DT, I agree completely with your analysis. I'll add that Vito wasn't quite sure about what to do with Fredo. However, I think this is interesting. As you point out, he thought Fredo's sexual cavorting was degeneracy. However, he was delighted to find out that Fredo had a genius for running a hotel. That was a surprise to him. Yet, he also referred to Fredo (in that capacity) as a cook. He was obviously disappointed.
"Generosity. That was my first mistake." "Experience must be our only guide; reason may mislead us." "Instagram is Twitter for people who can't read."
