I tend to agree with Lilo that Michael probably believed that he was giving Fredo enough responsibility to keep him happy. After all, Fredo seems to relish his tour-guide role in Cuba. And someone who bangs cocktail waitresses two at a time might be expected to enjoy running a nightclub or a brothel.

While we can talk about how unperceptive Michael was, we should keep in mind his background. No blood relatives - even the rebellious and ambitious Michael - would ever have considered betraying Vito. Michael draws a distinction between "businessmen" and family members as regards loyalty. Even in the bloody world he was raised in, betrayal by a brother was beyond the pale.