Perfect State starts with nearly every indication of being a fantasy. However, we quickly find that this doesn't quite match up. Kai is an emperor with seemingly magical powers, and loyal retainers, but, as we soon discover, he's also a brain in a jar. He's Liveborn; all those loyal retainers and everyone else in his worldwide empire are Machineborn.
In some sense, they are not really real.
As a Liveborn, Kai has some responsibilities outside his virtual world, and one of them is procreation. The Wode Scroll summons him from the Fantasy State that is his world, to a Common State where he can meet another Liveborn for the purpose of procreation. He is given a list, with compatibility scores; he chooses the woman at the bottom of the list--lowest compatibility.
He has a plan.
In the course of his pursuit of his plan, we discover what's bugging Kai; why he has resisted meeting other Liveborn, and his doubts about the underpinning of his world.
Really, it's a pretty good story, and after some rough bits getting into it at the beginning, I enjoyed it. Unfortunately, it' not so good that it should be a Hugo Finalist. Getting on the ballot is unfair to the story and to Mr. Sanderson. If I'd just happened across the story, I'd have enjoyed it more than I have by reading it as a story that made the Hugo ballot.
It's not bad; it's just not that good.
I received this story as part of the Hugo Awards Finalists packet for 2016.