually behave. Prohibition for example.