It's not so much that the Black Lotus is "entirely populated with total morons" than it is that the Chinese language has practically no sense of sarcasm. Seriously, it is outrageously difficult to translate snark into Chinese. It just doesn't exist in the language, at least not commonly. Sherlock doesn't owe his life to idiocy (which would be a beautiful type of ironic) as much as he does to language barriers. Which actually makes this moment one of my favorites.