Developers around the world are striving to build software that leverages conversational AI. It is helpful to split these efforts to 5 levels of capability, in analogy with research on autonomous vehicles. There is no straightforward dichotomy between dumb chatbots and AGI, but a series of gradations which can help us understand progress. I will talk about the key characteristics of level 3 conversational AI, which is where the most advanced teams are today. I will discuss the difficult machine learning and engineering problems that this poses, and how we see solutions developing within the Rasa community, leveraging research in the field to advance the state of the art.