I'm looking for a phrase or short illustration to describe someone completely missing the value of something or someone, e.g. a Sahara tribesman who stumbles across an iPhone and uses it to block a hole in his mud hut...
A sahara tribesmam stumbled across an iphone. Its use was lost on him as he used it to block a hole in his mud hut.
be lost on (someone) TFD
To have little or no impact or effect on someone; to not be valued, appreciated, or understood by someone.
Note that there's a value judgement hidden in the question. Do objects have 'intrinsic' value, or is their value entirely in the context of the user?
A discharged iPhone away from power and cell towers is merely an interesting mirror or a useful brick. That tribesman made the phone valuable to herself, thus adding value.