Freddie here. I almost never post here on GradCafe, but I feel compelled.
First-- of course, there's no reason to give up before you even get any rejections. I bet you that things are way better than you think. I of course can't know anything about your chances, but I've known people personally and followed people electronically on ApplyingToGrad who were sure they wouldn't get in anywhere, and then got into their first choice.
But say you don't get in anywhere-- it happens. I know that sounds crude and easy for me to say. It did happen to me, though, and I was crushed. But I came back stronger and with a much better idea about the system. And a lot of people don't get in anywhere the first time, and then get in in the future, without significantly changing their applications. This is because it really is about fit, and there are aspects of your fit and what the departments need that you simply can't control.
As far as you and your friend goes... it just sucks. But I always insist, over and over again, that the process isn't fair. I know I say it so often people get annoyed with me (people tend to get annoyed with me anyway), but I insist on it because it's true. And it's hard to reconcile that with how important the process is to your life. But the system messes people up all the time. Unqualified people get in, and qualified people don't. I know that's no comfort to hear. But that's why you need to maximize their opportunity to recognize your value, which means applying more than one round, often.
Meanwhile, I kind of can't believe I'm saying this now, because you haven't gotten rejected anywhere yet! It's so, so early, and I bet there's better news than you think on the way. In the meantime, nothing you think about the process can change it, so try to let go. I know that's hard, but it's all you can do.