I've often wondered about people who appear to be very smart, and do very stupid things.

I'd phrase it as people who are good at thinking (that could follow instructions, think outside the box, have a good short-term memory, etc.) failing to make good decisions, which can be attributed to several causes:

1) The decision doesn't require thinking as much as "hard-coded" instincts or experience in that domain - this would cover a lot of social domains like seduction, negotiation, reading people's mood, getting out of a fight, reassuring someone who's afraid. In some cases, relying on thinking can make things worse.

2) The decisions requires thinking, but for some reason thinking isn't actually used, or is overridden by an emotions, or is used to shoot oneself in the foot. This would include things like playing the lottery, choosing a career based on a superficial impression and no research, or coming up with clever reasons to keep believing in the pyramid scheme you signed into. Thinking about important and personal things might be especially painful.