<span>At the top of the waterfall, the water has potential energy. Once it goes over</span>
Answer:
What exactly are we supposed to be explaining? Is there another part to this?
The answer you are looking for is probably friction.
You clearly identified the pole you're talking about as the
"north-seeking" pole. Assuming your integrity and sincerity,
we would then naturally expect that pole to seek north, and
point to Earth's north magnetic pole.
I'm confident in this answer also because I have several of
these devices hanging from the ceiling of my office, and I can
attest to the fact that on most clear days, they do in fact point
toward Earth's north magnetic pole.