That little waterfall thought experiment might lead you to conclude that what I'm calling potential might be mere possibility or statistical probability, but the Japanese word for what I'm calling potential is bussho, which is conventionally translated as "buddha-nature" and is defined in the Shambala Dictionary of Buddhism and Zen as "a concrete expression for the substrate of perfection and completeness immanent in sentient beings as well as things."
Since that's a little metaphysical, the dictionary goes on to point out that according to Zen teaching, every person (like every sentient being or thing) has, or better, is buddha-nature (potential), without, at least in general, being aware of it or living this awareness as one awakened to one's true nature does. This awakening, and a living and dying that is a spontaneous expression from moment to moment of one's identity with buddha-nature (potential), is the goal of Zen.
In his commentary on the koan Mu presented in Philip Kapleau's The Three Pillars of Zen, Haku'un Yasutani states that the substance of buddha-nature (potential) is emptiness (ku in Japanese, shunyata in Sanskrit). "Now ku is not mere emptiness," Yasutani teaches. "It is that which is living, dynamic, devoid of mass, unfixed, beyond individuality or personality - the matrix of all phenomena," or as I call it, the "cookie dough."
Whatever we choose to call it - potential, buddha-nature, emptiness, ku, or cookie dough - it is beyond the imagination, it is outside of that which is conceivable. As Yasutani points out,
"Since everything imaginable partakes of form and color, whatever one imagines to be buddha-nature must of necessity be unreal. Indeed, what can be conceived is but a picture of buddha-nature, not buddha-nature itself. But while buddha-nature is beyond all conception and imagination, because we ourselves are intrinsically buddha-nature, it is possible for us to awaken to it."
So do not confuse potential with probability - while all forms are impermanent and constantly changing, and any aspect of the universe can manifest itself in a countless number of ways according to the forces and conditions to which it's subject - potential is not a property of transformation, it is that which is subject to transformation before probability determines what form is taken. It is the substrate of all transformation.