Michael Stipe and guitarist Mike Mills said REM didn’t want to release the same types of songs over and over, as noted The sun. Referring to the “Out of Time” album, they said it was a result of the band trying something different, and the song “Shiny Happy People” was “the strange man.” Stipe recalled his bandmates playing him parts of bubblegum pop music, and he wasn’t going to back down from the challenge. He wrote lyrics that he thought would go well with the music and said they were deliberately written to be “absurdly, ridiculously pop”.
The title also has an interesting backstory. As reported by ultimate guitar, the song was inspired by a Chinese propaganda poster during the 1989 Tiananmen Square Incident. The uprising was a result of the Chinese wanting less censorship and more political freedom. Crowds of protesters gathered in Beijing’s Tiananmen Square, and at one point the number reached one million (via BBC). The Chinese government released a propaganda poster that read “brilliant and happy people holding hands” to hide the real reason behind the large rally.
Record producer John Keane recalled how the band reacted to Stipe’s lyrics to the music. Hearing Stipe sing the words ‘happy, bright people’, Peter Buck and Mike Mills looked at each other and burst out laughing, Keane said Tide.