This song began as an idea by Sally Seltmann, a singer and songwriter from Melbourne, Australia who, until 2009, performed under the moniker New Buffalo. In an interview with Songfacts, Seltmann said:
I wrote the song "1234" after a good friend of mine told me she was leaving her husband. During this time, I had been listening to Feist's album Let it Die. I thought my little song about lost love, and the hope to recapture what you once had, sounded too much like a Feist song for me to use for New Buffalo. (Source)
Feist took this song and modified the lyrics in a way that hit her more personally. So, the original song was influenced by the understated pop of Feist, and then given to Feist to make it even more herself. The final product is one that could have only come from collaboration.
In terms of Seltmann's original idea, the basis for the song is taken from the idea of the counting-out nursery rhyme. Similar to "One, two, buckle my shoe," or another called, appropriately, "One, two, three, four, five," the song uses counting to set up a rhythm and simple rhyme scheme. While nursery rhymes employ meaningless phrases for the sake of matching the rhyme and rhythm of what they're teaching, Seltmann's song simply starts with that idea and expounded upon it with thoughts of lost love. Feist's contribution brings even deeper lyrical reflections to the already playful pop tune.