Michigan is a declining, rust-belt state. The hub of elite college football in the United States no longer spans the Great Lakes states. The greatest concentrations of the top college football talent are no longer in the industrial Midwest. The colder climate north of I-90 is not attractive to today's young athletes when so many other options abound. I could go on and on.
Harbaugh is clearly convinced that Michigan needs his continuous hype/publicity/pushing the envelope/clown show to try to level the playing field, both in his own conference (especially with Ohio State) and with the rest of the nation's top teams. And--regardless of how annoying I find his act and regardless of whether it ultimately succeeds of fails--he probably isn't wrong to try. All things being equal, I just don't see a lot of elite young athletes from Texas or Florida choosing Michigan over SEC programs, ACC programs, or even Ohio State.