When someone says “people are stupid”, they usually are not conveying “the average person has a lower-than-average intelligence”. And I don’t think that they’re even comparing people with some point of reference (the average, or themself, or someone else) - in the context they’re usually criticising some behaviour that they see as stupid, such as [in your words] “living below their potential”, or [in mine] “showing some blatant lack or reasoning”.