This phrase is a combination of the two phrases: the smartest guy in the room, and the sharpest
tool in the shed. The phrases are practically identical in meaning, so combining the phrases is a move of a literary genius. The phrase: the smartest
tool in the shed means the smartest
tool in a hypothetical shed.
He’s not the smartest
tool in the shed, it takes him a little
bit to understand.
He might be the smartest
tool in the shed, but that doesn’t make him a good person.